Powering on: Initiatives to increase electricity generation capacity are under way

As the largest supplier of electricity in Ras Al Khaimah, the Federal Electricity and Water Authority (FEWA), works to meet increasing electricity demand across the UAE, authorities in RAK are developing plans of their own to meet growing local demand. Abu Dhabi provides power and water to residential customers throughout the country, but it does not, nor does the FEWA, typically provide services to commercial entities, though the latter has recently expressed interest in doing so. To meet increasing demand for power in the emirate, RAK is now looking to work with the private sector to increase capacity and services.

Plans For Expansion 

To this end, the emirate has announced plans for a local regulator of the sector, commissioned an official demand forecast from Tata Power, a unit of the Indian conglomerate Tata Group, and is aiming for expanded services in future for both residential and commercial users. That means additional generation capacity but also perhaps a more developed grid for the emirate to complement FEWA’s.

The private sector in RAK has responded: plans are in progress for a clean-coal plant as well as future independent water and power plants (see analysis). Estimates based on existing forecasts peg increases in demand at around 6-10% a year for power and water in the emirate. At present, the lion’s share of demand is met by FEWA’s plants, of which there are two in RAK. As electricity and water are often a combined operation for utility providers in the region, FEWA also operates several desalinisation plants in the emirate. Production capacity for these is 15m gallons per day, and in addition RAK draws water from a FEWA pipeline running from Fujairah to the east, which has a capacity of about 17m gallons, of which 8m gallons is delivered to the emirate. Another line is in the works that will bring in an additional 3m gallons.

Local Participation

The federal government is open to private sector participation in any part of the power and water process. Generation licences are awarded by the individual emirates, while transmission licences require FEWA permits. Because FEWA’s obligations end at residential service, RAK has been adding capacity on its own, and in 2009 the RAK Investment Authority (RAKIA) created Al Ghail, a state-owned firm that operates two domestic power plants, Al Ghail and Al Hamra. The plants have installed capacity of 84.4 MW and 45 MW, respectively, although actual production ceilings are 65 MW and 35 MW. Neither Al Ghail nor Al Hamra produces water, however.

Customers include industrial clients within RAKIA’s free zones or those operating in the onshore economy with RAKIA as a partner. Al Ghail is its own transmission and distribution company, and does not use FEWA’s local grid. It runs point-to-point connections between its plants and customers, and in 2012 installed a 33-KV line between the facilities to help balance loads and meet demand. Tata Power is studying the current and forecast power demand of RAK to aid the setup of a coal-based power plant in joint venture with the RAK government and Al Ghail Power.

Private Provision

A third company, a private utility called Utico, is the largest provider of water to RAK, with current capacity of 31m gallons per day and plans for another 28m gallons per day within the next two years. Utico is the only private entity with licences for both generation and transmission, and on top of its water production activities has power generation capacity of 120 MW, and plans for another 730 MW to come in the future. Of that, 270 MW are envisioned coming from a clean-coal plant that would be the first of its kind in the UAE, and if successful would make Utico a global pioneer in clean-coal technology.

FEWA, for its part, has not ruled out the notion of serving more customers in RAK, that is, in addition to the obligation it has toward residents. To be sure, RAK’s growing industrial sector represents an economic opportunity for the federal utility. In fact, FEWA has been inviting RAK’s commercial customers to pay for a connection with the promise that they will receive power when it becomes available. That generally means in winter, when extra capacity is on hand thanks to lower demand for air conditioning systems. The RAK Investment Development Office has taken the lead among government agencies by commissioning a demand study from Tata Power, which is set to deliver a 10-year forecast by the end of 2013. Decisions will be made from there, with options including an independent power plant or independent water and power plant. As of mid-2013, Tata was reported to be considering such an investment. Tata has focused on power generation investments outside of India since early 2012, when it announced that policy and bureaucratic hassles at home had caused the company to refocus its investments on power in overseas markets.

Developing Infrastructure 

Developing an environment suitable to private sector participation is likely to be slightly different in RAK because of the federal makeup of the UAE. Traditionally, for example, an independent power plant would come with guarantees of a price and volume to be sold from a government buyer. Private sector developers could possibly also be incentivised by the chance to serve a dedicated zone with industrial customers that sign purchase contracts, often on a take-or-pay basis. While the latter is possible in RAK, the former is not – at least not yet, as the emirate lacks transmission and distribution companies. It also did not have a locallevel regulator until March 2013, when a decree from RAK’s ruler Sheikh Saud bin Saqr Al Qasimi established the Ras Al Khaimah Electricity and Water Authority (RAKEWA). The new regulator is therefore seen as an important step in bringing to the emirate the institutions and capacity necessary to stimulate private sector investment in the industry.

Clean Energy

The clean-coal plant under consideration by Utico would serve as an industry leader and a first in the GCC region, both for the feedstock and the emissions-free production (see analysis). Utico’s plan is for a 270-MW plant that would be operational by 2015. The plant would be situated in RAK Maritime City, a free zone offering private jetties to customers and serving a cluster of industries suited to take advantage of the strategic location. Utico is working with RAKIA on the plan, which involves a RAKIA subsidiary’s ownership of a coal mine on Indonesian Borneo.

A further incentive for investment in the power sector in RAK is the opportunity to export power to other GCC member states. Across the region, countries are ramping up spending to meet rising demand for power and water. According to electricity industry trade reports, investment in capacity reached $25bn on the Arabian Peninsula in 2012, and installed capacity is forecast to hit 170,000 MW by 2019. To this end, GCC countries have been working to connect their national electricity grids to allow for imports and exports across the peninsula. This is in the implementation stages, along with a plan for a grid to reach further afield to include Egypt, Jordan and Lebanon.