The recent announcement that utility tariffs in Abu Dhabi will be increased sharply next year should have a dramatic impact on demand for power and water in the emirate if the experience of higher tariffs in neighbouring Dubai is anything to go by.
In the five years to 2008 water demand in Dubai grew from 177 million imperial gallons a day (MIGD) to 264 MIGD, a compound average growth rate (CAGR) of 8.3 per cent, according to Dubai Electricity & Water Authority (DEWA). However, following the Dubai government’s decision to introduce a slab tariff and increase power and water rates for expatriates and industry in 2008, water demand has grown by a much smaller CAGR of just 1.8 per cent, from 271 MIGD in 2009 to 296 MIGD in 2013.
Demand for electricity also showed a similar decrease. Between 2004 and 2008, peak demand for power grew by a CAGR of 10.4 per cent from 3,228MW to 5,287MW, while for the period 2009-2013, it slowed to a mere 3.6 per cent, according to DEWA, growing from 5,622MW to 6,875MW. The slowdown in energy and water demand has meant that Dubai has a comfortable reserve margin, and also saved the emirate billions of dollars as it did not have to build new power and desalination plants to ensure supply kept up with demand.
Between 2012 and 2013 peak power demand, including exports, in Abu Dhabi rose 5.9 per cent from 10,618MW to 11,243MW, while system peak supply of water also increased by 5.9 per cent from 759MIGD to 804MIGD over the same period, according to Abu Dhabi Water & Electricity Company (ADWEC). With the introduction of increased tariffs, the annual increase in demand should slow considerably, and may even fall if the prospect of higher utility bills compels residents to use less power and water. “The introduction of higher tariffs in Dubai in early 2008 has ultimately saved Dubai at least $2bn by ensuring it has not had to award new power and desalination facilities in the ensuing period,” says Ed James, Director of Analysis at MEED Projects. “This is an addition to the hundreds of millions of dollars saved from reduced subsidies. The measures announced last week by Abu Dhabi have these cost savings in mind, but are also recognition that the era of unfettered access to almost free power and water must come to an end especially as oil prices enter a bearish period. At the same time, Abu Dhabi wants to consolidate its position as one of the region’s and the world’s pioneers of renewable energy, which it can only do by lowering its carbon footprint.”
The increase in tariffs and the capital cost savings they bring will be a key talking point at the annual MEED Abu Dhabi Conference at the St Regis Corniche on 8-9 December.
The event will be addressed by leaders of the energy, industry and infrastructure sectors of the Abu Dhabi economy including Emirates Nuclear Energy Corporation (ENEC) chief executive officer (CEO) HE Mohamed Al Hammadi; director general of the Industrial Development Bureau (IDB) HE Ayman Makkawy and Abu Dhabi Urban Planning Council (UPC) executive director Mohamed Al Khadar.
The MEED Abu Dhabi Conference is supported by Powerwise, an initiative of the Regulation & Supervision Bureau (RSB) of Abu Dhabi. Official industry patron is the Industrial Development Bureau and official infrastructure patron is the UPC.
“MEED’s Abu Dhabi conference is one of the most important events held annually for MEED customers and stakeholders,” says MEED Events Chairman Edmund O’Sullivan. “This year, we shall focus on developments in the energy, industry and infrastructure sectors, but a huge talking point for all three will be these historic changes in electricity and water prices.”
O’Sullivan said that Abu Dhabi’s a regional champion of energy and water efficiency and this is reflected in its support for key initiatives including Powerwise and Waterwise by the RSB.
UPC’s Estidama green building rating methodology was the first developed specifically to address the requirements of the region and this has been supported by action by the Department of Municipal Affairs to ensure build code standards are properly enforced.
The conference will also hear how Abu Dhabi is diversifying its energy mix to reduce dependence upon oil and gas production. ENEC, the UAE’s nuclear power producer, is due to start operating in 2016. The corporation’s CEO HE Mohamed Al Hammadi conference will tell the conference in a keynote address about progress in the project and Abu Dhabi’s plans to accelerate the development of the clean energy sector.
Existing clean energy projects include Masdar’s Al Nour 1 PV plant and the 100MW Shams 1 CSP plant.
Changes in the domestic energy system are being accompanied by further measures to stimulate investment in Abu Dhabi’s manufacturing sector.
HE Ayman Makkawy will set out in a keynote presentation the emirate’s new priorities, regulations, policies and licensing arrangements. He will also explain how steps will be taken to increase affordable lending to industry.
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