Learning from successful countries may hasten the region’s smartgrid implementation.
It’s established as something of a given – that the Middle East will expand its power transmission and distribution (T&D) sector. But what concerns industry experts and professionals is the perceived lacklustre move by the region, including the Gulf Arab states, toward smartgrids. And this could lead to inappropriate growth and substandard projects, especially if the necessary regulations and proper management systems were not in place.
The region may have been chasing peak loads to meet increasing demand for energy, but a whitepaper presented in a recent forum in Abu Dhabi describes this move as “a loss-making proposition for utilities in the long term”. The investments that governments and regional utilities are pouring into energy initiatives would only be for naught should they fail to plan and strategise future plans and outlays on the T&D infrastructure.
FLEXIBLE TARIFFS
It’s about time the industry pursued investments in infrastructure that simplifies the implementation of flexible and variable tariffs, according to Frost & Sullivan’s “Power Transmission & Distribution: The Inevitable Disruption of Status Quo”. The research and consultancy firm presented the report at the October 2010 Global Community Growth, Innovation and Leadership forum (GIL 2010: Middle East) on Yas Island in Abu Dhabi.
Abhay Bhargava serving as moderator of the Power T&D forum at GIL 2010: Middle East. The panellists are Ravinder Bhan, Principal Consultant for the Middle East at International Copper Association; the technical solutions director for Smart Grid, Middle East & Africa at GE Energy, Wajdi Ahmed, and Mohammad Moazzem Hossain
“With peak load pricing increasingly proven as one of the most successful tools for managing peak loads, regional utilities need to look at investing in AMI setups (or customised, localised versions of the same), which would allow them to implement flexible pricing policies with simplified controls,” the whitepaper says.
Having an AMI, or advanced metering infrastructure, is one of the major steps in moving toward smartgrids. This move calls for co-ordination amongst stakeholders across the value chain that must synchronise the implementation of smart meters, communication mechanisms and software. It’s such a complicated task as it involves a large number of utility firms, meter providers, telecom operators and software makers; not to mention the lack of universally acceptable standards and the lack of qualified manpower.
“Looking at this situation, a lack of focus on AMI could turn out to be a restraining force,” the report says. “The region’s utilities, hence, have a tough task ahead of them, if they want to ensure that their planned investments lead to what can be termed as technologically appropriate infrastructure in the long term, which facilitates, rather than restrains, economic growth and development.”
With about 18,000 circuit kilometres set to be added into the power T&D infrastructures across the GCC countries by 2015, the industry will see new investments of $30 billion over the five-year period. The money will be spent to ramp up the infrastructure, as well as meet increasing demand amidst economic growth and diversification, regulatory changes, interconnection plans and technological advancement.
Seen to be the highest investor, Saudi Arabia will account for 72% of the forecast rollout, though the UAE is expected to be the top Gulf country that will embrace the latest technologies for future grids. But how the investments by these countries and their neighbours would fare in terms of profitability poses some questions to a number of industry experts.
The report remarks, “With an unwritten mandate to be forward looking, the last thing regional utilities want is investment in assets that turn out to be technologically inferior and insufficient in the long term, leading to what could be termed ‘wasteful expenditure’ in retrospect.”
SMART METERS
Timely reading of utility consumption could help providers in the Middle East save billions of dollars, or equivalent to 15-20% of their gross sales, through smart meters and remote reading. This would encourage timely payment and pave the way for reduced bad debts, number of complaints and resolution time, says Mohammad Moazzem Hossain, the manager of Operations Planning & Studies Department at the Abu Dhabi Distribution Company. A 10-20% peak reduction would also be possible, he explains, through customer awareness if they had smart meters.
The difficulty in reading the meters during the summer months; restricted access to meter readers due to cultural and security reasons and the high cost of manpower in most cities are some of the prime concerns by experts who are endorsing smart metering across the Middle East. They say that efficient billing through remote metering is more important than many people think. The said factors, in fact, are major steps to building smartgrids.
In this context, Hossain explains, the smartgrid concept has great potential in the Middle East, which has an annual power demand growth rate of 15%. The region’s demand will double by 2030, increasing the gap between supply and demand. “And since that huge demand growth rate is driven by large development projects, smartgrid technology can be fully introduced with quick payback,” he says in his keynote speech at a forum dubbed “Power Transmission & Distribution” during the GIL 2010: Middle East conference.
Participants at the T&D forum of GI L 2010: Middle East
With a smartgrid, utility distributors in the Middle East could reduce peak load and connect more customers; implement remote disconnection for non-payment; integrate distributed renewable generation; put in place quick emergency response and better network reliability and share benefits with customers.
This is partly the reason why governments must set targets for power generation coming from alternative sources, such as wind and solar energy. Just like in North America where governments create huge stimulus for projects dedicated to renewable energy, says Abhay Bhargava, Industry Manager for Energy & Power Systems at Frost & Sullivan, Middle East and North Africa.
“There have to be mandates for targets on renewables,” he stresses in an interview, saying he expects governments in the Middle East and North Africa (MENA) to have mandates in place in three to five years. “Policies have to be in place that can set up infrastructure.”
But Hossain says the biggest challenge to the success of smartgrids in the region, specifically the Gulf, is the existing subsidised tariff. He describes a situation that “could be a potential success factor if the subsidy is reduced or removed”. This somehow gives credence to observations that cheaper electricity bills due to subsidised supply make most consumers unmindful of energy conservation.
He says it would typically take between three and eight years to launch a smartgid in the Middle East, the strategies for which include installing a smart meter for every new customer, and having smart meters and communication infrastructure for mega residential projects.
GOVERNMENT SUPPORT
Driven by government support, Hossain says, utility providers in the Middle East have taken some important steps toward smartgrids. Some of them have begun installing smart meters, for instance, and their remote metering systems are in advanced stages. He adds that having remote-control meters for street lights in some cities in the Gulf has resulted to 30% savings in energy.
There are also some other pieces of good news, such as the growing awareness amongst governments, developers, project owners and consumers on the use of LED (light emitting diode) lamps; intelligent building management systems being installed and the growing use of ice storage technology to reduce peak demand. Streetlights are now being replaced by LED lamps, which are eco-friendly and last longer than traditional bulbs. .
Hossain remarks that smartgrids, coupled with awareness on eco-friendly products and practices amongst utility distributors, investors and consumers, “shall reinforce and materialise to the full extent the above opportunities”.
The driving factors for countries to further pursue smartgrid initiatives are energy independence, the need to mitigate global warming, energy security and energy efficiency, Hossain says. Regulators must then look after the implementation of strong support and directives coming from governments, which should put more emphasis on moving toward smargrids than new generators. This move could save the six-member GCC up to $10 billion over the next 10 years in terms of deferred investments, he explains.
GRID INTERCONNECTIVITY
Plans to connect Iran and Egypt to the GCC interconnection grid will lead to further investment in MENA’s power T&D infrastructure, the Frost & Sullivan report says. The GCC interconnection grid is under way (see related story on pages 30 to 32), going in the direction of changing and enhancing the grids across the Gulf Arab nations.
But an increase in power generation will eventually mean losses for the grids, the report warns. Capacity augmentation, therefore, is one of the driving forces contributing to increased future investments in the T&D sector. Consider also the modernisation requirements for ageing grids; the demand for additional network coverage for upcoming industrial zones; moves toward energy efficiency and distributed sources of energy generation.
Egypt and Morocco, for instance, are moving towards clean energy. And besides the UAE and Oman, the other Gulf Arab states “are really not into it”, says Bhargava, who also describes as “shallow” moves being made by the Levant countries of Lebanon, Jordan and Syria. “Maybe because clean energy needs a lot of investment,” he opines. “Also, we need a role model – at least one working model!”
“Most countries in the region have declared their intent to embrace renewable energy, and whilst grid connected sources are not yet de-facto, this is expected to change,” the whitepaper says. “An instance is that of Abu Dhabi, which has already initiated pilots on the same. This is expected to gain momentum within the next three to five years, leading to a requirement for smartgrids-related technologies to be adopted.”
Bhargava says Abu Dhabi, which is pursuing nuclear power reactors as well as renewables, would link up with Morocco, which has huge potential for wind power, and Egypt through the GCC grid. That way each country could access each other’s energy source.
Whilst the approval process for nuclear energy could be long-winded, not to mention the region’s lack of manpower issue, some experts say it is worth pursuing, considering that the feasibility of renewables has not yet been proven in the long term. Better yet, countries must look to a mix of sources in meeting their energy demand, along with developing the local talent.
Human resources are a serious issue across the region, considering the significant levels of unemployment. Take Saudi Arabia, for instance, the biggest economy and the most populous GCC member at 29 million but is challenged with about 12% unemployment. Oman, with three million people, has a 15% unemployment rate.
Besides addressing the projected shortage in manpower for future smartgrid implementation, governments and the industry may also engage in some benchmarking against successful adoption of technologies in other countries, specifically the US and those in Europe. These steps would allow for some learning from the experiences of other successful countries, the Frost & Sullivan report stresses, “and not reinventing the wheel”.
There may be no one-size-fits-all approach for better power generation for all countries, but one thing is sure: grid modernisation is a must! The report remarks, “[E]ach one will have to evaluate their current situation and, accordingly, frame a plan that incorporates and addresses their individual needs and requirements.”
