UAE utilities ramp up capacity procurement
4 October 2024
Abu Dhabi state utility Emirates Water & Electricity Company (Ewec) invited bids for contracts to develop three independent power producer (IPP) projects in rapid succession in the third quarter of 2024.
These projects comprise the 2,500GW Taweelah C combined-cycle gas turbine plant, the 1,500MW Madinat Zayed open-cycle gas turbine project and the 400MW battery energy storage system to be located in Al-Bihouth and Madinat Zayed.
They bring the number of Ewec’s electricity generation IPP projects currently under tender to four, in addition to the 1,500MW Al-Khazna solar photovoltaic (PV) IPP, which it tendered in April.
Ewec also issued the expression of interest notice on 1 October for a contract to develop the emirate’s fifth solar PV IPP, the 1,500MW Al-Zarraf project.
This robust project pipeline implies that the offtaker and developers, investors and contractors bidding for these projects have entered a hectic period compared to the past few years.
Abu Dhabi’s growing IPP pipeline will compete with Saudi Arabia’s equally robust pipeline for developers’ and contractors’ resources over the near to medium term as both states endeavour to meet their 2030 decarbonisation targets.
Abu Dhabi plans to procure 1,400MW of renewable energy capacity annually between 2027 and 2037 and to meet more than 50% of the emirate’s electricity demand from renewable and clean energy sources by 2030. This is expected to rise to 60% by 2035.
It also previously stated that it expects to reach a renewable energy installed capacity of 7,500MW by 2030, or three times its current capacity.
The expiry of power-purchase agreements for several generation assets over the next couple of years and the likelihood of these contracts not being extended also drive Abu Dhabi’s procurement programme for gas-fired capacity.
Dubai has a slightly different strategy. Dubai Electricity & Water Authority (Dewa) has abandoned any plans to procure additional gas-fired capacity in the foreseeable future.
Dubai’s future generation projects will be focused on the Mohammed Bin Rashid Solar Park, which is expected to reach an installed capacity of 5,000MW by 2030.
So far, Dewa has awarded contracts for the first six phases of the project, which have a total combined capacity of 4,600MW.
Further phases are being planned, with the state utility expected to appoint transaction advisers for phase seven, for which the capacity has not yet been made public, next year.
“The volume of projects coming to the market is almost unprecedented,” notes an industry source, who expects that utility developers are starting to be selective when bidding for new contracts regardless of the energy source.
Nuclear capacity
Notably, the UAE’s Federal Authority for Nuclear Regulation announced that the fourth reactor, or Unit 4, of the Barakah nuclear power plant in Abu Dhabi reached commercial operations in early September.
It marks the completion of the $43bn, 5,600MW Barakah 1 project, which was jointly implemented by the UAE’s Emirates Nuclear Energy Corporation (Enec) and South Korea’s Korea Electric Power Corporation (Kepco).
The entire plant reached full commercial operations approximately 16 years after Abu Dhabi first announced the project in 2008 and 12 years after construction works commenced on Unit 1.
The completion of Barakah 1 also implies that the project’s next phase is likely to proceed in earnest.
Hamad Alkaabi, the UAE’s permanent representative to the Austria-based International Atomic Energy Agency, said in July that the UAE government is considering initiating the tendering process for its next nuclear power plant this year.
Apart from the final tendering process decision, the market is also keen to know who will be invited to bid or submit proposals for the contract to implement the nuclear power facility’s next phase.
Washington and Abu Dhabi entered into the bilateral 123 Agreement for peaceful nuclear cooperation in 2009, which could determine to a large extent which companies or countries will be invited to participate in the project’s next phase.
What the rush is about
Ewec has made clear that expiring generation capacities and the need for gas-fired baseload as more renewable energy enters the UAE electricity grid underpin its ambitious capacity procurement pipeline.
Other factors influencing future capacity procurement plans include the UAE’s multibillion-dollar national industrialisation strategy. This strategy involves expanding downstream industries, including clean hydrogen production for both domestic and export use, potentially resulting in an exponential increase in peak demand.
This is in addition to the need to decarbonise while expanding the production of hard-to-abate sectors such as the oil and gas, steel and aluminium industries.
In addition to these demand sources, many believe the UAE’s 2031 National Artificial Intelligence (AI) Strategy is a major contributor to Abu Dhabi’s ongoing generation capacity buildout.
“They need to build power-hungry data centres to support their AI strategy,” notes an executive with an international infrastructure investment firm with offices in Dubai.
The UAE’s AI strategy encompasses deploying AI in priority sectors and “providing the data and infrastructure essential to become a test bed for AI”.
Meeting these and the other stated objectives, in addition to the data sovereignty regulations, has started driving a boom in data centre construction across the UAE.
State-backed enterprises, utilities, banks, logistics, tourism and service industries, and real estate companies have launched or are expected to launch AI programmes to boost productivity and efficiency, in line with the UAE’s 2050 net-zero target and circular carbon economy strategy.
These span industry-specific applications ranging from chatbots and small-language models to generative AI and large-language models, the latter of which require significant data bandwidth and consume enormous amounts of energy.
AI applications in defence and national security are also presumed to be a major component of the overall AI plan.
“The AI programme is progressing,” notes an Abu Dhabi-based utility executive, confirming a plan to procure 5,000MW of AI-dedicated thermal capacity.
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