By Soren Billing
A series of power cuts in Sharjah illustrates the need for a sustainable energy policy if the UAE.
A series of power cuts in Sharjah is making some residents consider relocating. They also illustrate the need for a sustainable energy policy if the UAE is to meet its ambitious growth targets.
As Sharjah residents this month stayed with friends, slept in cars or checked into Dubai hotels to escape the sweltering summer heat, many wondered how it could be that one of the most energy rich regions of the world is unable to supply its cities with energy.
"If the government updates us on when the power is going to be cut, maybe we can safeguard ourselves or invest in alternate solutions like Inverters and Uninterruptible Power Supply (UPS) systems. Over this past week my Sharjah office has lost a bit of data due to the uninformed power cuts," said Arabian Business reader Karan Kalra.
"This is the last straw," wrote another reader. "With rents in Dubai coming down, it won't be much time before the exodus starts from Sharjah back to Dubai."
For owners of newly built properties that have been waiting for months to get connected to the emirate's power grid the outlook went from bad to worse.
Sharjah Electricity and Water Authority (SEWA) has been tight-lipped on what the cause of the outages has been, but it appears that authorities have underestimated the rate of growth in Sharjah, Ajman, Fujairah, Ras Al Khaimah and Umm al Quwain, after the region collectively known as the Northern emirates was drawn into the Dubai-led property boom.
"They can put a band aid over the situation and get this turbine fixed in a couple of weeks to a couple of months...But what Sharjah needs at the moment is some reserve standby capacity that they can utilise when they have outages," says the regional director of an energy company, who does not want to be named.
"Have you taken a drive to Sharjah and Ajman and seen the number of towers that are blacked?" he says of the many developments waiting for electricity.
A government report estimates the number of commercial buildings in the northern emirates waiting for electricity to be around 1,000, UAE daily The National recently reported.
If the cause of the disruptions has been a failing gas turbine, which seems likely, the solution would simply be to build more of those once financing is in place. But even then, Sharjah and the rest of the UAE would probably not have enough gas to cover its own needs. The situation is exacerbated by state subsidies that have encouraged energy use, and sometimes led to what many see as wasteful consumption.
Dana Gas, a Sharjah-based private-sector natural gas company, said earlier this year that it is moving ahead with plans for the exploration and development of a concession in Sharjah. The Western Offshore concession covers an area of 1,000 sq km and includes the Zora gas field, which was discovered in 1979.
Elsewhere, the $3.5bn Dolphin gas pipeline, scheduled for completion in 2010, will transport gas from Qatar's North Field to the UAE and Oman. But with Qatar preferring to export gas in its more profitable liquid form, it is unlikely to quench its southern neighbour's thirst for energy.
Could the solution lie across the Gulf? Abu Dhabi-backed investment firm Mubadala last month denied a report that it was in talks with the National Iranian Oil Co (NIOC) over importing Iranian gas to the UAE. Tehran's semi-official Mehr News Agency had reported that Mubadala Petroleum Services had reached a preliminary agreement to import Iranian gas.
Sharjah-based Crescent Petroleum has unsuccessfully tried to strike a deal with NIOC over gas imports. Eight years ago, the privately held company signed an agreement with NIOC for supplies of 600m cubic ft of gas per day, and has been ready to take delivery since late 2005. The oil and gas company said in August that it would take NIOC to arbitration.Since then, Iran's National Iranian Gas Export Co (NIGEC) has claimed it has entered a three-year gas delivery contract with the UAE. Separately, the state-owned company saidin August that it had signed a memorandum of understanding with an unnamed UAE firm to export 3bn cubic metres of gas per year to the country over a 25-year period. It wasn't clear whether the two contracts were with the same company.
The UAE federal government estimates energy demand will rise by nine percent per year on average from 2007 until 2020. This will lead to national annual peak demand for electricity of more than 40,000 MW.
Green energy is part of its strategy to increase capacity. Abu Dhabi is building what it claims will be the world's first carbon-neutral, zero waste city: Masdar City, which will also house the headquarters of the International Renewable Energy Agency. But despite heavy investment and year round sunshine, alternative energies such as solar and wind power are only estimated to account for four to five percent of peak electricity demand by 2020.
Moody's last year estimated that $50bn may be spent in the GCC countries by 2015 on increased generation capacity of nearly 60,000 MW. Substantial investments will also be needed to update transmission and distribution networks.
"Moody's believes that...exceptional growth trends are likely to challenge local utilities, which will need to install significant additional capacity to meet rising demand," said Philipp Lotter, senior vice president at Moody's Middle East.
"Power shortages and temporary blackouts have already been seen in certain countries with tight supply margins, and these are likely to increase, particularly where utilities are operationally and financially unable to fully execute their expansion plans."
For its short term needs the UAE will probably have to supplement gas with burning oil, if it wants to avoid the disruptions seen in Sharjah. The Dubai Electricity and Water Authority (DEWA) has said energy consumption will grow by 10 percent this year, which would be among the highest growth rates in the world.
To that end, Dubai's ruler Sheikh Mohammed Bin Rashid Al Maktoum on August 31 issued a decree forming a new body to oversee the emirate's energy needs, the Supreme Council of Energy.
The new agency will be led by chairman Sheikh Ahmed Bin Saeed Al Maktoum, also the chairman of Emirates, and the executive chairman of DEWA, who will be deputy chairman. It will also include representatives of Dubai Aluminium, Emirates National Oil Co, Dubai Petroleum, the Dubai Nuclear Energy Committee and the Dubai Supply Authority.
Solving the former boomtown's energy needs when growth resumes will be no easy task. While the burning of liquids (crude oil and diesel) is logistically viable, it would be too expensive and pollutive to function as a long term solution. Coal-fired power plants are cheaper but would have an even more detrimental effect on the environment.
The federal government believes the solution lies in its $41bn nuclear energy programme, which it hopes to set up in record time.
In March 2008, the UAE cabinet approved a memorandum submitted by foreign minister Sheikh Abdulla Bin Zayed Al Nahyan on the UAE's potential development of a peaceful nuclear energy program.
The Emirates Nuclear Energy Corporation met with international firms in Abu Dhabi this year and is now weighing bids for the role of prime contractor.
General Electric, Korea Electric Power and Areva are among the bidders for the contract, which is unlikely to be awarded before the end of this month, according to the Middle East Economic Digest (MEED).
The UAE hopes the programme will be up and running by 2017.
This is like having a fresh water Lake on your doorstep, and yet your family are famished by thirst.. There are so many opportunities and systems to get almost free energy, and yet there are power cuts.. UAE creates enough waste per day, to generate enough electricity to keep it going...without the need for gas