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Dubai Electricity and Water Authority: Rising demand drives grid expansion [free access]

August 1, 2013

During the first quarter of 2013, Dubai’s power demand grew by 7 per cent over the corresponding period last year. This is attributed to the region’s steady recovery in economic growth since the slowdown in 2009. By the end of 2012, gross domestic product in Dubai grew by 4.4 per cent with manufacturing becoming a particularly important sector. In this backdrop, the need to expand infrastructure—both in power generation as well as the transmission and distribution (T&D) network—has gained emphasis.

 

Thus, the focus is on the Dubai Electricity and Water Authority (DEWA)—the government-owned vertically integrated power utility—to provide for the growing requirement. The utility holds a monopoly control over the T&D network in Dubai. The Regulation and Supervision Bureau is responsible for regulatory oversight in this industry, while policy direction is the responsibility of the Dubai Supreme Council of Energy.

 

DEWA’s transmission assets include 3,305 km of line length and about 200 substations. The high voltage network operates primarily at 400 kV and 132 kV voltage levels. Between 2007 and 2012, line length grew at a compound annual growth rate (CAGR) of 12.7 per cent. This has been driven mainly by growth in 132 kV lines, which registered a CAGR of 15.5 per cent during the same period. DEWA’s network is also interconnected with the utility networks of the other Emirates. The first such interconnection was established in May 2006 between Abu Dhabi Water and Electricity Authority’s Taweelah power station and DEWA’s Al Aweer power station through a 400 kV overhead power transmission line. The second interconnection was established in mid-2007 between DEWA’s Al Aweer power station and Sharjah Electricity and Water Authority’s Dhaid station. The interconnected network is operated and monitored from a control centre at the Al Aweer power station. It should be noted that interconnections among the UAE’s power utilities are an important element of the Gulf Cooperation Council regional grid to connect the six member countries.

 

In recent years, network expansion has been driven by the rising demand. By end-2012, DEWA’s network handled a peak demand of 6,637 MW against 4,736 MW in 2007. System strengthening and reliability are other factors driving DEWA’s efforts to upgrade the network by adding substation capacity especially those based on gas-insulated switchgear. Recently, the utility has also been considering the introduction of new technologies for optimum operation of the grid. In April 2012, DEWA invited proposals and tenders for implementing smart grid technologies in Dubai’s power transmission and distribution network. Deploying smart grid technologies will enable greater integration of renewable energy sources in the region’s power mix, besides managing the existing operations with greater efficiency.

 

Renewable energy will be an important part of Dubai’s upcoming generation capacity. DEWA is building a 13 MW solar power plant, which could be commissioned by October 2013. There are also plans for encouraging grid-connected solar rooftop projects. Dubai aims to source about 5 per cent of its energy from renewable sources by 2030. The projected rise in the share of solar power will require appropriate technological measures in Dubai’s power transmission network. Experience shows that integration of solar power systems affects the quality and supply in a network that relies entirely on thermal power sources. In this regard, it is only relevant that the regulator has revised the electricity transmission norms to incorporate elements such as nuclear and renewable energy in the grid.

 

Notably, DEWA has not changed tariffs since 2011. However, there are levies such as fuel surcharges that raise the overall costs for the end-consumer. The stated objective of the government not to allow higher power tariffs has also driven them to decide against private sector participation. The government of Dubai recently decided not to privatise its power sector. Effectively, the private sector will not be allowed to participate in DEWA’s projects. This decision is reportedly based on the presumption that private participation will lead to higher prices in power utility services. This decision also runs contrary to the government’s plans in 2011 to end the monopoly in the power and water business by allowing the private sector to play a role in the same.

 

All the same, higher utility bills arising from DEWA fuel surcharges on tariffs have helped improve cash flows for the business. DEWA reported a net profit of AED 4.65 billion in 2012. This is a 6.4 per cent growth as compared to the previous year’s profit of AED 4.37 billion. Cash from operations was reported at AED 7.5 billion during 2012 against AED 7.4 billion in the previous year. Most importantly, DEWA was able to reduce its debt burden during 2012. This is seen in the decline in net debt from AED 22.9 billion in 2011 to AED 20.6 billion in 2012. This marks a turnaround for the utility, which has been reeling under a high debt burden in recent years. In June 2013, DEWA announced that it had repaid an AED 3.2 billion Islamic bond that had been issued in June 2008. Improved financials strengthen the utility’s ability to undertake improvements in the power network.

 

In May 2013 DEWA commissioned a 132/11 kV substation in Dubai Marina. The substation has a capacity of 150 MVA and entailed an investment of USD 29 million. The utility laid 320 metre long, 132 kV cables to connect the substation to the main distribution station at the Palm Jumeirah and another distribution station in Jebel Ali.

 

Another 150 MVA substation at 132 kV voltage level was commissioned in February 2013 at a cost of USD 38 million at Dubai’s International Media Production Zone (IMPZ). As part of the project, DEWA also extended the existing 132 kV underground cable network at a cost of USD 6 million. It laid 3 km long, 132 kV underground cables to connect the new substation to a main 132/11 kV substation located at IMPZ and to another 132/11 substation at Jebel Ali Gardens.

 

Among key upcoming projects, DEWA is planning to implement a new 132 kV underground transmission line project. The length of the proposed transmission line is 274 km. A USD 81 million contract has been signed. The project has three phases. The first phase is focused on modifying loads in 132 kV electricity transmission networks between Al Quoz and D Station in Jebel Ali. The second phase involves transferring loads between the Bu Kadra station and the 400/132 kV substation at Jebel Ali race course. The third phase entails extension of new 132 kV cables to transfer electricity to the Jebel Ali port network. The project is scheduled to be completed by December 2014.

 

The company has begun works on another 132 kV transmission line project for the Gardens and Dubai Investment Park area. The contract for this AED 19.5 million project has been signed and involves development of a 26 km long network. It is expected to be completed by February 2014. This project is part of DEWA’s planned investments to strengthen the existing transmission infrastructure to ensure greater reliability and quality of power supply. To this end, the company is inducting systems such as Volt-Amp Reactive (VAR) compensators. Japan’s Mitsubishi Electric Corporation won an AED 198 million turnkey order from DEWA for two static VAR compensator systems that will be installed at the Nahda and Car Complex substations. The project for which this order was made is expected to commence operations in February 2014. Meanwhile, the company has also invited international bids for supply of overhead transmission line materials signalling a step-up in future network investments.

 

The rapid expansion in power supply planned for Dubai will require complementary investments in grid expansion and strengthening. There are expectations that the utility may seek funding for select upcoming projects in the power generation segment. The company will also seek to engage entities to develop and operate about 100 MW worth of solar power generation capacities as a step to reduce its dependence on gas-based power. DEWA’s budget allocation for 2013 is about AED 14 billion. Of this allocation, an estimated AED 1.2 billion is for capital projects, including AED 204 million for works related to development of the 132 kV network.

 

The timely augmentation of planned capacities in power transmission holds the key for catering to the upcoming demand in the network. To an extent, this will also require changes in the tariff regime to equilibrate demand and supply as well as to raise resources for the upcoming investments. Further, it may be time for a policy rethink on the role of private participation in driving efficiencies in the sector. As such, DEWA’s role will be critical to maintain the growth momentum in the economy.

 

 

 

Table 1: Transmission line length (km)

 

400 kV

132 kV

Total

2007

        636

      1,181

      1,817

2008

        766

      1,333

      2,099

2009

        870

      1,468

      2,338

2010

        870

      1,596

      2,466

2011

        875

      2,422

      3,297

2012

        876

      2,429

      3,305

Source: Dubai Electricity and Water Authority

 

Table 2: Number of substations

 

400 kV

132 kV

Total

2007

          11

          88

          99

2008

          12

        116

        128

2009

          14

        139

        153

2010

          14

        153

        167

2011

          17

        165

        182

2012

          18

        184

        202

Source: Dubai Electricity and Water Authority

 

 

Figure 1: Peak Demand in DEWA's Network

tso_fig_1_481 

Source: Dubai Electricity and Water Authority

 

(AED1=USD0.27)