The UAE has signalled its intention to develop nuclear power as the local grid strains to cope with soaring energy consumption. Arabian Business reports on the nuclear race against time, and reveals why the cost of electricity is set to rocket across the region.
The UAE expects demand for power to triple in the next 12 years - not much longer than the time required to build a nuclear power plant from scratch.
I believe the UAE would not be enriching uranium — they’d be buying it in under the auspices of the IAEA. But they will undoubtedly have their critics.
That's why the Gulf state which controls almost 10% of the world's oil reserves has signalled its intention to go nuclear, with plans to invest US$100m in establishing the Emirates Nuclear Energy Corporation.
As much as 80,000 megawatts of new generating capacity is needed across the region over the next decade - demanding roughly 22 trillion cu ft in additional gas requirements, according to international power consultant PFC Energy.
It is one reason why nuclear energy is now under serious consideration among the Gulf states, which together account for the world's largest gas reserves.
But what of the cost of delivering nuclear power plants at a time when construction and engineering costs are soaring and when other cheaper alternatives exist such as the abundant natural gas lying beneath the desert?
UAE Foreign Minister HH Sheikh Abdullah bin Zayed Al Nahyan stressed the cost and environmental advantages of nuclear power, as the government published its white paper that outlines nuclear ambitions that are still under evaluation.
"In-depth studies carried out by government entities have shown that nuclear energy represents a commercially competitive and environmentally friendly option for the secure generation of electricity in the UAE, particularly in light of projected gas shortages," he said.
As construction costs continue to soar amid a weakening dollar environment, some commentators are questioning why energy-rich countries such as the UAE need to generate nuclear power.
The cost of building a nuclear plant is between 50% and 300% higher than a coal or gas-fired facility, says PFC.
"While the initial construction costs of a nuclear power plant would have typically averaged between US$1000 to US$2500 per kilowatt, capital expenditure costs today have soared and can reach US$8,000 per kilowatt," according to research from the consultant.Even using a base cost of US$3000 per kilowatt, the cost of delivering nuclear power in the UAE might appear prohibitive.
But the cost comparison between a gas and nuclear-fuelled future is far from straightforward and depends on many factors, including what emerges from future gas exploration in the region.
"Questions about the region's future gas reserves are undoubtedly weighing heavily in the push towards nuclear power," says PFC Energy analyst Raja Kiwan, who cites the unsuccessful gas exploration in Saudi Arabia's Rub Al Khali desert, as well as Qatar's moratorium on additional gas projects pending the completion of the North Field reservoir study.
Such questions may be studied by the new Emirates Nuclear Energy Corporation, which will recruit experts in nuclear regulation, safety, security and non-proliferation according to the newly released policy white paper.
The publication of the paper follows a series of studies into the use of other energy sources including oil, coal, solar and wind power.
Despite the promotion of alternative energy through initiatives like 'Masdar', launched in 2006 to promote sustainable energy technologies, the UAE government white paper says that such energy sources could only supply 6-7% of the power needed in the country by 2020 - even if they were to be used "aggressively".
"Stacked against these options, nuclear power generation emerged as a proven, environmentally promising and commercially competitive option," says the report.
The UAE is under pressure to deliver new power generating capacity amid soaring demand from a construction boom and a rapidly expanding population.
Power demand is likely to rise at an annual growth rate of 9% to reach 40,000 megawatts by 2020, compared to about 15,500 megawatts in 2008.
Known natural gas reserves could only deliver about 25,000 megawatts of power by 2020, according to government studies.The UAE would become the second Gulf state to develop a nuclear programme after Iran, which last month provoked the UN Security Council into intensifying sanctions against the country for refusing to suspend its uranium enrichment activities.
Government officials emphasised the 'peaceful' nature of the country's own nuclear ambitions as it unveiled its nuclear energy policy document in Abu Dhabi.
The white paper commits to adopt all major non-proliferation instruments, including the International Atomic Energy Authority protocols guarding against theft of nuclear materials, and the control of the supply of nuclear materials and equipment.
"The involvement of experienced and reputable foreign commercial partners in the construction and operation of any eventual nuclear plants would provide a continuous and fully transparent window into the UAE nuclear sector," says the policy document published last week.
The UAE is likely to approach its nuclear programme in a very different way to its Gulf neighbour, according to PFC Energy's Kiwan.
"I believe the UAE would not be enriching uranium - they'd be buying it in under the auspices of the International Atomic Energy Agency. They are starting in a very different way. But they will undoubtedly have their critics," he says.
The entire region is running short of power as oil prices that reached a record US$117 a barrel last week have encouraged countries to develop new infrastructure and add hotels, shopping malls and apartment blocks.
Saudi Arabia, Bahrain, Qatar, Oman, Kuwait and the UAE, which together hold 40% of the world's oil reserves, plan to spend about US$25bn to add 45,000 megawatts of grid capacity.
In the meantime, some Gulf states are relying on temporary power from generators to top up the grid.
Temporary power providers such as the UK-based Aggreko cannot keep up with demand in Dubai as their generators are hired to run building sites and industrial facilities across the emirate.Electricity consumption in Dubai rose 30% in 2006, according to the Dubai Water and Electricity Authority (DEWA).
DEWA is not alone in its struggle to deal with soaring power demand in the region, which is made worse by the dramatic swings in peak and off-peak demand during the year caused by the increased use of air conditioning during the summer months.
Energy consumption is growing at between 7% and 14% a year across the GCC, creating massive pressure on the network and increasing the likelihood of blackouts.
The regional energy crisis is most severe in Kuwait, which despite holding more than 8.4% of the world's oil, could face a 5000 megawatt power shortage by 2010 according to Alstom, the world's third-largest power plant builder.
Nuclear power plant orders are surging worldwide as national electricity grids come under pressure. More than 230 reactors could be built around the world by 2030 according to the World Nuclear Association in London.
Only 78 nuclear plants have been built since the Chernobyl disaster in the Ukraine in 1986.
The UAE government insists it is still evaluating its nuclear options and has not yet committed to building its first reactor. However the creation of the Emirates Nuclear Energy Corporation and the commitment of US$100m to its establishment shows that nuclear power has become more than just an option for the Gulf state.
Soaring consumption across the region together with dwindling gas reserves means that subsidised power generation regimes cannot endure, according to PFC Energy.
Dubai recently increased electricity prices for the first time in a decade after gas shortages forced it to buy in power from Abu Dhabi and generating costs rose.
Elsewhere, in Oman, Bahrain and Kuwait, where electricity prices are among the lowest in the world, the increase in electricity pricing may be even more dramatic.
Time is running out and whether or not the next major power station to be designed and commissioned in the UAE uses coal, gas or nuclear-generated energy - the era of cheap power is drawing to a close in both the UAE and the wider Gulf region.
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