Meeting demand: Attention turns to diversifying the energy mix and developing infrastructure

Buoyed by surging demand driven by rapid economic and demographic growth, the energy sector in Dubai is witnessing a period of significant transformation.

The emirate’s utility company currently relies on natural gas imported from Abu Dhabi and Qatar for approximately 99% of its electricity generation capacity. Gas is expected to remain the dominant fuel in the energy mix for the foreseeable future, responsible for a projected 71% of generation capacity in 2030 under Dubai’s Integrated Energy Strategy (DIES).

Acknowledging the potential impact of disruptions and fuel price volatility, the energy landscape has begun to change to reflect the strategic imperatives of fuel diversification and demand side management (DSM). The total capital expenditure required for initiatives resulting from these strategies is estimated to be some $10bn, with potential energy savings of about $20bn, according to Saeed Mohammed Al Tayer, CEO of the emirate’s utility company and vice-chairman of the Dubai Supreme Council of Energy (DSCE). As these plans are executed, opportunities are likely to increase for producers of energy-saving technology.

Championing the diversification strategy is the DSCE, a governance body established in 2009 and tasked with oversight of policy to ensure that the local economy has adequate access to energy resources. The DSCE includes representatives from several key energy stakeholders, including the Dubai Electricity and Water Authority (DEWA), Dubai Aluminium Company (DUBAL), Emirates National Oil Company (ENOC), Dubai Supply Authority (DUSUP), Dubai Petroleum Establishment (DPE), Dubai Nuclear Energy Committee (DNEC) and Dubai Municipality (DM).

Hydrocarbons

The hydrocarbons sector accounts for approximately 80% of all government revenues in the UAE. However, the sector’s GDP share varies substantially within the federation, from over 50% in Abu Dhabi to less than 6% in Dubai, according to government statistics centres in both emirates. Of the 97.8bn barrels of confirmed crude oil reserves in the UAE, some 94% are concentrated in Abu Dhabi and 4% in Dubai, the bulk of which is exported.

Given its relatively modest hydrocarbons endowment and its reliance on gas for close to 99% of the fuel mix in electricity generation, Dubai must import the bulk of its energy feedstock. Although Abu Dhabi's gas production (about 2.42trn cu ft in 2011) has been insufficient to meet domestic demand, most of it has been locked into long-term liquefied natural gas (LNG) supply contracts. As an alternative source, the Dolphin project was initiated in 2000 to provide 2bn cu ft per day (bcf/d) of piped gas to the UAE from Qatar under a long-term structure. A 460-km sub-sea pipeline extends from Qatar’s offshore North Field, supplying the vast majority of the roughly 300 bcf of natural gas delivered to Jebel Ali in Dubai every year.

The intense exploitation and advanced depletion of Dubai’s limited oil and gas reserves over the past two decades has contributed to a steep decline in the relative economic importance of hydrocarbons production to Dubai’s GDP. As with crude oil, the UAE's proven natural gas reserves of 215trn cu ft (tcf) are largely located in Abu Dhabi, which controls approximately 94% of the country's endowment (201.7 tcf in 2011). Sharjah has the second-highest volume of proven reserves (8.65 tcf), followed by Dubai (3.53 tcf). Most of these deposits have a relatively high sulphur content that makes the gas highly corrosive and difficult to process. As techniques for processing this “sour” gas improve, it is possible that Dubai will be able to increase its marketed production levels, but the differential would represent a negligible percentage of sector GDP share.

Oil Fields

 The DPE, nationalised in 2007, is the state oil company and regulator responsible for Dubai’s four offshore fields: Fateh, South-west Fateh, Falah and Rashid. Production in the new Al Jalila Field, east of the small Rashid Field, will likewise fall under DPE authority when it comes online in 2014. While Dubai has producing mature oil basins, offshore reserves are nearly exhausted and the cost of recovery continues to climb. The largest field in Dubai is the Fateh-South-west-Fateh-Falah fields, with 80,000 barrels per day (bpd) operated by the DPE. Most crude oils extracted in the UAE are considered light but sour. Sulphur content is very high in offshore crude oil fields like Dubai’s Fateh basin, where sulphur makes up approximately 2% of composition by weight. These crude oils are traded at significantly lower prices than leading benchmark crude oils from Texas (WTI) and the North Sea (Brent).

Midstream

Dubai has a developed domestic pipeline network used to link oil fields with processing plants and export terminals. Most gas imported from Qatar to Dubai is sent via the Dolphin Energy pipeline project either directly to the port of Jebel Ali or via Abu Dhabi's Taweelah power stations. The pipeline supplies all seven emirates, meeting roughly 30% of the UAE’s demand for natural gas. Large ongoing ventures include a $150m project fronted by DUSUP to build a 41-km fuel gas pipeline between Jebel Ali and Hassyan P power station in Dubai, in addition to a 60-km pipeline link that will to connect the new Horizon Terminals Limited (HTL) oil storage terminal at Jebel Ali to Dubai’s Al Maktoum International Airport.

Downstream

The UAE has five refining facilities, the largest of which are the Ruwais refinery in Abu Dhabi (415,000 bpd) and the Jebel Ali refinery in Dubai (120,000 bpd). ENOC owns and operates the Jebel Ali petroleum refinery in the Jebel Ali Free Zone. This complex processes condensate and light crude oil to yield refined products such as naphtha, diesel oil, fuel oil, jet fuel and liquid petroleum gas (LPG) for local and export markets. Furthermore, it is worth noting that condensate production is outside the OPEC quota mechanism and therefore suitable to generate a sustained stream of additional export receipts.

Following an $850m upgrade in 2010, including the installation of a reformer and a hydrotreater, the refinery also began producing 102 octane reformate and ultra-low sulphur naphtha. In June 2012, ENOC announced plans to boost the refining capacity of the Jebel Ali refinery by 20,000 bpd as part of a larger port expansion project. Just over one year later, in September 2013, the DSCE signed a memorandum of understanding with China Sonangol International to build what will be the emirate’s second crude oil refinery. The project is expected to cost around $3bn and may be completed by 2017, reducing domestic reliance on imported fuels and positioning the UAE as a major petroleum products exporter.

Some energy analysts have expressed doubts regarding the plan, claiming that China Sonangol is not well known in the region and lacks refining experience. The capacity of the proposed plant and a precise schedule for completion have not been disclosed and a project consortium has yet to be mobilised to oversee front-end engineering design, green-field project financing and process flow management. Questions are also being asked as to whether additional domestic refining capacity should be prioritised given that the Abu Dhabi Refining Company is working to double capacity at its existing 415,000-bpd refinery at Ruwais.

Potential For Services

 As a means of diversifying exposure in the hydrocarbons sector, Dubai’s energy regulators are also seeking to exploit the significant potential in services like bunkering, re-exports and strategic defence storage. Demand in these segments is largely driven by growing domestic aviation requirements and the strategic location of the port at Jebel Ali, the emirate’s main shipping hub for general cargo and oil products. Through its UAE Terminals business unit, ENOC subsidiary HTL is expanding rapidly to meet this demand with new opportunities for bulk liquid terminalling. The Horizon Terminal at Jebel Ali currently handles the widest range of petroleum liquid and chemical products in the region, including fuel oil, naphtha, gasoline, gas oil, jet fuel and liquefied petroleum gas. With a capacity of 936,755 cu metres through 55 tanks, the terminal plays an important role in establishing Dubai’s reputation as a regional hub.

“Dubai is an ideal storage and distribution point for lubricants, especially as it increasingly supplies to growing industrial sectors throughout the region,” Christopher Bradley, country chairman at Chevron, told OBG. Another terminal being developed by HTL at Jebel Ali will add storage capacity of more than 141,000 cu metres by the last quarter of 2013. The $142m bulk liquid petroleum terminal will be fully automated and will have facilities for receiving jet fuel from marine tankers and from the adjacent 120,000-bpd refinery, owned by ENOC. A 60-km jet fuel pipeline will link the terminal directly to Dubai’s Al Maktoum International Airport to increase operational efficiencies and meet demand for assured jet fuel supplies. LNG terminalling provides yet another set of opportunities for growth. DUSUP constructed the emirate’s first floating storage regasification unit in March 2010 by converting a Jebel Ali LNG tanker into a storage unit with a total capacity of around 3m tonnes per year.

By the end of the year, DUSUP had begun importing LNG to augment natural gas as a feedstock for electricity generation in the summer months, when demand is high. A surcharge was introduced from January 2012 to cover the cost of the imported LNG fuel. Other storage areas for gas in Dubai include the Margham field and the Jebel Ali Salt Dome, with reports in March 2012 suggesting that Dubai authorities were in the process of reviewing plans to use depleted oil wells to create additional storage capacity for natural gas. The increased storage capacity could do much to cement Dubai’s role as a gas exchange point, though this would require major investment, including a gas export terminal and trading system on one of Dubai’s stock exchanges.

Power Generation

The DSCE is the central planning agent for power generation and water distribution in Dubai, organising the rights and duties of service providers and rationalising the use of energy. DEWA is a key member agency of the DSCE. The government-owned utility posted growth of 6% in profits for 2012, netting $1.2bn on revenues of $4.27bn, up from $4bn in 2011. Investments to boost network reliability and operating efficiency contributed to the earned surplus, which was adequate to fund all capital investment requirements. To refinance existing debt, DEWA returned to global debt markets for the first time in more than two years in February 2013 with a $1bn dollar-denominated sukuk (Islamic bond), which drew strong investor demand. The utility raised an additional $230m of debt through export credit agency finance, syndication and securitisation deals. As a result of this, the company is not expecting to require external funds or issue further sukuks before 2015 if electricity demand growth remains steady.

DEWA has projected annual growth in energy demand of up to 5% through 2030, a statistic that reflects the pace of industrial and economic growth in Dubai. According to data provided by the Dubai Statistics Centre, electricity, gas and water grew by a total of 4.3% as a percentage of GDP over the first half of 2013, in line with a 4.9% expansion in the emirate’s economy. Corresponding DEWA figures suggest that demand for energy increased by 7.1% in the first quarter, as compared to the same period in 2012. In order to meet this increased demand, production capacity, transmission and distribution networks have all been expanded. With the commissioning of M Station in 2012, the emirate’s utility boosted total installed power capacity to 9646 MW, up by 10.6% from the 8721 MW recorded in 2011. This is believed to have provided sufficient resources to cope with future requirements for the next five years at a base forward demand growth forecast of 5% electricity consumption per year. Short-term demand surges that exceed reserve margins can be met by additional capacity in the national power grid or by new domestic turbines that can be drawn on at short notice.

Efficiency Initiatives

 Dubai’s per capita energy consumption rates are among the highest in the world, a result of rapid economic and demographic growth, wasteful habits and an environment that requires major energy investments in desalination and cooling. As a consequence, the emirate’s electricity demand has experienced a compound annual growth rate of more than 8% over the past six years and a 6% growth in annualised demand in 2013, according to Vahid Fotuhi, President of the Middle East Solar Industry Association.

Most electricity in Dubai is produced in co-generation or combined-cycle systems, a process where waste heat from the burning of natural gas to produce electricity is captured and used to heat water at desalinisation plants. Output is split between gas turbines that burn the fuel directly (7104 MW, or 74%), and steam turbines, which use it to create steam (2542 MW, or 26%). Natural gas is the most efficient primary fuel for these processes, supplemented by LNG in the summer and diesel oil as a secondary fuel. These and other power augmentation technologies have helped DEWA improve production efficiency by 26% since 2006, enhancing fuel use efficiency by about 84-90% through optimum power plant design and operations, according to Al Tayer, the CEO of the utility company.

The emirate has also sought to drive efficiencies in DSM by introducing a cost-reflective slab tariff system in 2011 and a surcharge for end users in 2012, the latter to cover the cost of expensive imported LNG fuel. The initiatives incentivise customers to focus on efficiency measures by raising usage costs to Dh0.45 ($0.12) per kilowatt hour (KWh) for electricity, compared to Dh0.20 ($0.05) three years ago.

Electricity Transmission

The domestic electricity grid in Dubai is operated by DEWA and integrated into a national and regional GCC Interconnection Grid, helping to improve transmission efficiency in the UAE.

In 2012, DEWA achieved a milestone in increasing its installed capacity, growing the number of 132-KV main substations from 165 to 184 and growing 132-kV electricity transmission networks by 245 km over the previous year. The number of DEWA’s 400-KV substations likewise increased to 18, and the number of 11-KV and 6.6-KV power transformers grew to 26,756. Underscoring the gains in efficiency over the past two decades, Al Tayer has claimed that grid power losses in transmission and distribution networks dropped to 3.5% in 2012, compared to 6-7% in Europe and the US.

Smart Networks & Meters

DEWA continues to work on improving its own operations to maximise efficiencies and enhance the flexibility of Dubai’s electrical grid to accommodate market demands. The company therefore began implementation of the Smart Networks and Meters project, which aims to replace all mechanical and electromechanical water and electricity meters in Dubai with smart meters. The threephase project, costing Dh7bn ($1.91bn), is intended to replace 250,000 metres in the residential, industrial and commercial sectors by 2018. The new meters will be able to automatically generate and then submit usage readings over bi-directional digital communications systems that maintain and store all consumption records. The meters will also provide DEWA’s customers with detailed usage information that can be used to rationalise consumption and reduce monthly utility bills. The project completes the implementation of DEWA’s SmartGrid network, integrating supervisory control and data acquisition (SCADA) systems alongside efficiency improvements in virtual system maintenance and breaker access. One case of smart grid technology has been operational at Dubai International Airport since 2004, when the power and automation technology group ABB was contracted to supply and install an Airport Distribution SCADA system. In March 2012, the Dubai Aviation City Corporation (DACC) awarded ABB a contract for the extension of the existing SCADA monitoring system at Dubai Airport, adding more data, substations and distribution equipment.

Desalination

 As with electricity, water demand and consumption are growing. Average per capita water consumption rates in the UAE are three times higher than consumption in EU countries and approximately 82% above the global average, data provided by DEWA show. According to government figures, water demand across the country will reach 9bn cu metres by 2030, up from 4.5bn cu metres in 2008. The majority of this demand is met with groundwater reserves, estimated at approximately 583bn cu metres nationwide at a ratio of 3% freshwater to 97% salt water. There are 70 desalination plants in the country, making the UAE the second-largest desalinated water producer in the world after Saudi Arabia. In Dubai, desalination plants supply 98.8% of water demand, with the remaining 1.2% sourced from groundwater. The energy required to desalinate water is typically captured as waste heat from the burning of natural gas to produce electricity, an energy-intensive process known as co-generation.

DEWA recorded an increase of 17.5% in desalinated water production capacity in 2012 to 2.1m cu metres per day (cmd). Peak demand for water over the same period had fallen well under capacity to 1.3m cmd, with a reserve margin estimated at 840,000 cmd. Statistics provided by the emirate’s utility indicate residential areas in Dubai have the highest rate of water consumption at 57%, compared to 27% for commercial areas, and 3% for industrial areas across its customer base.

Water Usage

 Ongoing projects are focused on the water productivity market segment. Government efforts in this area were reported by DEWA to have resulted in a 10.88% decrease in network line losses in the water sector in 2012, down from 42% in 1988 and below the North American average of 15%. DEWA is currently examining approaches to boost groundwater production by injecting reservoirs with surplus drinking water. This can be retrieved and channelled into water pipeline networks at times of emergency to increase water productivity and boost the efficiency of pipeline networks.

The DSCE is also developing its efforts in water-reuse and efficient irrigation strategies by developing partnerships between public and private players to promote sustainability, a pillar of DIES. DIES includes two components to implementation: optimisations ( efficiencies, demand abatement) in addition to supply-side diversification (renewables). “Financial institutions in the UAE are not always capable of facing the changes associated with efficient and sustainable technologies, but with the right support, incentives and regulation the adoption will become seamless,” Waleed Ali Ahmed Salman, chairman of Dubai’s Carbon Centre for Excellence, told OBG.

To achieve its target of a 30% energy demand reduction by 2030, a DIES objective, Dubai is implementing a strategy aimed at reducing and optimising energy usage. Investments are being channelled into eight short-, medium- and long-term DSM programmes and 24 initiatives at various stages of development and implementation. At DSCE member level, these include reducing DEWA line losses and plant operating costs, reducing natural gas use in DUSUP operations, optimising electricity and water use in the DM’s operations and optimising natural gas use and water production in DUBAL. This emphasis on demand abatement distinguishes the Dubai model from other GCC diversification strategies, which focus on supply side management initiatives and the diversification of energy generation.

Dubai’s DSM initiatives are undergirded by policies and regulations that will be used as technical levers to provide incentives, establish targets for sector expansion and develop new institutions, regulatory agencies and state-funded energy service companies (ESCOs) that can pilot and scale-up energy efficiency measures. Potential savings are enormous. The DSCE estimates that 19 terawatt hours and 213.7m cu metres of water could be saved by 2030 through cost-effective DSM prescribed in the DIES. These savings could close the energy supply gap by up to 40%.

Building Regulations

These measures could be particularly important in future. Rapid population growth, the revival of deferred construction projects and the announcement of numerous large-scale developments over the past year have resulted in an extraordinary surge in power and water demand in Dubai. The changes also provide the emirate with a unique opportunity to invest upfront in energy-efficient practices for the next generation of the built environment.

Buildings in Dubai are currently responsible for approximately 75% of the emirate’s demand for electricity in addition to 86% of its water usage, according to the Building Studies Unit of the DM Building Department. Recognising the need to reduce these levels of demand, DM has prioritised the improvement of building efficiency in line with the emirate’s vision for sustainability. Local building codes first began incorporating efficiency measures in the 1990s, predominantly with a focus on insulation. In 2001, DM, through Decree No. 66, introduced energy efficiency standards for new buildings that included minimum efficiency requirements for air conditioning equipment and procedures for the calculation of peak building energy demand.

All buildings constructed over the last 12 years have incorporated these minimum standards. Since 2003, DM has also applied thermal insulation as a key method for energy saving, resulting in a reduction of up to 40% in air conditioning power consumption. This is key as about 70% of the electricity use in a building goes into cooling. This percentage reflects the intense air conditioning requirements of buildings and the relatively small contribution of the industrial sector (see analysis). Recent years have also seen a trend toward government adoption of more rigorous rating systems (such as the Estidama Pearl Rating and Leadership in Energy and Environmental Design) and “green building” design methodologies as a strategy to address local sustainable development challenges.

The second phase of green building code implementation, extending from 2011 to the end of 2013, was the mandatory application in all government buildings of the 79-point “Dubai Green Building Regulations and Specifications”, the region’s first mandatory green building code developed in partnership by DM and DEWA. The programme’s senior architect, Adel Mohammed Mokhtar, told OBG that the main aim of the regulatory scheme was “lowering Dubai’s ecological footprint through a marked improvement in design standards.”

The code is designed to reduce electricity and water consumption in buildings by at least 20%, while ensuring that costs do not exceed a 5% increment. Illustrating the impact of the regulations, DEWA’s Sustainable Building in Al Quoz opened in February 2013 and was rated the GCC’s most “Energy Efficient Building”, with energy savings of 66%.

The emirate’s utility has budgeted Dh16m ($4.36m) for green building initiatives in 2014. The third phase of building regulation implementation, slated to begin in 2014, will require all public and private construction projects to adhere to the Dubai Green Building Regulations and Specifications.

Building Retroprofits

 Retrofits of existing building infrastructure are an essential element of the DIES strategy. With an expected investment of Dh3bn ($816.6bn), the authorities have set an objective of retrofitting 30,000 buildings in the emirate to meet the energy efficiency guidelines of the Dubai Green Building Code by 2030 – an attractive market for ESCOs looking to engage in the emirate. Government intervention in the retrofit market has focused on the creation of a viable market for ESCOs in which building owners, private sector ESCOs and government entities can initiate energy efficiency projects in existing buildings.

Dubai already has some ESCOs operating in its market, including Energy Management Services (EMS), Pacific Controls, Veolia Azalia and Zamil Industrial from Saudi Arabia. International ESCOs engaged in Dubai tend to be facility management companies on the demand side, such as Farnek Services LLC and Dalkia, and equipment companies on the supply side, such as Schneider, Siemens or Johnson Controls. These typically have a different central focus with a small energy service component that they hope to be able to grow.

To help structure the market and supervise the work done by other ESCOs, Etihad Energy Services Co ( Etihad ESCO) was established as a “Super ESCO” and wholly owned DEWA subsidiary in June 2013. The company will lead projects and mobilise technical expertise and finance for initial ventures, while standardising efficiency assessments and energy audit processes.

Barriers to market entry for private sector ESCOs include a lack of access to third-party financing. One proposed solution, energy performance contracting (EPC), is a performance-based procurement method for building renewal whereby utility bill savings that result from implemented efficiency measures would pay for the cost of the building renewal project.

ESCOs would be able to make use of this financial instrument to guarantee efficiency savings that offer clients high internal rates of return with limited risk. Dividends are allocated among the parties in a shared savings model over a three-to-seven-year timeline. This very specific and complex financial instrument does not currently exist in Dubai. Etihad ESCO is actively seeking to attract green funds or clean tech funds with EPC experience to invest in these types of projects.

Energy Diversification

Dubai is in the advanced stages of formulating a strategy to diversify its energy mix beyond hydrocarbons-based electricity generation. The strategy aims to improve negotiating leverage with natural gas suppliers – specifically Qatar – and mitigate the risk of disruptions and fuel price fluctuations. “As new sources of gas supply will eventually be needed, reducing dependence on this fossil fuel has therefore become a priority,” Al Tayer told OBG.

For instance, Dubai’s Energy Diversification Strategy, part of DIES 2030, aims to source just 1% of energy production from renewables and 14% from “clean coal” by 2020, adjusting to 5% and 12%, respectively, by 2030. Given the lack of wind and hydro resources in Dubai, the renewable component will be sourced primarily from solar power via the planned 1000-MW Mohammed bin Rashid Al Maktoum Solar Park.

An additional 12% of energy production will be sourced from Abu Dhabi’s planned nuclear facilities. The remaining 71% will continue to come from gas. Taher Diab, director for strategy and planning at DSCE, confirmed that specific supply and risk scenarios have been evaluated and linked to demand planning and the introduction of alternative sources.

Solar Energy

 Nationwide, the UAE receives around 6.5 KWh per sq metre per day of total solar radiation and 6 KWh per sq metre per day of direct normal solar radiation, according to the Research Centre for Renewable Energy Mapping and Assessment, based in Abu Dhabi. This is a strong indicator of the potential in solar energy as an alternative source of power. To capitalise on this potential, the UAE is currently implementing a diversification strategy that includes a focus on developing solar energy capacity.

Dubai announced plans in January 2012 to build the landmark 1000-MW Mohammed bin Rashid Al Maktoum Solar Park to reduce energy imports and power 200,000 homes by 2030. The first-phase construction contract, DEWA 13, was awarded to US-based First Solar for a modest 13-MW photovoltaic (PV) plant that was commissioned on schedule in October 2013.

The equity-financed Dh120m ($32.7m) plant, which is currently the largest PV solar power facility in the region, is expected to produce roughly 22m KWh that will be fed directly into the DEWA grid to meet the average annual electricity needs of more than 500 local households. The utility’s robust network is not expected to be a barrier to high levels of solar penetration. As much as 50% of the cost of the plant was spent locally, ranging from the racks used to support the panels to transformers, cables and switchgears. In a context such as this, it is worth noting that more than half of the more than 70 solar-related companies scattered across the region are based in Dubai.

The continued roll-out of solar projects as part of the 2030 target is expected to provide these suppliers with sustained commercial opportunities. For example, in the park’s second phase, a 100-MW solar plant is set to be procured in partnership with the private sector as the emirate’s first independent power project (IPP). The planned PV facility will be put out to tender to be developed and run by a private partner with 49% equity in the project. The tendering is expected to end by March 2014, and the project is expected to be completed by 2016 at a cost of up to Dh800m ($217.8m).

Planning around the appropriate technology to adopt for subsequent phases of the Sheikh Mohammad Bin Rashid Al Maktoum Solar Park remains flexible. The recommended solar technologies will be reviewed every three to five years and the master plan will be amended, based on the costs of available technologies.

Concentrated Solar Power

 In addition to various, relatively low-cost streams of solar PV technology, solar energy in Dubai can also be generated using solar thermal, also known as concentrated solar power (CSP). If CSP costs continue to fall, the benefits of being able to draw on electricity when there is no sun (thanks to solar storage) will likely tip the balance in favour of CSP and more of that technology will be installed. As well as the Sheikh Mohammed Bin Rashid Al Maktoum Solar Park, DEWA is expected to establish a market for cost-effective residential and commercial roof-top solar panelling that can be used for domestic energy needs and to feed electricity into the grid.

A feed-in-tariff (FiT) mechanism is expected to be introduced in 2014, providing the conditions necessary to spur private sector rooftop solar development. DEWA, solar installation companies and housing developers can also play a critical role in advancing the local solar leasing market for residential rooftop PV installations. Another government push in the residential application market for solar energy has focused on hot water systems. Since January 2013, DM requires all new single-owner buildings to install solar hot water systems with the capacity to cover at least 75% of their needs.

Efficiencies of solar thermal collectors are higher than PV technology, ranging from 82-96% for top-of-the-range systems, according to Katarina Uherova Hasbani, senior analyst with the DSCE. A strategy has also been selected to generate 50% of the forecasted 115,000-MWh operational energy demand for Dubai Expo 2020. This strategy concentrates on the use of highly efficient thin-film solar panels that are incorporated into the walls and roofs of buildings, shading, lighting, and walkways across the site in order to generate a total of 44 MW of solar power.

Around 350,000 sq metres of solar panels are expected to be needed to produce the electricity required to meet the energy demand target. Although utility-scale solar is still more expensive than conventional generation, the combination of European demand and Chinese investment has slashed the cost of solar panels by about two-thirds since 2006. The cost of PV technology in Dubai may drop to par as early as this decade.

Enviornmental Challenges

 For this reason, current projections for solar generation capacity of 5% by 2030 are widely viewed as quite modest and possibly scalable if technology costs continue to fall. “Targets as high as 20% could be made economically viable under the right circumstances,” Robin Mills, head of consulting for Manaar Energy Consulting, told OBG.

In order to help influence market dynamics and increase the short-term cost-competitiveness of residential and commercial solar, the DSCE and the Regulatory and Supervisory Bureau have developed the “Feed-in-Tariffs and Technical Codes for Independent Solar Power Producers” mechanism. Globally, 127 out of 138 countries with solar energy targets have similar support policies. Environmental challenges to solar penetration in Dubai also include the high heat, which lowers the efficiency of panels, and soiling accumulation on solar modules, which requires special cleaning systems. Researchers in Saudi Arabia have found that solar panels that are not cleaned for just one month can result in a drop of output of over 30-40%. This can carry very serious implications in term of energy production and cost for both large-scale solar power plans and residential roof-top PV systems.

The thin-film Cadmium Telluride modules used by First Solar at the DEWA 13 plant have provided one potential solution to the issue of high heat, offering a distinct energy yield advantage when compared against conventional silicon technologies. Both First Solar and Masdar at Shams 1 have also developed waterless, mechanical methods to clean PV system panels of dust.

Nuclear Energy

 With the development of Mohammad Bin Rashid Solar Park, Dubai’s energy mix is already changing. It will evolve further from 2017 to 2020, when an additional 12% of Dubai’s energy production comes on-line from four commissioned 1400-MW nuclear reactors in Barakah, in Al Gharbia in Abu Dhabi. The Korea Electric Power Corporation was awarded the Dh73.4bn ($19.98bn) contract in December 2009 following bids from French, American and Korean contenders. Licenses were approved to begin construction on the first two reactors in July 2012.

The Emirates Nuclear Energy Corporation (ENEC) is currently on track to commission the first of the reactors in May 2017, with one coming on stream each year until 2020. Combined, the four reactors are expected to save the UAE up to 12m tonnes of CO emissions each year while at the same time generating 5600 MW of power, representing 25% of the country’s total, when completed by 2020. However, Dubai has yet to negotiate a supply contract with Abu Dhabi.

Clean Coal Energy

 In addition to solar and nuclear power, DIES 2030 envisions the use of “clean coal” to supply 12% of Dubai’s energy needs by 2030. Clean coal, in this context, is understood to mean ultra-modern power plants that produce very low levels of air pollutants and incorporate carbon capture and storage (CCS) technology. To this end, DEWA has issued a request for tenders for a 1200-MW clean coal independent power plant at Hassyan. It is expected that this plant will be built in two phases to generate 600 MW each when completed in 2020 and 2021, respectively.

Moreover, the emirate’s utility has completed a feasibility study into clean coal-based generation and received bids for the advisory mandate on the planned Hassyan coal plant. The plan incorporates technology to transfer coal to gas before it is burnt, a technique used in only a few plants worldwide. The carbon emissions can then be captured and pumped underground.

The scheme is a revision of the $1.3bn Hassyan independent water and power project which the Dubai government cancelled in April 2012. Scepticism remains over the selection of high-tech clean coal, given the demands of CCS technology and the absence of the required regulatory environment for CCS to attract large-scale investment. Nevertheless, DEWA remains committed to the clean coal strategy and will be interested in the outcome of a similar project in nearby emirate Ras Al Khaimah, where utility companies Utico and Shanghai Electric signed an agreement in 2012 to build a Dh1.5bn ($408.3m), 270-MW coal-burning power plant capable of capturing 1.1m tonnes of carbon a year.

Landefill Energy

Building on the alternative energy sourcing strategies contained in DIES 2030, DM in partnership with Green Energy Solutions and Sustainability (GESS) have also initiated a waste-to-energy pilot project to recover bio-fuels from organic waste at Al Qusais Landfill. All technological and economic feasibilities are accordingly being assessed for increased power generation through the flaring of methane. Launched in July 2013, the project is in line with DM’s vision to generate 20 MW of power from landfill gas by 2020.

Indeed, there is potential to generate 12-15 MW of energy at Al Qusais site, although it currently produces 1 MW, which is used to power the plant. The project is funded by GESS and is not intended to generate profit, but rather to reduce the UAE's points on the UN carbon emissions register through the implementation of the Clean Development Mechanism, as well as the elimination of 300,000 tonnes of CO a year.

Outlook

DIES includes two components: optimisations (efficiencies, demand abatement) and supply-side diversification (renewables). Given that buildings in Dubai are responsible for approximately 75% of the emirate’s electricity demand and 86% of its water usage, demand abatement strategies are concentrated around green-building codes and building retrofits.

In order to diversify exposure in the hydrocarbons sector, therefore, Dubai’s energy regulators are also seeking to exploit the potential for growth in services such as bunkering, re-exports, strategic defence storage and LNG terminalling. Indeed, the planned diversification of the emirate’s energy mix beyond hydrocarbons-based electricity generation suggests that downstream solar and CCS products and services will likewise trend positively over the short- to mid-term.