PROBLEMS AND PROSPECTS OF DEVELOPMENT

A. Y. SHAROVA

Post-graduate student of the ISAA of Lomonosov Moscow State University

Unified energy system Keywords:, Cooperation Council for the Arab States of the Persian Gulf, electric power industry

In the life of the six Arab countries - Bahrain, Qatar, Kuwait, the United Arab Emirates, Oman and Saudi Arabia, forming the Cooperation Council for the Arab States of the Persian Gulf (GCC)¹-a major event is taking place: the creation of the unified energy System (UES) of these countries is being completed. The history of the project, starting from the first steps, goes back three decades, although the main work was carried out over the past eight years.

In fact, the very idea of creating a Unified Energy System in the Persian Gulf countries emerged in the late 1970s, when these countries started talking about the possible creation and introduction of alternative energy sources, in particular, the development of nuclear energy. However, the needs for generating capacities of relatively small Gulf States were so modest at that time that the construction of nuclear power plants was simply unprofitable. And combining their power systems could have a positive effect. Plans for the development of nuclear power were postponed, and the UES project received some development.

In 1986, experts from the King Fahd University of Petroleum and Mineral Resources (Saudi Arabia) and the Kuwait Institute of Scientific Research prepared a feasibility study (feasibility study) for the unification of the energy systems of six states.

It was expected that the energy integration process would take about 10 years, and the total cost of the project would be $1.6 billion, and it was estimated that after the completion of the work, the GCC countries would save up to $2 billion annually by abandoning the construction of new power plants and expanding existing ones. in year ².

The project provided for the creation of two separate power complexes. One was supposed to connect the electricity networks of Saudi Arabia, Kuwait, Bahrain and Qatar, and the other-the United Arab Emirates and Oman. By 2005, it was planned to merge them into a single power system.

THE HARD WAY FROM A PROJECT TO ITS IMPLEMENTATION

In practice, the process of energy integration has turned out to be much more complex than initially expected. In the 1980s and 1990s, the young GCC integration group faced more important tasks and priorities than creating a unified energy system. In the second half of the 1980s, global oil prices fell and, as a result, the incomes of energy - exporting countries declined. Their economic development slowed down, and there was a need to reduce public spending on supporting expensive projects, including the project to create the UES of the GCC.

The Iran-Iraq War of 1980-1988, and later the Gulf War of 1990-1991, exacerbated the internal security issues of the region's states. Natural gas played an increasingly important role in their economy, and in the late 1980s and early 1990s, plans to create a regional gas market replaced plans to organize a similar electricity market. However, the project of the unified gas system had to be abandoned, mainly due to price disagreements.

In 1992, a group of Arab, European and American experts prepared another study on the interconnection of the GCC countries ' energy systems. These experts confirmed that the project is technically feasible and economically viable. However, the issue of financing the work remains open. Disputes began over who should finance them - Gulf governments, energy companies, or private investors. The high growth rates of electricity demand in the GCC countries prompted the heads of state to sit down at the negotiating table on this issue as well.

In 2001, the GCC Power Grid Association Authority was established (with the status of an international body), which was charged with the responsibility of supervising the implementation of the project.-

to monitor the project implementation, and in the future - to perform the functions of a system operator in the single electricity market. The Office is headed by a 12-member Board of Directors (two representatives from each country). The Saudi city of Daman was identified as the location of the Office's headquarters.

In 2003, a group of experts prepared a new feasibility study for the project, and in May 2004, it was announced that its implementation would be fully funded directly from State budgets. The shares of each participating country in the total share capital were distributed as follows: Saudi Arabia - 31.6%, Kuwait-26.7%, the United Arab Emirates-15.4%, Qatar-11.7%, Bahrain-9%, Oman-5.6%.

In 2004, tenders for the implementation of works were held, and at the end of 2005 there were reports of their beginning. In 2006, contracts were signed with construction companies.

The main goals of the project, as well as 20 years ago, were announced:

- reduction of the required installed capacity of power plants due to the use of different times of occurrence of maximum loads in individual power systems;

- creation of conditions for mutual assistance of power systems in emergency situations, which will facilitate the conditions for repairs, provide opportunities for mutual compensation of unforeseen deviations of power consumption from the standards in certain regions;

- reduction of operating costs due to optimal utilization of jointly operating power plants and increase in electricity generation using the most advanced equipment, which, in turn, will increase the efficiency of the association as a whole;

- creating opportunities for GCC countries to participate in regional and international electricity trade.

THERE IS A LOT OF OIL, BUT NOT ENOUGH ELECTRICITY. why?

In recent years, the GCC has faced a paradoxical problem: countries with the richest hydrocarbon reserves are experiencing a shortage of electricity, due to both the lack of sufficient reserve capacity of power plants and the lack of fuel for them. Despite the fact that power outages are short-term and occur mainly during peak periods, they show the vulnerability of the GCC countries ' electricity systems and exacerbate the problem of ensuring energy security.

Since the 1980s, total electricity consumption in this region has increased 10-fold. Particularly high growth rates were recorded in the 80s-90s of the last century, when its consumption tripled. By the end of the first decade of the twenty-first century, the GCC countries had become major global consumers of electricity. In 2010, the region used almost 400 TWH3 ^of electricity, or 2.2% of its global consumption. Saudi Arabia is the largest consumer of electricity among the Gulf States, accounting for 54% of the region's total consumption.

The main indicators for the development of the electric power industry in the GCC countries are presented in Table 1.

In the early 1980s, the most

Table 1

Key indicators for the development of the electric power industry in the GCC countries (2010)

* Data for 2008

** Data for 2009

Compiled and calculated from: Statistical Bulletin 2010, 19th Issue / / Arab Union of Electricity http://auptde.org/PublicationsCat.aspx?lang=en&CID=95

The UAE and Oman significantly increased their electricity consumption, followed by Saudi Arabia. In the first decade of the 21st century, it grew most rapidly in Qatar and the United Arab Emirates - more than 9%, in Oman and Bahrain - 7.5 - 8%, in Kuwait and Saudi Arabia - about 5% per year. During the economic boom of 2005-2006, the growth rate of this indicator reached even higher values - 18% in Qatar and 14% in the UAE.

The maximum peak load grew in the GCC countries at a faster rate than electricity consumption. Thus, in 2010, compared to the previous year, the peak load in Qatar increased by 12.2%, in Bahrain-by 11.1%, in Saudi Arabia-by 10.8%, in Kuwait-by 9.34%, in the United Arab Emirates-by 9.1% and amounted, respectively, to 5,090, 2,708, 45,661, 10,890, 16,980 MW ⁴.

The first reason for such a rapid increase in electricity demand in the Gulf States is their intensive economic development. Large-scale infrastructure construction started in the 50s of the last century, accelerated industrialization, growing production of steel, aluminum, mineral fertilizers and refined products - all these are extremely energy-intensive industries associated with a large specific (per ton of production) electricity consumption.

The second is the rapid growth of the region's population, which is associated with both the influx of migrants and high natural growth, as well as an increase in the standard of living of the population. Hence, an increase in electricity consumption in the housing and communal and commercial sectors . In 2009, they accounted for more than half of the total electricity consumption in the Gulf countries. In Bahrain, this share was 88%, the United Arab Emirates-70%, Saudi Arabia-65%, Kuwait-55%⁵. The main factor in increasing electricity consumption was the widespread use of air conditioners by the population. Moreover, the maximum demand for it in the GCC countries is manifested in the summer months, and not in the winter months, as in Russia or Western Europe. In 2010, the peak was recorded in Kuwait on June 15, in the United Arab Emirates and Qatar-on July 14, and on August 25 - in Bahrain.

PROS AND CONS OF LOW FARES

The policy of electricity tariffs applied in the Persian Gulf countries is also interesting. These tariffs are not based on economic calculations, as in most other countries of the world, but on the simple desire of governments to fully provide energy to all enterprises and all industries. State-owned electric power companies are supplied with fuel (by the same state-owned companies) to produce electricity at low tariffs, and then supply electricity to industrial enterprises and the population at subsidized tariffs. Thus, the cost of electricity for the end user is many times less than its real price. The liberalization of electricity markets, which was subsequently initiated in the GCC countries and stimulated private sector participation in the development of the industry, did not change the main approaches to tariff setting in the electric power industry today.

As can be seen from Chart 1, electricity tariffs in the Gulf States are among the lowest in the world. In Kuwait, the cost of 1 kWh in 2009 was $0.666 for the residential and commercial sectors, and $0.333 for industry. Tariffs in this country have not changed since 1966. The cost of electricity here does not depend on the volume of its consumption, while in other countries of the region the price of 1 kWh varies depending on the amount of electricity consumed per month. So, in Bahrain, if a private household consumes from 1000 to 3000 kWh per month, the cost of 1 kWh is $0.8, at the level of 3001-5000 - $2.39, more than 5001 - $4.24. This principle of setting tariffs is used by states so that even the low-income segments of the population can pay for the electricity used without much strain on the family budget. Moreover, as the authors and initiators of such a procedure for paying for electricity assumed, this should also encourage its savings to some extent.

However, the effect was reversed: such low tariffs, as well as various preferential programs operating in some countries of the Persian Gulf, led to the fact that their residents consider electricity a gift from the state and do not care at all about saving it. Currently, some Gulf States are the world leaders in per capita electricity consumption. In all of them, except Oman, per capita consumption is higher than the European Union average. In Qatar, Kuwait, and the United Arab Emirates in 2009, this indicator exceeded the values recorded in countries that traditionally consume large amounts of electricity: Australia - 11,038 kWh per person, the United States-12,884, and Canada - 15,467 kWh.⁶

The growth of electricity consumption in the Gulf States has led to a shortage of generating capacity, which has led to frequent power outages, and for all categories of consumers. During the period of maximum loads-during the daytime of the summer months-the demand for electricity increases twice as much as during the night hours, and three times as much as during the winter period. The situation is particularly difficult in Kuwait, as well as in the northern emirates of the United Arab Emirates and Bahrain, where entire villages and large areas of large cities are periodically without electricity for several days. This has resulted in a shortage of fresh water, as the water supply here is directly dependent on the desalination of seawater.

Figure 1. Electricity tariffs in the GCC countries and some countries of the world in 2008 ($ cents/kWh)

Compiled by the author on: for the GCC countries-statistical collection "Electricity tariffs in Arab countries" (in Arabic) / / Arab Union of Producers, Transporters and Suppliers of Electricity. November, 2008. pp. 7, 11, 15, 17. For other States - U.S. Energy Information Administration (http://www.eia.gov/countries/prices/electricity_ households. cfm, http://www.eia.gov/countries/prices/electricity_ industry. cfm).

Power outages occur not only in the residential sector, but also in industry. The aluminum and steel industries of Bahrain and the United Arab Emirates have been severely affected by power outages in recent years, with enterprises having to reduce output or completely stop production for several days due to power outages.

In 2009, losses from power outages in Sharjah, one of the emirates of the United Arab Emirates, according to experts, reached approximately $19 million. Comparable damage in 2010 was caused by one of the largest oil refining complexes in Saudi Arabia, Petro Rabigh, which was forced to suspend operations for several days. In the same year, 2009. The Saudi Electric Company has cut power to an industrial zone in southern Jeddah altogether to prevent more widespread blackouts across the country.⁷ Large enterprises in the Persian Gulf countries were then forced to purchase diesel generators to ensure uninterrupted power supply.

As a response to the current alarming situation, the Governments of the Gulf countries plan to significantly increase their generating capacity in the coming years. In a statement issued by the GCC working group on further energy development, it is said that its states set a goal to invest $272 billion by 2015. in the electric power industry and water supply. Bahrain, Kuwait and the United Arab Emirates intend to double their generating capacity by 2020. The UAE plans to return to its nuclear power development plans. Saudi Arabia expects to double the capacity of its power plants by the end of 2013. Oman and Qatar expect to add from 1 to 5 thousand tons to the existing capacities. MW ⁸. At the end of 2009, the Messayed thermal power plant (TPP) with a capacity of 1 thousand tons was put into operation in Qatar. After that, the government announced the "end of the era of blackouts" in the country, as well as that Qatar is ready to become a regional exporter of electricity.

THREE STAGES OF UES CREATION

The Gulf Unified Energy System project involves the creation of 10 interconnected energy hubs on the territory of the Arabian Peninsula: 5 in Saudi Arabia and one each in Bahrain, Qatar, Kuwait, the United Arab Emirates and Oman. The length of power transmission lines will be 1,100 km, of which 800 km will pass through the territory of Saudi Arabia.

The creation of the UES involves three stages.

Phase I: Integration of the power grids of Saudi Arabia, Bahrain, Qatar and Kuwait into a single energy complex "North", which was commissioned in 2009. The 400 kV transmission line connected Kuwait City and Doha via the Az-Zour (Kuwait), Al-Fadili, Gunan, Salwa (Saudi Arabia), and Jasra (Bahrain) substations, and a high-voltage cable was laid under water between Saudi Arabia and Bahrain. At the Al-Fadili substation, a so-called inverter unit is installed for converting alternating current with a frequency of 60 Hz (used in

Figure 1. Map-scheme of the UES of the GCC.

Источник: Gulf Cooperation Council Interconnection Authority (official site) http://gccia.com.sa

Saudi Arabia) to 50 Hz alternating current (used in the rest of the GCC countries). In addition to the construction of power lines, the first stage also includes the construction of a common control center, several power plants, as well as a number of infrastructure facilities.

Contracts for the construction of energy facilities totaling $1.95 billion. They were signed with global energy companies, including ABB, Pirelli, Nexas, Areva Etc., Midco, and Hyundai. The largest contract was awarded to the Swiss company AIBB. The Russian company Technopromexport participated in the tender for the construction of the power transmission line, but, unfortunately, it was unsuccessful.

Phase II: integration of the national networks of the UAE and Oman, as well as the construction of a 220 kV power transmission line between the Al-Wasit substation in Oman and Al-Ain substation in the UAE and their subsequent integration into a single energy complex "South".

Stage III: integration of the North and South energy complexes into the GCC Unified Energy System by the end of 2013. As part of this phase, 200-kilovolt transmission lines are to be laid between the Al-Wahah substation in the UAE and Al-Wasit substation in Oman, as well as a 400 kV transmission line connecting the Salwa substation in Saudi Arabia and Shuweihat substation in the UAE. In 2011, the UAE energy system was connected to the GCC UES.

A map of the energy interconnection of the Persian Gulf countries is shown in Figure 1.

As a result, after the construction of all the above - mentioned facilities is completed, Saudi Arabia will be able to both receive and supply 1,200 MW of power from the system-the same amount as Kuwait. For the UAE, the same figure will be 900 MW, for Qatar-750 MW, Bahrain-600 MW, Oman-400 MW.

The unified energy system is primarily a tool for transferring capacity in emergency situations. Electricity is not traded through it yet. The exchange of electricity on a contractual basis implies the existence of a common, organized market, which can be created only after the implementation of reforms in the electricity industries of each of the participating countries, which imply the transition from a vertically integrated structure to a competitive electricity market. Currently, all the Gulf states are taking steps to deregulate and privatize this sector of the economy, but the" speed " of these processes varies from country to country.

ELECTRIC POWER INDUSTRY REFORMS: LEADERS AND OUTSIDERS

The Sultanate of Oman is a recognized leader in power industry reform among the countries of the region. In fact, the reform of the electric power industry began there in 1996, when the first independent energy project was completed. In 2005, the Law on the electric power industry was adopted, which formed the legal basis for further privatization of the industry and its opening to private investors. The law also provided for the separation of the areas of generation, transmission and distribution of electricity. In the same year, the Department for State Regulation in the Energy Sector was established.

Currently, the electricity market in Oman (as well as the related water market) consists of three distinct segments: 1) the main state-owned unified power system in northern Oman; 2) the rural power system controlled by the state-owned rural electric company; 3) the private power system "Salalah".

In the field of electricity production, there are 8 companies operating in the Sultanate, 3 of which were previously owned by the state. One of the state - owned energy companies, Al-Rusail, was privatized back in 2006 by selling 100% of its assets, which was the first such experience in the region. This marked the beginning of the privatization of state-owned energy companies , a process that continues to this day.

In the field of electricity transmission in Oman, it operates

the only company that owns and operates a 220 kV and 132 kV transmission line system to supply consumers in the areas controlled by the main unified energy system. The Government plans to eventually privatize the Oman Electricity Transmission Company. This was planned back in 2008, but the global financial crisis put the process on hold.

The Power and Water Supply Company of Oman, which is wholly owned by the state-owned Electricity Holding Company, buys electricity from 8 generating companies and sells it to three distribution companies. The government plans to privatize the latter, and keep the Energy and Water Supply Company under its control.

Among the seven emirates that make up the UAE, the largest emirate in the country, Abu Dhabi, has achieved the greatest success in privatizing and deregulating energy. Until 1999, the sector had a vertically integrated structure and was fully owned by the state. In 1998, a law was passed that initiated the reform of the electric power industry by creating the so-called "one-buyer"model.

In addition to state-owned companies operating in this area, independent electricity and water producers are also allowed to operate in Abu Dhabi. Currently, there are 9 such companies operating in the emirate. However, the procurement and distribution of these resources remains in the hands of the State. In the remaining 6 emirates of the United Arab Emirates, there are currently no specific plans to reform and privatize electricity and water supply facilities.

In Saudi Arabia (KSA), in 2000, a royal decree established the Saudi Electric Company (SAEC), which united 10 regional energy companies that previously supplied the kingdom with electricity. At the same time, the Government allowed the private sector to invest in electricity generation. The creation of the private company "Marathon", which supplies electricity and fresh water to the cities of Yanbu and Jubail, as well as the creation - also private - of the" Water and Electric Corporation " in the west of the country, became a kind of incentive for further deregulation of the industry and the privatization of its facilities. In November 2001, the Electricity Regulatory Authority was established.

The plan of organizational restructuring of the KSA electric power industry, adopted for the period from 2008 to 2016, provides for three stages of reforms:

- division of electricity production, transmission and distribution spheres by disbanding the "universal" SEC and creating new, highly specialized companies;

- creation of a competitive wholesale electricity market;

- creation of a competitive retail electricity market.

Currently, the activity of independent electricity producers (NPEs) is allowed in the KSA. In addition, large industrial consumers have the right to create their own generating capacities, and sell the surplus electricity to the general grid owned by SEC.

Qatar allows for the organizational separation of electricity generation, transmission and distribution processes, as well as the participation of the private sector in such procedures.

The Qatar General Electricity and Water Corporation (Kahramaa) is still responsible for a significant part of the functions of transmitting electricity to consumers and distributing it among them. And electricity production was transferred to the newly formed Qatar Electricity and Water Company. However, the Government issues licenses to private companies for the construction of the power plant, and is currently exploring the possibility of privatizing Kahramaa and creating a private electricity transmission and distribution company based on it.

Bahrain still retains full responsibility for the production, transmission and distribution of electricity, but the process of reforming the energy sector has also come to this Kingdom. Thus, the government allowed the private sector to participate in electricity generation, and also privatized the Al-Hidd and Al-Ezzel power plants.

In Kuwait, electricity facilities are state-owned, and the industry has a vertically integrated structure. Despite the fact that Kuwait's electricity consumption is growing at one of the fastest rates in the region, the Government does not have any program to reform the electricity sector.

THE SYSTEM WAS CREATED, BUT THE PROBLEMS REMAINED

Energy experts in the Persian Gulf countries are concerned about the fact that the load schedules in the GCC countries almost completely coincide. In these circumstances, the mechanism of mutual assistance in emergency situations may not work, because the neighboring state will not have enough free electricity at the right time. There have already been examples of similar situations.

I believe that there is only one way to solve this difficult problem: to increase generating capacities in all countries of the region, which, of course, will require significant investments. Naturally, the new capacities will not change the load schedules, but they will form certain reserve capacities available for any of the states. In addition, new investments in generating capacities are one of the conditions for creating the future of regional development.

commercial electricity market. Fortunately, there are plans and projects for the construction of new and expansion of existing power plants in all countries of the region.

However, an increase in generating capacity will inevitably provoke the problem of insufficient capacity of power transmission lines connecting the energy systems of the Persian Gulf states. Therefore, it will require modernization of power lines designed to ensure large capacity flows throughout the system.

Currently, the total installed capacity of the combined power transmission system of the Gulf States is 2,400 MW; it was calculated on the basis of energy consumption forecasts made back in 1990. Since then, the demand for electricity in these countries has grown significantly. It's time to increase the total system capacity. Technically, this is possible, but modernization will require significant capital investment.

Another problem that the GCC Governments need to address is the reform of pricing mechanisms used in domestic electricity markets. State subsidies reduce the inflow of private investment in the industry, artificially inflate domestic electricity consumption due to the lack of incentives for its efficient use, and also hinder electricity trade with other regions. Reducing consumer surcharges applied in almost all countries in the region can also serve as an important tool for reducing peak loads, as consumers will use electricity more prudently; therefore, investment in the industry will also be reduced.

* * *

So, the creation of a Unified Energy System of the GCC countries is almost complete, and this may have noticeable positive socio-economic consequences for the entire integration association. Throughout the Council's existence, its goals have been: cooperation based on common infrastructure projects, implementation of collective efforts to ensure security (including in the field of energy), creation of a common market for goods and services.

However, many projects and ideas were never implemented. For example, there are plans to introduce a single currency and create a currency union, as well as to build a powerful gas pipeline through the territories of all 6 countries. In this regard, the nearing completion of the GCC EEC is undoubtedly the most important event in the recent history of the Council and all its member States. The implementation of this large-scale project was made possible thanks to the collective efforts of States and their unified political will. The importance of the UES for the successful development of the region as a whole cannot be overemphasized.

The use of the unified energy system, first of all, as a mechanism for mutual assistance in case of emergency outages, and not as a platform for trading electricity, has become a political decision dictated by the current situation in the electricity farms of the GCC countries. At the same time, the commercial exchange of electricity that is beginning to develop presupposes the existence of a single electricity market, and its creation, in turn, requires deep transformations in the industry. This will take some time.

Electricity trade can bring very large economic benefits and will contribute to deeper economic integration between the countries of the region, as well as create opportunities to enter regional and international electricity markets, including European markets. It will be extremely promising to join the GCC Unified Energy System to the "Seven Countries" energy interconnection project, which is still being developed, which includes Turkey, Syria, Iraq, Lebanon, Jordan, Egypt and Libya.

But all this is in the future, although, most likely, not so far away...

¹ The Cooperation Council for the Arab States of the Persian Gulf (GCC) is a regional closed international organization. Established on May 25, 1981; its policy is defined in the Charter, ratified in 1982. The main objective of the organization is coordination, cooperation and integration in all economic, social and cultural affairs. Among the Arab States of the Persian Gulf, Iraq is not a member of the GCC; Yemen has been negotiating to join the organization since 2005, Jordan and Morocco have been invited to participate in the organization.

^{Karim A.M.H.A., Maskati N.H.A., Sud S.} 2 Status of Gulf cooperation council (GCC) electricity grid system interconnection // Power Engineering Society General Meeting, Denver, 6 - 10 June 2004. Vol. 2, p. 1385 - 1388.

³ TWh (terawatt-hour - one thousand thousand kilowatt-hours of electricity) is a new, relatively little-used unit of electricity consumption.

⁴ Statistical Bulletin 2010, 19^th Issue // Arab Union of Electricity - http://auptde.org/ Article_Files/551.pdf

⁵ Рассчитано по: Statistical Bulletin 2010, 19^th Issue // Arab Union of Electricity -http://auptde.org/PublicationsFile.aspx?lang -en&CID=272

⁶ For the GCC countries: Statistical Bulletin 2009, ^18th Issue / / Arab Union of Electricity -http://auptde.org/PublicationsCat.aspx91ang =en&CID-96; for others: International Energy Agency - http://iea.org/countries/ membercountries/

^{Kakande Yasin.} 7 Sharjah counts cost of power cuts // The National. 07.09.2009 -http://www.thenational.ae/news/uae-news/ sharjah-counts-cost-of-power-cuts; Algharndi Yassim. Power failure shuts down Petro Rabigh // Saudi Gazette. 25.10.2010 http://www.saudigazette.com.sa/index.cfm9m ethod-home.regcon&contentid-20101025860 71; Algharndi Yassim. Power cuts hit industrial area in south Jeddah // Saudi Gazette, 16.06.2009 - http://www.saudigazette.com.sa/ index.cfm?method-home.regcon&contentID= 2009061640963

^{El-Katiri Laura.} 8 Interlinking the Arab Gulf: Opportunities and Challenges of GCC Electricity Market Cooperation. The Oxford Institute for Energy Studies. 2011, p. 10.

Permanent link to this publication: