What are the reasons for pioneering the independent power and water producers (IWPP) model in the UAE?
Abu Dhabi is the pioneer in the region to promote IWPP and other reforms in the water and electricity sector. We view IWPP as a commercial business in which everyone participates in tendering exercises and the one with the best price will be awarded the unit. It is good for business to have certain activities managed commercially, such that people are more conscious of the cost and management, the rationalization, and cost reduction in order to maximize profit. This has resulted in low-cost electricity generation and water production and timely completion of the production plant. The model has been successful in attracting private investment and expertise in the electricity and water sectors and in meeting power and water demands in a timely and efficient manner.
Who will be the main beneficiary of new prices amidst the price war among generation companies?
Competition, falling costs, and other factors have resulted in significantly lower generation prices from photovoltaic (PV) solar projects. The electricity price achieved for the third phase of Dubai solar project is indeed commendable. Such prices are more favorable than conventional methods, particularly gas-based, generation. More importantly, this diversity increases security for the customers at affordable prices. Any cost saving will be reflected in the unit cost that will be passed on to the customer. Right now, many customers—commercial, industrial, or residential—have different government subsidies, so whatever is gained will be passed onto the customer or the government itself. Where customers already pay full cost tariffs, the gain will be passed on to them. There is an annual price increase of about 5%, which is unlike three or four years ago, when the annual increase was much higher. The planning function within the Emirate has evolved significantly in recent years with more sophisticated energy.
What are your thoughts on desalination, and how can the technology be improved?
Traditionally, gas-fired power plants have been the mainstay of UAE generation, which was coupled with the traditional thermal desalination process. Desalination in all its forms is an expensive process with energy-intensive needs. However, we are able to reduce the energy required through the use of reverse osmosis together with energy recovery systems. The new Mirfa plant and two plants at Fujairah are applying this system, which provides efficiency advantages over standalone thermal desalination facilities. In addition, we are closely monitoring the Masdar pilot research project to identify emerging technologies with the potential to scale up accordingly in the future. The UAE and Abu Dhabi are committed to improving the security of supply through diversifying the overall energy mix within the country. There is now a significant focus on leveraging favorable market conditions for PV solar technology. Given the large swings of power demand between summer and winter and relatively flatter demand for water throughout the year, we have been planning and working to decouple water production from electricity generation. Reverse osmosis rather than conventional desalination will likely emerge as a more suitable technology.
How are tariffs creating another steady and secure revenue source for the government?
There was one increase in electricity and water tariffs on January 1, 2015 for all customer categories. We should also note that all government organizations now pay full-cost reflective tariffs as a result of the 2015 tariff reforms. The other customer category paying the cost-reflective tariffs is expat residential customers with high consumption. These tariff reforms are an effective way to encourage our customers to value energy sources and manage their consumption more wisely. To date the government has subsidized water and electricity, but the plan is to reform this subsidy regime over time. This is in line with our green and red campaign a few years ago, where the purpose was to give targets for customers to stay in the green and avoid the red as much as possible.