After a drop in activity in the region’s power and water projects sector in 2014, the coming year is expected to see progress on several major power generation and desalination schemes as governments seek to meet the demands of their growing populations.

With pressure to deliver uninterrupted utility services having increased since the social unrest in 2011, the need to provide sufficient power and water will ensure investment in the sector will remain at the top of public agendas in 2015.

Productive year

The news that Abu Dhabi is going to introduce water tariffs for local residents for the first time from 1 January 2015 underlines the impact that rapidly growing demand for utilities is having on government budgets. This, combined with the increasing enthusiasm for renewable energy, means 2015 promises to be one of the most interesting in the history of the Middle East and North Africa (Mena) region’s utilities sector.

According to MEED estimates, to keep pace with consumption growth, total installed generating capacity in Mena countries will have to rise by 144,218MW to reach 420,335MW by 2020, an increase of about 34 per cent on the current installed capacity of 276,117MW.

The demand for power is being driven by both residential and industrial usage, and with governments pursuing major development plans to diversify their economies, the need for additional capacity is not going to subside in the near future.

The region’s largest power market, Saudi Arabia, had a quiet 2014, with no major awards for new projects. The lack of contract awards is not a surprise, with a lull in new project procurement expected since the kingdom began awarding contracts to build about 32,261MW of new capacity in 2010. The most recent award was for the Rabigh 2 independent power project (IPP) at the end of 2013, which will boost the capacity of the kingdom’s grid by 2,060MW when it is commissioned in 2017.

It is estimated that the kingdom will require an additional 20,239MW of capacity by 2020, and Riyadh still has much work to do to hit demand forecasts.

Saudi Arabia, therefore, promises to offer more opportunities in 2015, with a number of major projects at various stages of the design and bidding process. These include the Fadhili IPP, a cogeneration plant being developed by a joint venture of state utility provider Saudi Electricity Company (SEC) and oil major Saudi Aramco. Expressions of interest were submitted in August, and tenders should be issued by the first quarter of 2015.

With governments pursuing major development plans… the demand for additional capacity is not going to subside

Interestingly, two major power schemes at the tendering stage are integrated solar combined-cycle plants, which will see solar technology used alongside conventional gas turbines. While the proposed Waad al-Shamal and Duba 1 facilities will only have solar components of 60MW and 50MW respectively, out of full capacities of 1,000MW and 500MW, the decision to integrate renewable energy into major projects may be a sign that the kingdom is finally ready to start with its much-heralded alternative energy programme.

Fulfilling pledges

After establishing a special body, the King Abdullah City for Atomic & Renewable Energy (Ka-Care), in 2010, and announcing plans for an ambitious 54GW renewable energy and 17GW nuclear programme, little progress has been achieved. With rumours that SEC and Saudi Aramco are now set to play an important role in getting the programme up and running, 2015 may be the year that Saudi Arabia finally begins to deliver on its alternative energy pledges. Technical bids were received for the Waad al-Shamal and Duba 1 plants in 2014, with commercial submissions expected in the first quarter of 2015.

With a demand growth rate of 6 per cent a year for water, the kingdom is also set to be one of the region’s most active desalination markets in 2015. After a quiet 2014 in terms of new desalination schemes, with only the 2 million-imperial-gallons-a-day (MIGD) Haql 3, Duba 4 and Al-Wajh 4 desalination plants being tendered, Saline Water Conversion Corporation is expected to initiate the tendering processes for much larger projects in the coming year.

After Saudi Arabia, Kuwait has the second-largest new-build generation capacity requirement in the GCC, with the country’s Ministry of Electricity & Water (MEW) estimating that an additional 10,500MW will be needed by 2022 to cope with demand and to establish an adequate reserve margin. Kuwait also faces one of the largest programmes to build new desalination facilities, with an additional 350MIGD required.

After a positive end to 2013, with the signing of the country’s first independent water and power project (IWPP), 2014 was more disappointing for Kuwait’s utility sector. The scheduled deadlines for tendering the next major planned projects, Al-Zour North 2 and the Al-Khiran IWPP, were missed.

The main reason for the delay is amendments to the country’s public-private partnership (PPP) law, which entails a restructuring of the PPP body, the Partnerships Technical Bureau. It will be renamed the Kuwait Public Authority for Public-Private Partnerships. The approval for the restructured entity is expected to be finalised in the first quarter of 2015, which will allow the next planned generation and desalination schemes to proceed.

Another GCC state that is continuing to record rampant demand for power and water is Oman. The sultanate currently has one of the highest population growth rates in the world, increasing more than 8 per cent a year since 2012. Combined with Muscat’s drive to develop its industrial sector, this requires unprecedented expansion of power and water supplies.

The scheduled commissioning of the 2,000MW Sur IPPby the end of 2014 should alleviate some pressure on the sultanate’s grids. But with annual demand growth for electricity and water expected to reach 9 and 6 per cent respectively until 2020, Muscat is planning a number of other new projects. In addition to the Qurayyat independent water project and Salalah 2 IPP schemes, which are currently under bid evaluation, Oman Power & Water Procurement Company is planning to tender an IPP with a capacity of 2,600-3,500MW over two sites, and an IWP, in 2015.

Oman will remain one of the GCC’s most active utility markets in 2015. The sultanate will also begin working on plans to introduce the Gulf’s first electricity spot pricing market, with several power purchase agreements for its initial IPPs due to expire in the next five years.

Qatar projects

Despite enjoying comfortable reserve margins in its power and water sectors, Qatar will also move forward with plans to develop its next IWPP in 2015. Qatar General Electricity & Water Corporation (Kahramaa) received bids in May for the Facility D IWPP, and intends to follow the award of the scheme with the issuance of requests for proposal for a 45MIGD IWP at Ras Laffan
industrial city.

Outside the GCC, Egypt and Iran will need to build the most additional power capacity in the coming years. MEED estimates Egypt will require up to 30,000MW of additional capacity by 2020, while Iran will need 18,500MW by 2018 to meet expected demand.

After three years of political uncertainty and inertia in the projects market, Cairo is aware it must make swift progress with building new generation capacity and upgrading its networks. Major power cuts in the Egyptian capital in September, which even disrupted the Cairo Metro, have provided increased urgency to push ahead with projects.

The government of newly elected President Abdul Fattah al-Sisi has pledged to drive forward plans for Egypt’s first nuclear, coal and major renewable projects in addition to speeding up construction of conventional gas-fired plants. In late November, more than 100 companies submitted expressions of interest for its direct proposal renewable energy programme. This followed the creation of a feed-in tariff for renewable projects in September. 

Egypt will also require substantial desalination capacity in the coming years to meet the water needs of its people. This will be provided through a number of PPP desalination schemes, with three already at various stages of the planning and design stage, and due to be tendered in 2015. While the need for additional power and water supplies in Egypt is clear, the success of the plans will depend on whether Cairo can receive financing for projects. If international banks and financial institutions are willing to provide backing for Egypt’s utility programme, there is significant enthusiasm from developers and contractors to participate in building the plants.  

Iraq shortfall

The country with the most urgent requirement for additional capacity is Iraq, which is currently suffering from a sizeable shortfall of electricity during peak periods. Following two decades of conflict and underinvestment, Iraq’s Electricity Ministry has awarded contracts for more than 11,000MW of new power since 2011 to try to meet demand. However, many key projects have been put on hold as a result of the advance of Islamic State in Iraq and Syria in the northern part of the country. While progress with Egypt’s utility programme is dependent on achieving financing, security will prove Iraq’s biggest hurdle to meeting its power and water needs in 2015.

Dubai and Jordan will offer the most diverse opportunities in the power market in 2015. Both are set to award contracts for major renewables schemes, with Dubai pushing ahead with its Mohammed bin Rashid al-Maktoum Solar Park development and Jordan on the second round of its direct proposal renewable energy programme, under which the first round of projects were approved in early 2015.

Dubai will also receive bids in early 2015 for its 1,200MW coal-fired Hassyan IPP, the first major coal-fired power facility in the GCC. Meanwhile, Jordan will start work on the region’s first shale oil-fired power plant and will seek to sign the final agreements for its maiden nuclear energy project.

As 2014 draws to a relatively quiet close for the region’s power and water market, 2015 is ready to emerge with a buzz of activity. A flurry of contract awards expected in the first quarter should be followed by the start of tendering for a variety of major power generation, desalination and grid schemes. While the falling oil price may force governments to scale back planned infrastructure spending, the power and water sector is one area where they must deliver.