Expanding renewables capacity to meet growing demand

Kuwait’s vast oil wealth has allowed its leadership and citizenry the luxury of inexpensive, readily available electricity, with energy demands traditionally met using oil-fired power stations. Oil consumption for power generation previously comprised a relatively small portion of overall crude production and did not make a major dent in oil revenues. However, with an expanding population, sustained world oil prices of more than $100 per barrel, and increased concern about government spending and ambitious crude production targets, the state is looking to renewable energy sources to play a greater role in meeting demand.

Private Sector Steps In

The Ministry of Electricity and Water (MEW) made history when it announced plans to build Kuwait’s first ever integrated solar combined-cycle (ISCC) plant, which will be one of the world’s largest when construction is completed. This announcement has opened the door for private sector participation in renewable energy. The MEW hopes to meet 15% of Kuwait’s energy needs with renewables by 2030, which will require significant private sector participation. Although Kuwait came late to the renewables game compared to its GCC neighbours, the nation’s intense sunlight, blistering summer heat and strong winds should prove to be an advantage.

Solar energy projects face several obstacles for implementation in Kuwait, including high costs, relatively small generating capacities and previous delays in implementing projects. However, the MEW and the Partnerships Technical Bureau (PTB) have shown early success in working together to develop clean energy projects, with work in awarding tenders for two considerable undertakings, Shagaya Park and the Al Abdaliya ISCC project, expected to gain momentum in 2014.

Demand Growth

Demand for electricity in Kuwait has soared over the past five years, with electricity consumption growing by 20% between 2009 and 2013 to hit 12,060 MW, and expected to reach a peak load of 14,500 MW by 2015, according to the MEW. The MEW forecasts peak load will jump to 25,500 MW by 2020, requiring the state to effectively double its electricity production within the next six years. Achieving this target is likely to prove a challenge, especially since Kuwait managed to add less than 5000 MW of new capacity between 2002 and 2012, according to MEED Insight.

Although these challenges will be mitigated by Kuwait’s proximity to the GCC interconnection network, which allows for cross-border transmission of emergency power, there is an urgent need for new domestic electricity supply. The MEW’s latest projections show that the state will need to utilise 25% of total oil and gas production for electricity generation by 2030, representing an unsustainable drain on oil revenues. “The world is not running out of oil, the world is running out of easy oil. So with more mature fields, new technology must be incorporated to increase production from difficult sites,” Wadii El Karkouri, vice-president and general manager at Schlumberger Kuwait, told OBG.

Given its ever-expanding capacity requirements, Kuwait has had little choice but to pursue non-renewable power generation. Aware that government efforts to build capacity have previously been mired in bureaucracy, the state approved private power provision in 2008, with the passing of the public-private-partnership law, later introducing legislation allowing for the development of independent water and power plants (IWPP) in 2010. After a lengthy tendering process, the Al Zour North project became the country’s first IWPP in 2013 (see electricity analysis), which bodes well for future power project development.

Early Efforts

Renewable energy has been an intermittent government priority since the 1970s, with feasibility issues and delays in the wide-scale adoption of green technology – in addition to geopolitical developments – having previously slowed progress.

Under the state’s first renewable energy programme, which ran from 1975 to 1988, a number of solar facilities were constructed, and the Kuwait Institute for Scientific Research (KISR) investigated the possibility of building wind farms across the country, in addition to solar projects. Buildings including the Kuwait English School and the Ministry of Defence implemented solar projects in 1983 and 1984, respectively, but the late 1980s oil price crash and the Iraqi invasion of 1990, coupled with the high cost of materials and engineering, brought early renewables efforts to a halt.

Revival

The programme was revived in 2005, when Kuwait drew up a 2030 renewable energy strategy and carried out a feasibility study looking into renewable technologies for power generation. In October 2011 the government announced an ambitious green energy target. Eyad Ali Al Falah, assistant undersecretary for technical services at the MEW, indicated that the state plans to meet 10% of its domestic energy demand through renewable energy by 2020, and 15% by 2030, exceeding Abu Dhabi’s target of 7% by 2020. However, analysts have said that the 10% target is unrealistic for Kuwait, arguing that even Abu Dhabi, home to the world’s largest solar plant at Masdar City, was forced to push its 7% target deadline from 2020 to 2030.

Concentrated solar power (CSP) is the most attractive option for wide-scale solar projects in Kuwait. CSP systems use reflective surfaces and lenses to concentrate sunlight from large areas onto a smaller focal point, converting light into intense heat, which is used to drive a steam turbine connected to an electrical power generator. The other major technology, photovoltaic (PV) involves using PV cells, commonly referred to as solar panels, to convert concentrated sunlight into electricity. CSP allows large-scale solar projects to feed directly into the power grid, whereas utilising excess energy from solar panels will require a feed-in-tariff (FIT) system connecting panels to the national grid.

“We do not have the FIT programme yet, but we are working on it. The biggest challenge is time; we need to move forward and implement these programmes with a sense of urgency,” Suhailah Marafie, director of the MEW’s department of studies and research, told OBG.

Solar Parks

Large-scale projects will help Kuwait meet its renewables targets, with Shagaya Park, the government’s first major renewables pilot project, slated to see significant development in 2014, following early success in the bid tendering process.

The Shagaya Renewable Energy Master Plan was developed to help conserve Kuwait’s oil reserves for the export market and local industrial development, while simultaneously diversifying the oil-dependent economy and reducing greenhouse gas emissions. The three-phase plan, drawn up by the KISR, will see construction of a new energy park capable of generating 50 MW of CSP with an additional 20 MW to be composed of wind and PV power. Shagaya’s second and third phases are expected to add a further 930 MW and 1000 MW of power, respectively. KISR hopes to complete the park, which will be built at a 100-sq-km site west of Kuwait City by 2030, with the first phase expected to finish in 2017. In June 2013 KISR launched the bidding process for the engineering, procurement and construction of the park’s first phase, with bidding closing in November 2013. Six consortia were announced in February 2014, with five led by Spanish contractors.

Bidders included Spanish engineering firm TSK Electronica y Electricidad, which is currently involved in the construction of the 50-MW Bokoport independent power producer (IPP) project in South Africa and the 160-MW Ouarzazate IPP in Morocco. Abengoa’s subsidiaries Abener and Teyma, two global firms that have worked on many large-scale facilities, including Abu Dhabi’s 100-MW Shams 1, also expressed interest. The winning bid, to be decided in 2014, will execute the contract under a build-operator-transfer model.

Al Abdaliya

Al Abdaliya, the state’s first ISCC and most advanced solar project, had its feasibility study conducted by Japan’s Toyota Tsusho Corporation in 2007. The project will consist of Al Abdaliya Solar Plant, a 60-MW trough solar collector, which will be part of a 280-MW ISCC system, integrating a parabolic trough collector with a gas turbine. Early studies were completed in late 2012, after which the PTB and MEW issued a call for proposals to provide technical assistance. The project’s construction will cost an estimated $720m, with the entire project valued at $3.27bn.

The ISCC project will contain Kuwait’s first CSP plant, and is being set up as a special purpose vehicle (SPV) which will design, build, finance, operate and maintain the power generation facility for a fixed duration of time, with the SPV expected to sign an energy conversion and power purchase agreement with the MEW.

In September 2013 the Ministry of Finance’s technical office for examining development projects and initiatives signed a contract with HSBC to act as a transaction advisor. Under the agreement, HSBC will assist in procuring the transaction, and in the establishment of a public joint stock company that will serve as the SPV for the project. The consultancy contract with HSBC marked the first time a private company had been involved in a state development strategy, although later agreements signed for the Al Zour North IWPP have contributed to private sector momentum in power grid expansion. The MEW is also implementing smaller projects to generate 1 MW of electricity in 2014.