LeAnne Graves
The UAE is poised for another cheap power benchmark with Dubai’s US$1.8 billion Hassyan clean coal plant set to deliver electricity at what could be the world’s lowest rate for the commodity, according to the Dubai Electricity and Water Authority (Dewa).
A consortium consisting of Saudi Arabia’s Acwa Power, Harbin Electric of China, the GE-acquired Alstom and US-based NRG Energy has started construction after reaching financial close on the 1.2-gigawatt first phase of the project under an Independent Power Producer (IPP) deal. It will ultimately generate 2.4GW of electricity by 2023.
Dewa’s new plant will provide a 12.5 per cent boost to Dubai’s current grid capacity, according to Alstom, amid rising demand for power. Hassyan also supports the emirate’s efforts to diversify its energy mix by 2030 with 7 per cent of electricity to be produced from “clean coal”.
The first 600-megawatt unit is expected to be operational in March 2020 and the second 600MW unit exactly a year later – and will supply electricity at a price of 4.241 US cents per kilowatt hour (kWh) under a 25-year power purchase agreement. This compares to the price of natural gas that runs around 6 cents (prices vary based on commodity prices in the market), while Dubai’s planned 800MW solar plant will produce electricity at 2.99 cents per kWh.
The Hassyan plant will be 78 per cent financed by the developer and Dewa will hold a 51 per cent stake under the agreement.
Acwa is in talks with a Chinese export credit agency and several local, regional and international banks for a $1.4bn loan to finance the plant. These include Industrial and Commercial Bank of China, Bank of China, Abu Dhabi-based FGB and the UK’s Standard Chartered, according to Acwa.
What makes the Hassyan price even more interesting is that the plant will produce power from coal at rates even cheaper than countries that actually have the resource – Dubai will need to import 6 million tonnes of coal annually. It must be a high grade of coal as a result of the tight emission standards, sourced from the international market but most likely coming from major producers such as Australia and Indonesia and possibly southern Africa.
Acwa Power told The National that the agreed tariff for Hassyan was based on a reference price of coal – from May 2015 – which will then be adjusted as it is supplied to the plant. Prices have risen in the past year with Nymex Indonesian coal futures up 37 per cent, for example.
In South Africa, a country that houses 3.5 per cent of the world’s coal and uses it to meet 77 per cent of its needs, the price for coal-powered electricity is nearly three times more than estimated for Dubai’s Hassyan plant.
The IPP model used for Hassyan has allowed the project to achieve such low prices, according to one of its developers.
“It is the efficient, transparent competitive tendering process run by a credible utility like Dewa and the private sector is putting its best foot forward,” said Paddy Padmanathan, chief executive of Acwa.
Another reason that Dubai is able to achieve low prices is because of the application of more efficient technology.
GE said that its technology increased efficiency rates to 44 per cent compared to the 33 per cent of conventional coal solutions.
“Coupled with our environmental control solution technologies … this makes the Hassyan a smarter, cleaner coal power plant,” said Sacha Parneix, commercial general manager of GE’s steam power systems for the Middle East, North Africa and Turkey (Menat) region.
The International Energy Agency says coal is used to power over 41 per cent of the world’s electricity, even though it is one of the heaviest polluters. Globally there has been more of a focus on cleaner technology to cut carbon emissions.
Acwa’s Mr Padmanathan said Dubai has “recognised the environmental impact” of using coal “and have gone overboard to specify and ensure the toughest emission standers ever specified for a coal plant in the world”.
lgraves@thenational.ae
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