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Utilities Unbundled - Gulf states deliver pioneering transmission project - EY - Global

Utilities Unbundled    issue 12

Gulf states deliver pioneering transmission project

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An unprecedented project linking the electricity grid in six Middle East states unlocks cost savings and signals possibilities for interconnection initiatives worldwide.

More than 20 years in planning, the Gulf Cooperation Council’s (GCC) Interconnection Project today links the transmission networks of six Gulf states on one unified grid via overhead lines and submarine cables.

Since the official go-ahead in 1999 and the establishment of the GCC Interconnection Authority (GCCIA) in 2001, the project has progressed rapidly to implementation. Bahrain, Kuwait, Saudi Arabia and Qatar interconnected in 2009; the United Arab Emirates (UAE) hooked up in 2011, with Oman currently connected to UAE via a 220kV link that will be upgraded to 400kV.

Latest in technology innovation
The project is not only audacious in concept but employs the most innovative technologies. "Building an entire grid system from scratch means there are no legacy systems to negotiate," explains GCCIA’s Ahmed Ali Al-Ebrahim.

"It’s the first-ever project in the GCC and the Middle East to use High Voltage Direct Current (HVDC) technology. This enables power flows between Saudi Arabia, which operates a 60 hertz grid, and the other five states, which operate at 50 hertz. The HVDC substation for Saudi Arabia cost more than US$200m, compared with just US$50m for the others, but is integral to the overall solution."

Smart technologies enable real-time decision-making and remote diagnosis of faults. "An engineer can pinpoint an issue with a substation in the desert 400 kilometers away, and direct the right crew with the right capabilities to remedy the fault." Security cameras and heat-detection systems also provide alerts and enable preventative action.

Today, the connected grid helps to counteract "major load shedding, which used to be severe and commonplace. These days, we don't lose a single customer, let alone country, due to the stability of the network and the immediate flow of energy between member states. If there is an outage, it is dealt with imperceptibly."

Budding energy market
Beyond providing emergency backup, this project is designed to create a common energy market so that the lowest-cost generation can be fully utilized.

A bilateral trading system currently gives countries visibility over capacity in other member states and enables them to place bids using yearly, monthly or daily options. This is facilitated by the GCCIA, which then arranges transmission.

In time, the system will become more sophisticated, ultimately enabling countries beyond the GCC to balance energy demand and supply.

Benefits of collaboration
The first phase cost around US$1.2b and was financed by GCC governments. Shareholdings are proportionate to the anticipated savings and economic benefits that each state will derive.

"The interconnector alone will save countries up to US$3b in capital investment by avoiding the need to build more than 5GW of generation capacity over 20 years. Operational and fuel efficiency savings across the system will amount to at least US$300m, based on feasibility estimates to 2028."

Even without significant economic benefits and energy security, Al-Ebrahim believes this is a good strategic project for the region. "It has the backing of GCC leaders and the support of electricity and energy ministers of the Gulf states to share in a united generation capability. Though the shareholdings vary, each country has equal representation on the GCCIA board, with the chairmanship rotating every three years, so that no single country drives this initiative."

Also on the agenda is greater exploitation of renewable resources, such as wind and solar. “The GCCIA is an active participant in the EU-GCC Clean Energy Network, exploring opportunities to seek renewable energy initiatives in the GCC,” says Al-Ebrahim. Increased interconnection should allow greater renewables penetration without affecting system stability. In addition, building new baseload generation plants, such as nuclear, becomes more economically feasible when it can be shared across a larger GCC market.

Toward a more interconnected future
Al-Ebrahim believes that energy interconnection in the Gulf States could be just the start.

"The GCCIA aims to promote power trading within and beyond the GCCIA countries to optimize fuel resources. Interconnection with other grids, such as the Egypt, Jordan, Iraq, Lebanon, Syria and Turkey (EJILST) grid, or the Maghreb Arab grid, will create opportunities to export surplus power to other regions."

This market would encourage energy interchange to meet seasonal demand diversity across regions. But it is not just about energy. By thinking ahead, the GCCIA deliberately built an additional 80% telecommunications capacity into the grid. Deals are being struck with telecoms companies in the region that will use the interconnectivity lines to deliver better quality and lower-cost services. Broadband connectivity might also be possible.

That, however, is the future. The present is all about the seamless ability to avoid power outages by drawing on the resources of a neighboring GCC member over a unified network. As a top executive at a GCC member states utility said: "Just being able to avoid a total or partial shutdown means the interconnection will pay for itself."

 

For more information, contact:

Power & Utilities Advisory Sector Leader, Middle East and North Africa
Manama, Bahrain
+ 973 1753 5455
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