Power swap on cards for Gulf countries

Currently electricity prices across the Gulf are different because of energy subsidies – a significant challenge to the sharing of power across borders to meet rising regional consumption.

Energy consumption is rising between 6 and 10 per cent a year across the region. Pawan Singh / The National

Gulf countries will by the first quarter of next year have agreed a deal to pay for shared energy with energy instead of cash, paving the way for further interconnectivity of regional power grids, an electricity official said yesterday.

Currently electricity prices across the Gulf are different in each country because of energy subsidies – a significant challenge to the sharing of power across borders to meet rising regional consumption.

“We are doing negotiations and final discussions regarding signing the contracts for bilateral trading in kind, energy-for-energy. We hope to commission the first one in the first quarter of 2015,” said Ahmed Al-Ebrahim, the chief operating officer at the GCC Interconnection Authority (GCCIA).

“It would really eliminate the effect of the subsidies and the different ways of calculating the price of electricity between the member states.”

“We are still finalising the deal between two and three different countries.

“We are 80 per cent close to the agreement. Hopefully we sign it in January and we will start immediately after,” he said. Consumption is rising between 6 and 10 per cent a year across the region according to Mr Al-Ebrahim, significantly faster than the global average. In the UAE, between 2008 and 2012, national power demand grew 37 per cent, said a report from the Dubai Carbon Centre of Excellence.

In 2009 neighbouring countries in the Gulf began connecting their power grids to exchange power during emergencies. The Gulf Cooperation Council Countries Interconnection Grid (GCCIG) initiative, which has a total capacity of 1,200MW, links Saudi Arabia, the UAE, Qatar, Bahrain, Oman and Kuwait.

Installed capacity across areas covered by the shared grid is 50GW. The UAE – which has some of the highest electricity tarrifs in the region – linked up to the shared grid in 2011, contributing Dh800m to the project. From January 1, Abu Dhabi has introduced higher prices for power and water.

This change will not impact the shared connectivity, Mr Al-Ebrahim said. Member countries could spend up to US$420 million to boost the capacity of the grid starting in 2019.

The GCCIA, the Saudi-based body in charge of the shared network, is conducting a study into the proposed expansion, which will likely cost between 20 per cent and 30 per cent of the initial $1.4 billion cost for the project.

“By 2019 we will reach a limitation on the GCC inter-connector, which means we will have to start expanding,” he said.

“We might need to expand by 300 to 400MW, but we wait and see after the study is done.”

The GCC power grid project will save countries over $6bn, equivalent to building up capacity of 8,000MW, Mr Al-Ebrahim said.

“When the members are sharing resources they don’t need to build as much capacity as they used to do when they are not interconnected,” he said. “They can rely now on other member states to supply this reserve power and that will result in them building less power stations than before, while maintaining the same reliability level.”

The UAE is looking to diversify its energy mix with the goal of generating 24 per cent of its total output via clean energy projects by 2020. It is building four nuclear power plants in Abu Dhabi, which will have a total capacity of 5,600MW by 2020. Clean energy firm Masdar also has a number of solar projects in the country.

The GCC grid will also be able to connect to renewable and nuclear energy power facilities to mop up any extra capacity, according to Mr Al-Ebrahim.

“For nuclear energy, they (nuclear plants) have to be running on a continuous basis that means their output shouldn’t be changed much. Because of that whenever there is excess in the nuclear plants, the interconnector can be used to sell that excess energy to other countries,” he said. “Solar and wind energy, they come as resources are there and not as the load requires. That’s why whenever you have excess renewable energy that you don’t need you can export it through the interconnector member states.”

Gulf countries hope to eventually connect their shared grid to other networks in the Middle East and North Africa and ultimately to Turkey and Europe.

Saudi Arabia, meanwhile, is forging ahead with linking its power grid with Egypt’s by early 2018, a project that is expected to cost around $1.6bn, to be financed by both Egypt and Saudi Arabia. The transmitting capacity of the project is 3,000MW.

“Everything is ready and the funds from both sides are already secured and hopefully by the beginning of next year in February 2015 the project will be ready for bidding,” said Saleh Al-Awaji, the Saudi deputy electricity minister.

Saudi Arabia is negotiating with Turkey to link up their grids, in order to eventually connect to the European power network.

“Now we are negotiating (with Turkey) and doing further studies to be sure of the economic feasibility,” said Mr. Al-Awaji.

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