Amid COVID-19, unlike the global scenario, the electricity consumption increased in the country's different emirates especially in the domestic regions, like in Sharjah, due to lockdown restrictions. Different power companies also offered discounts over power bills during the lockdown period. On the other hand, the pandemic has also resulted in delays in major renewable project auctions and the construction of ongoing projects. The electricity consumption is growing in the country, resulting in the demand for new power projects and up-gradation of the transmission and distribution networks. Moreover, to decrease the dependency on fossil fuels, renewables sources are likely to drive the market in the coming years. However, the lack of privatization in the power sector in the northern emirates is expected to restrain the power sector's development during the forecast period.
The United Arab Emirates generates most of the electricity through natural gas. In 2019, the country generated 133 TWh of electricity from natural gas. Therefore, with a significantly lower share of renewables, thermal energy is expected to dominate the market during the forecast period.
In 2017, the United Arab Emirates launched 'Energy Strategy 2050', which aims to increase clean energy in the total energy mix to 50% by 2050 and reduce the carbon footprint of power generation by 70%. This, in turn, is expected to create significant market opportunities for the renewable energy companies in the near future.
The country is exploring its potential in renewable energy particularly in solar power. With various projects being under construction, renewable energy is expected to drive the power market significnatly.
Key Market Trends
Thermal Power Generation to Dominate the Market
The United Arab Emirates has traditionally been a hydrocarbon-based power generation country with natural gas accounting for a major share in the country's electricity power generation mix. Natural gas alone generated around 97% of electricity in 2019.
With increasing power demand and population, the dependency on thermal sources is likely to continue, which is favored by vast natural gas reserves in the nation.
The country is expected to add new gas-fired power generation capacity during the forecast period. For instance, as of 2020, Fujairah F3, a 2.4 GW capacity power plant with an investment of USD 1.1 billion, is expected to become operational by 2022.
However, with multiple policies to increase the renewable energy share in the country's power generation mix, thermal energy growth is expected to be restrained. Despite this, with 134 TWh of electricity generation in 2019, thermal sources are expected to remain the dominant sources for power generation in the country during the forecast period.
Renewable Energy to Drive the Market
In January 2017, the United Arab Emirates launched a national "Energy Strategy 2050". The government has allocated over USD 163 billion to meet its goal of increasing the contribution of clean energy sources in the total power generation capacity mix to 50% (44% renewable and 6% nuclear) by 2050.
The country has witnessed significant growth in renewables in recent years. As of May 2020, the share of clean energy in Dubai's energy mix increased to around 9%. This exceeds the target set in the Dubai Clean Energy Strategy 2050, which aimed to provide 7% of Dubai's total power output from clean energy sources by 2020.
DEWA launched Mohammed bin Rashid Al Maktoum (MBR) Solar Park, one of the largest solar parks globally. The fifth phase of the project with 900 MW capacity was allocated in November 2019 and expected to be commissioned in mid-2021.
In April 2020, Emirates Water and Electricity Company (EWEC) announced the 2 GW Al-Dhafra Solar PV IPP project, a consortium led by France's EDF and China's Jinko Power. The project is going to have the capacity to power approximately 160,000 households across the nation. The project is expected to complete in the first quarter of 2022.
With multiple government initiatives, the country's renewable power generation has grown at a significant rate and the nation reported 1.8 GW of installed renewable energy capacity in 2019. The United Arab Emirates' power market is further expected to grow in the future with ongoing renewable policies.
Competitive Landscape
The United Arab Emirates power market is moderately consolidated. Some of the major companies include Abu Dhabi National Energy Company PJSC (TAQA), Abu Dhabi Transmission & Despatch Company (Transco), Dubai Electricity and Water Authority (DEWA), Emirates Nuclear Energy Corporation (ENEC), Emirates Water and Electricity Company, and others.
