Dark days ahead?

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The energy-rich Gulf faces a power shortage of unprecedented proportions, as rapid growth in consumption has left producers unable to keep up with demand.

When proposals for a large retail development in Ajman were scrapped earlier this summer, property consultant Ritu Chopra was left counting the heavy cost of cancellation.

The manager of retail leasing at Colliers International was forced to break the bad news to developer clients - that the new project could not be hooked up to the emirate's power grid due to insufficient capacity.

The aborted Ajman project cost Chopra's firm months of lost revenue, and she is now worried that other schemes she works on in the future may be wrecked by power shortages.

"I have already heard of other projects that have been put on hold because of this problem," she says. "Power shortages could become a real issue, and it's something we are getting more and more concerned about."

As the Gulf's power grids buckle under the pressure of soaring demand caused by high population growth, industrial expansion and a thriving construction sector, a scarcity of electricity could become a severe problem and even inhibit economic development across the region.

Economic forecasting company Global Insight predicts that while power consumption is expected to rise by 50 percent in the Gulf over the next five years, power generation will only increase by 30 percent over the same period.

In Dubai, rows of gleaming new high-rise towers have been left unoccupied for anything up to a year after construction was completed, because of insufficient electricity supply.

"There's a lot of construction happening where they are not very well connected with Dubai Electricity and Water Authority (DEWA)," says one well-placed source within the emirate's building industry. "There are high-rise towers ready and the power infrastructure is not there from a period of a few months to up to a year."

"In new areas it may become very common to see whole areas of new buildings not inhabited because of this," he adds. "Personally it is a concern and from a construction point of view when you have finished a job and could be away, it's frustrating when the power is not in place."

Even Saudi Basic Industries Corporation (SABIC), one of the Middle East's biggest manufacturers, has not been immune to the problem, with power outages caused by interruptions to the electricity supply forcing the temporary shutdown of the petrochemical giant's polyethylene and polypropylene plants in Al-Jubail, Saudi Arabia last month.

High consumption rates and sizzling summer temperatures were blamed by the Saudi government for the recent blackouts across the country, with deputy minister of electricity for Electricity Affairs Dr Saleh Al-Awaji admitting last week: "Despite everything we do, power outages are inevitable."

Further signs of a worsening power crunch have come from Kuwait, where hospitals were among energy consumers hit by blackouts this summer. Meanwhile in Oman, industrial projects have had to be shelved because of gas shortages.

Analysts warn that if the issue of unreliable energy supplies is not addressed soon, the problem could start to hold back the pace of development in the region.

Vicente Raurich, head of Group Business Development at Siemens Building Technologies, says that despite massive investment in energy capacity there is already a "five or six year" divide between the growth in power generation and consumption - and the gap may widen.

"In the Gulf, increasingly in Qatar, Saudi Arabia and UAE and Bahrain the economic growth is huge and although there is a massive investment in capacity, that's still outperformed by economic growth and demand for power," he warns.

Peter Barker-Homek, CEO of Abu Dhabi National Energy Co (TAQA), says that although the UAE has typically maintained a 15 to 20 percent reserve margin in power supply to avoid interruptions, Dubai is lagging behind in building its supply because of the sheer pace of growth in the emirate.

"Central planning around energy intensity is as much art as it is science, and given the rapid development of structures around here, each of which has thousands of people that each have equipment, it is going to be lumpy as you bring power on," he warns.

"I don't know that it is necessarily anything wrong with Dubai's central planning, I just think that when you are in a rapid environment where petty much everything is growing in double digits, all you need is one delay and it starts to throw your reserve margins out."

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READERS' COMMENTS

Dark Days Ahead
Posted by Sarah, Birmingham, England on Tuesday 19 August 2008 at 00:06 UAE time


I suspect that any elected government would be extremely worried about their job future for failure to provide ‘on tap’ basics like electricity . It my own business it would be an instantly sackable situation

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