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Mideast to Invest $500b in Power Projects

DUBAI - The Middle East countries need to invest more than half a trillion dollars in electricity infrastructure by 2030 to facilitate economic growth in the coming years, according to A.T. Kearney, a leading management consulting firm.

“While investments are estimated to be more than $500 billion by 2030 for the region, forecasting of energy demand is not accurate,” said Dr Dirk Buchta, Managing Director of A.T. Kearney Middle East. “Growing demographics and wealth in the Middle East will lead to a constant increase of demand for electricity in the foreseeable future.”

Pointing out that many countries were still behind in forecasting and capacity planning, Buchta said as a consequence, customers could suffer from increasing supply-demand imbalances, power outages and soaring electricity prices.

He said several countries in the region lagged behind in their infrastructure planning. “Increasing supply-demand imbalances, power outages and soaring electricity prices might be the consequence.”

According to a recent report by the Sharjah-based Crescent Petroleum, the Gulf countries alone will need to spend over $120 billion in the next ten years to set up new power generation projects to cope up with the increasing demand for power. The report said that over 118 various projects for power generation are currently under development at a total cost of $150 billion in the GCC countries. The first phase of the proposed GCC power grid is set to be completed in the first quarter of 2009. The UAE and Oman have completed integrating their own network and the remaining two phases of the project are expected to be completed by 2010.

Besides the common power grid, GCC states are expected to invest more than $45 billion into projects to expand their current electricity generation capacity.

According to UK’s Benoil Services, the UAE would invest $8 billion to boost capacity by 7,000 megawatts while Kuwait could pump around $3.6 billion in the additional production of 5,000 megawatts. Saudi Arabia is expected to invest $30 billion to boost capacity of existing power plants and setting up of new power projects to increase energy output by 20,000 megawatts, while Qatar will spend around $3 billion to boost production by 2,500 megawatts. Bahrain and Oman are expected to invest $1 billion and $800 million respectively.

According to A.T. Kearney, although many Middle East countries are discussing ambitious renewable targets — for example, achieving a 20 per cent share of renewables in 2020 like in the EU — the regulatory framework and funding of such investments are open in most cases. Initiatives such as Masdar are only a preliminary step in leveraging the region’s solar power potential.

“A sound demand forecast, capacity planning and regulatory management will be key to avoid power outages in the future,” said Dr Goetz Wehberg of A.T. Kearney. “To better balance supply and demand within the region and prospectively with Europe, the transmission grids in the Middle East need to become more integrated.”

· issacjohn@khaleejtimes.com