The second phase of the AED5bn ($1.4bn) Gulf power grid became operational on Wednesday with the UAE joining the grid, officials said.
The electricity grid unifies those of six Gulf states with the first phase having become operational in early 2009 connecting Saudi Arabia, Kuwait, Bahrain and Qatar.
"This would provide a platform for energy trade and exchange, while improving the reliability of existing energy systems and lowering electricity reserve requirements on GCC countries," Sheikh Mohammed Bin Rashid Al Maktoum, vice president and prime minister of the UAE said in a statement.
The project will save up to $5bn and will lay the foundation for a common energy market among the GCC countries, he said, adding it will provide the GCC states with sustainable energy supplies to support the national economies.
Essa al-Kawari, chairman of the Gulf Cooperation Council Interconnection Authority (GCCIA) said studies were under way to connect the gulf grid to the wider Arab region as well as to Europe.
"The Arab League is conducting a study for the connection to the wider Arab region and Saudi Arabia along with the World Bank is conducting the study for connection to Europe," he told reporters without giving a timeline.
The total capacity of the Gulf grid is up to 1200 MW, the maximum power that can be transferred to any country at any time, said Kawari.
Discussions are currently going on for selling power on a commercial basis. Currently each Gulf country can negotiate bilaterally with one another to agree on tariffs for purchase and sale of electricity, he said.
"All countries have benefited from the grid," Kawari said, adding there was a penalty for countries for not supplying their quota or spinning reserve to the grid.
Oman had delayed joining the grid by two years, Kawari said. "Due to rapid growth in demand in Oman and the GCC they are expected to join in two years."
The Gulf Cooperation Council (GCC) is a loose political and economic alliance between Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. ($1=AED3.672)