Abu Dhabi to boost alternative energy

The financial appeal of renewable power is to be enhanced as part of a change in methodology of production, says Masdar chief.

Abu Dhabi will unveil a new energy policy later this year that will boost the financial appeal of renewable power, but keep down the cost of electricity in the emirate, the head of Masdar said yesterday. As demand for power grows with the population and its broadening industrial base, the emirate is diversifying its energy sources, from simply burning its own oil and gas resources to a mixed portfolio including imported gas, solar and probably nuclear power.

"We need to adopt a new methodology for energy production," said Sultan al Jaber, the chief executive of Masdar, the government-owned future energy company. "We have cheap sources of power today because our energy sector is being subsidised." A new formula for calculating energy costs will be unveiled in the Energy Vision 2030, which is scheduled for release later this year. The energy plan is expected to highlight a target of generating seven per cent of electricity from renewables by 2020, and should also include provisions for the development of nuclear energy and improvements in energy efficiency.

Under the new policy, the average cost of producing power would remain low because energy produced from conventional sources, such as natural gas, is cheaply produced. Dr al Jaber declined to say whether the extra cost of renewables would be borne by the Government or by the consumer, in the form of higher electricity bills. "As far as we're concerned, it's not going to be as expensive as it is being produced in Spain or in any other place," Dr al Jaber said.

"At the end of the day we have one price for all energy production. The low [cost] energy sources will help bring the renewable energy production cost down." The emirate's energy plan will be influenced by the outcome of an ongoing federal government feasibility study for the application of civilian nuclear power in the UAE. Electricity generated at solar plants, the emirate's principal green power source, still costs more to produce than market rates for power from natural gas, oil or coal.

But in the UAE the gap is widened further because of subsidies. Expatriates in Abu Dhabi currently pay Dh0.15 per kilowatt-hour (kW/h) of power while Emiratis pay Dh0.05. This compares with the US, where residents pay an average of Dh0.41. If renewables are to take off, either consumers will have to pay more in the form of higher tariffs, or the Government will need to absorb the loss, said Vahid Fotuhi, a Dubai-based energy economist.

"It comes down to one word: tariffs," he said. "Unless the state is willing to subsidise the gap or gradually increase the tariff, it's going to be uninteresting" to companies in the renewables industry. A new strategy to encourage the growth of renewable energy sources could take a number of forms of financial support, including tax credits or feed-in tariffs that require utilities to buy a certain proportion of energy from renewables at a set price, said Hélène Pelosse, the director general of the new Abu Dhabi-based International Renewable Energy Agency (Irena).

"We have been using all the different options in Europe," she said yesterday. "The most important thing is the target. How you get there, the mix of technologies, is mainly up to each country to decide." Abu Dhabi is expected to rely heavily on the development of large-scale solar thermal power plants to meet its seven per cent target. The plants use the heat of the sun to produce steam, which is then fed through a conventional electricity generator.

A construction contract for a 100-megawatt plant called Shams 1 is expected by the third quarter of this year. The plant will the first in a string of similar-sized solar thermal developments by Masdar. The energy plan is expected to assign priority to the development of nuclear energy, which could see the first reactor open in the country by 2017, and carbon capture and storage, a scheme to pipe emissions from natural gas plants into permanent storage in ageing oil wells.

Masdar says it will commit billions of dollars to a project to capture carbon emissions from three power stations and a steel plant, and officials have said the technology could eventually become a centrepiece of the country's drive to reduce its carbon footprint. The plan could also include measures to boost energy efficiency. A study commissioned by the Executive Affairs Authority found that the Government could save itself the cost of two power stations if it undertook a full-scale effort to encourage energy-saving appliances and convince consumers to adopt less wasteful habits.