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Wed 17 Dec 2008 06:21 AM

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$500bn needed to support power generation by 2030

Industry expert says region could be hit by blackouts as demand is underestimated.

The Middle East will require investment of more than half a trillion dollars in electricity infrastructure to aid economic growth in the coming years, an industry expert has said.

At the same time, several countries in the region are lagging behind in their infrastructure planning which could result in major power blackout problems, according to management consulting firm AT Kearney.

The company said that growing demographics and wealth in the Middle East will lead to a constant increase of demand for electricity in the foreseeable future.

“While investments are estimated to be more than $500 billion by 2030 for the region, forecasting of energy demand is not accurate. Many countries are still behind in forecasting and capacity planning,” said Dr Dirk Buchta, managing director of AT Kearney Middle East.

“For those countries it is not apparent, where to build how much capacity - based on which kind of energy sources. As a consequence, customers could suffer from increasing supply-demand imbalances, power outages and soaring electricity prices."

According to AT Kearney, the additional generation capacity needed is potentially underestimated. While economic growth in the Middle East is expected to be seven percent, the buildup of generation capacity is only four percent per annum.

“The structures within the electricity portfolios of the regional utility companies need to change significantly towards alternative energy sources like solar, wind and nuclear,” said Dr Goetz Wehberg, from the Global Utilities Practice of AT Kearney.

“In addition to large scale solar farms, smaller local units such as photovoltaic home installations must evolve."Initiatives such as Masdar in the UAE, according to AT Kearney, are only a preliminary step in leveraging the region’s solar power potential.

Key growth areas for future electricity supply are tourist hubs, economic cities and industrial zones.

The six Economic Cities of Saudi Arabia for example, will have a future metro population of several million people and investment requirements for electricity generation of more than $4 billion.

Additionally, countries such as Bahrain are running out of oil and need to secure their energy supply for the future, the company added.

Wehberg said: “To better balance supply and demand within the region and prospectively with Europe, the transmission grids in the Middle East need to become more integrated.”

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