New Market Report: United Arab Emirates Power Report Q2 2013

From: Fast Market Research, Inc.
Published: Tue May 07 2013

BMI View: Confronted by a sustained increase in demand over our 10-year forecast period, the UAE authorities at both federal and emirate levels will continue to prioritise generating capacity expansion programmes. Though we question whether targets will be met with the anticipated speed, the government and its parastatal utilities are doing most things right, and we expect the sector to keep pace with rising demand. The country is expanding its electricity mix to include a wider range of fuel sources, spanning to traditional steam and gas turbines to carbon-light technologies, such as renewables and nuclear.

A comparatively sanguine 2013 macroeconomic outlook for the UAE supports plans for hikes in generating capacity, and with more than US$8bn to be invested in the period up to 2020, the market is expected to remain highly attractive to regional and international developers. Several major players are vying for contracts in the well-established thermal segment, as well as in renewables and nuclear:

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* Natural gas-fired generation will continue to fire the lion's share of generation (78.71% in 2022), as the country perseveres with fossil-fuel-based capacity additions with a view to take advantage of its abundant and cheap domestic resources. Yet, gas generation will grow by a more modest 2.38% between 2013 and 2022, as new technologies are developed.
* The UAE has been among the most vocal and proactive supporter of nuclear in the region, with plans advancing fast and ahead of schedule. Marking another milestone in the country's nuclear effort, the government-owned Emirates Nuclear Energy Corporation (ENEC) submitted a bid to the Federal Authority for Nuclear Regulation (FANR) in March 2013 to obtain a license to construct the third and fourth nuclear power plants in the country.
* The formal inauguration of Masdar's 100-megawatt (MW) Shams-1 solar power plant in Abu Dhabi marks a crucial step for the country's renewables industry. Capitalising on its competitive edge, Masdar is expected to undertake a greater number of renewable energy projects (particularly solar), following the conclusion of the project. For instance, in January 2013, the company announced that it would be launching a renewable-powered desalination pilot plant in the UAE, with the aim of reaching commercial scale by 2020, and Masdar is also waiting for approval from the executive council of Abu Dhabi for construction of the 100MW Noor 1 photovoltaic plant.

That said, we reiterate that the tight timeframes for many of these ambitious new projects will present logistical challenges - a risk already factored into our forecasts.

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