Windfall from energy projects

The region's infrastructure industry is set to grow as nuclear and renewable power plants come online, reshaping the GCC grid.
Abu Dhabi aims to obtain 7 per cent of its power from renewable sources.
Abu Dhabi aims to obtain 7 per cent of its power from renewable sources.

Billions of dollars are expected to be spent over the next 10 years to connect the country's first nuclear power and renewable-energy plants to homes and businesses, providing a shot in the arm for a host of local companies.

Such alternative-energy projects often require longer transmission lines and the recalibration of existing infrastructure as they are usually located hundreds of kilometres from city centres.

In the UAE, companies are boosting production of infrastructure materials including long-distance power lines and the plastic used to insulate them.

"The focus on renewables will change the shape of the grid," said Andrew Shaw, the managing director of Ducab, a cable maker owned by the governments of Abu Dhabi and Dubai.

"The trend is towards more linkage. It's more efficient. It's not enough just to build a plant nowadays."

Those changes are driven by the Abu Dhabi Government's aims to obtain 7 per cent of the emirate's power from renewable sources and up to 25 per cent from nuclear energy in the coming decade.

The Government plans to use four nuclear reactors, two 100-megawatt (mw) solar plants and 500mw of solar panels on Abu Dhabi's urban rooftops. The emirate's other clean-power project, a cutting-edge hydrogen power plant that was to be built by BP, is awaiting word from the Government on how carbon dioxide would be purchased from the plant.

Excluding one of the 100mw solar plants and the rooftop solar panels, for which budgets have not been announced, spending on infrastructure to transmit power from the new plants will total at least US$5.6 billion (Dh20.56bn), according to figures provided by Bob Bryniak, a regional utilities consultant.

The cost of the wiring, piping and substations needed to transmit the electricity from power plants is usually equal to at least 25 per cent of a plant's cost, said Mr Bryniak, the chief executive of the Dubai management consultancy Golden Sands.

The expansion would be particularly welcome because utilities had caught up with demand they had trouble meeting in Dubai's boom years of the mid-2000s, he said.

"The recession has had a silver lining," Mr Bryniak said. "It's allowed the utilities the catch up to capacity."

Local infrastructure growth could also be a boon for Borouge, the Abu Dhabi Government's joint venture with the Austrian plastics maker Borealis. Last week, Borouge awarded the last major contract for its Borouge 3 development, part of a rapid expansion of production capacity. The facility will make a speciality polymer used to insulate electricity cables that are laid underground.

But infrastructure development will be tempered by the high price of copper, a main component of power lines. A rise in copper prices driven by rapid infrastructure development in China has led Ducab to increase the prices of some of its products, said Ashish Chaturvedy, Ducab's marketing manager.

"It has to be passed on to the customer," he said.

The higher cost of cables has not held up infrastructure projects in the region, he said, because the cost of delaying a project can outweigh the high cost of copper.

"It's always very tricky," Mr Chaturvedy said. "The rise in copper tends to put the customer away. But most of the projects are already committed."

Ducab plans to make its first high-voltage cables as early as this spring at a new factory in Jebel Ali, part of a joint venture with utility companies of Dubai and Abu Dhabi. The Dubai Electricity and Water Authority and the Abu Dhabi Water and Electricity Authority, each of which holds a 25 per cent stake in Ducab's high-voltage cable business, are expected to buy the factory's first output.

"We are investing so that they don't have to go overseas," said Mr Shaw, who was meeting this week with clients at an electricity conference in Dubai that attracted exhibitors from as far away as France and Taiwan.

Published: February 10, 2011 04:00 AM


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