In line with the on-going preparation of the Dubai Chamber of Commerce & Industry to organize and host the Dubai-Hamburg Business Forum 2007, due to be held on October 23-24, the Chamber prepared a number of studies on certain economic sectors which will be the pivotal issues to be discussed by the participants of the Forum, in order to explore areas of anticipated cooperation between the businessmen and investors from Dubai and Hamburg in Germany. These studies reflect the development both cities have witnessed in these sectors which include aviation, banking & finance, foreign trade, maritime, logistics, energy and healthcare.
The following is a study that will discuss the developments occurred to the Energy Technology Sector in both Dubai and Hamburg, and the potential cooperation between the investors of this sector in both cities.
Dubai’s Renewable Energy Technology Sector
Facts and Figures, Current Situation
The UAE has one of the highest levels of energy consumption per capita in the world (see Graph 1). In 2005 the average UAE citizen consumed triple the amount of energy as the average German (12 Mtoe compared with 3 Mtoe each). Forecasts indicate that demand for UAE utilities (electricity and water) will continue to grow at a minimum rate of 10% per annum until 2010. Furthermore, forecasts for Dubai indicate that demand growth will be above the national average and grow between 12% and 14% per annum until 2010 (Kuwait Times). Despite very real concerns as to whether Dubai’s Electricity and Water Authority (DEWA) will be able to continue to increase capacity to sufficiently meet peak demand, renewable energy as a viable source remains extremely marginalised within the UAE.
Graph 1:
Source: BP Statistics and IMF IFS
Provision of electricity and water in Dubai is run by a state-owned monopoly, DEWA. To-date there is no formal plan for the market to be privatised. However, DEWA does contract work out to private companies (mainly foreign) to build both the power stations and desalination plants.
Although forecasts by the Department of Renewable Energy at the Ministry of Energy forecasts are optimistic regarding the use of renewable energy in the future, as yet little has been done in Dubai to actually realise this (Hannover Messe, 2006, p36).
Dubai’s Renewable Companies
The renewable energy sector in Dubai is in its infancy. To-date the applications of renewable energy are generally small, limited to parking meters, traffic lights, off shore buoys, water heating in some hotels, monitoring systems (water flows), oil rigs and telecommunications. However, the number of companies engaged in renewable energy has been growing over recent years.
There are 21 companies in the UAE registered as Solar Energy Businesses in the United Arab Emirates (see Appendix 1). Eight of those companies manufacture renewable energy products, whilst the majority are involved in trade and retail. Of the UAE companies ten are situated in the Emirate of Dubai, half of which are manufacturing renewable energy products such as solar water heaters, solar air conditioning units and photovoltaic cells. According to the Dubai Chamber of Commerce and Industry’s membership database 29 companies are registered as engaged in solar energy systems and components trading and to-date none registered under the renewable energy consultancy classification.
Despite some activity in the market with regards to renewable energy production and trade the penetration ratio of renewable energy within the market is still negligible.
Locational Advantages for Renewable Energies in Dubai
Hydroelectric power is the most popular form of renewable energy generation in the world; however, Dubai’s geographical environment does not lend itself to hydroelectric power generation. Solar and wind power seem to be more appealing, feasible solutions.
Solar Energy
Dubai’s weather conditions (hot and sunny) make it an obvious environment for solar/thermal energy generation. Currently, however DEWA limits the use of solar power to monitoring water flow or combating rust in pipes. In Dubai solar powered systems are only used in fairly small, specific projects within; for telecommunications, on oil rigs, parking meters, traffic light signals and in monitoring systems (such as water flow) (Hannover Messe (2006) p36).
Al Tayer, managing director and chief executive of DEWA, said: "There are internal discussions on solar energy but usage is curtailed by its relatively high and uncompetitive unit cost of production, its requirement for considerable space and its relatively small scale of electricity production compared with the huge requirement of DEWA." The Department of Renewable Energy, however, predicts that up to half the UAE's required energy will come from renewables by 2050 as the UAE wishes to maintain its position as a net exporter of energy.
Energy levels in the UAE peak during the summer due to reliance on air conditioning units; subsequently, there is concurrence between the period with the highest solar radiation and the period with the highest demand for electricity. It is estimated that 2,000 kWh/m2/year of energy could be generated through solar in the UAE. It is estimated that solar radiation in the UAE is capable of producing 5-7 (kWh/m2/day) 3 solar energy (ESCWA, 2001).
Given the UAE’s climatic comparative advantage it is surprising that virtually nothing has been done to develop solar energy projects. Such projects would give the UAE the opportunity to acquire production facilities in technology that is extremely new, with low barriers to entry and huge economies of scale. It remains to be seen whether a current proposal for a Swiss-UAE consortium to launch a US$10 billion solar project for the production of (exportable) hydrogen will be approved.
Example 1:
The Umm Al-Nar Power Station and desalination plant in Abu Dhabi was one of the first renewable energy system (RES) installations in the world in 1984; it is a solar-powered thermal desalination plant with a capacity of 80m3/d (Tzen (2005) p13).
Example 2:
In 2006 Dubai’s first ‘green’ building was built by Pacific Control Systems which uses 100kW of solar energy for its lighting and solar-thermal energy to support 100 tons of air conditioning. This initiative lead to the creation of the Emirates Green Building Council (GBC) and subsequently increasingly, new developments in the city are being designed with integrated systems to reduce their environmental damage.
Example 3: ESCWA’s Energy Issues Section (EIS) recently completed a study entitled “Potential and Prospects for Renewable Energy Electricity Generation” and have reported that solar technologies are developed enough and could power water desalination systems of different types and capacities. The suitability of the technology, system configuration, performance rating and costs depends on the specific site, application characteristics and requirements of the desalination plant. Abu Dhabi has preliminary plans to invest US$350 million in a 100 megawatt solar power plant, with a potential to increase its capacity to 550 MW in the future (ESCWA, 2001).
Wind Energy
Dubai Water and Electricity Authority (DEWA) is exploring wind energy options, and if the study confirms that the region would be a good site for wind farms then wind energy may soon be operational in Dubai. Wind speeds in the UAE often exceed the minimum of seven metres per second required to harness power, often reaching up to 12 metres per second. Experts estimate the potential national capacity to be generated from wind in the UAE to be 1,000 MW (Hannover Messe (2006) p33). Feasibility studies have been conducted in Fujeirah, following which there is a proposal for 3 wind farms with a capacity of 66MW. In 2004 the first wind plant in the UAE was set up on Sir Bani Yas Island which yields a minimum 1 million kWh a year.
Example 4: The Burj al-Taqa (Energy Tower) to be built in Dubai will produce 100% of its electricity needs from a roof-mounted wind turbine, 60 meters in diameter, and 15,000 square meters of PV solar panels. Another 17,000 square meters of solar panels will be located on a nearby artificial island visible from the tower. Any excess electricity generated will be used to extract hydrogen from sea water by electrolysis to be used to generate electricity at night through hydrogen fuel cells.
Energy Generation and Supply
The BP Statistical Review of World Energy (June 2006) reveals that the UAE produces and consumes 0% hydroelectric energy. Hydroelectric energy is the most popular and widespread source of renewable energy in the world. Similarly, according to the Energy Information Administration (EIA), in the International Energy Review 2004, the UAE’s net geothermal, solar, wind, and wood and waste electric power consumption has been continually 0% since 1980 to 2004.
R&D
The electricity and water authority in Dubai (DEWA) is state-owned and initiatives by DEWA into the renewable energy sector have hitherto been fairly limited. The privatised market in Abu Dhabi is a lot more forward thinking and proactive in its attitude toward renewable energies as a feasible and valuable source of energy generation. The Masdar Project outlined below, indicates Abu Dhabi’s commitment to the renewable energy market through research and development. Given that the UAE is a relatively small country there will inevitably be positive spillover affects from Abu Dhabi into Dubai’s energy sector.
(ENPARK) Project in Dubai
Four months ago, TECOM Investments, a member of Dubai Holding, today launched the Energy and Environment Park (ENPARK), a fully comprehensive eco-friendly community for both commercial and residential use, as a role model for Dubai’s commitment to sustainable development.
The project will be developed on an area of 8 million square feet, and will offer a business environment to foster sustainable development and clean energy. The park will consist of several components. The commercial components will include green commercial office space, retail and boutique manufacturing facilities as well as showrooms for energy saving technologies. It will also house energy efficient residential units as well as green hotel and conference areas.
ENPARK will have renewable and efficient water utilities, as well as clean and efficient transportation facilities as part of its infrastructure. Intelligent building systems, including energy management control, renewable energy production monitoring, fire alarm monitoring and security systems, will be a feature of the park.
The park has been launched at a time when the global renewable energy market is forecast to exceed US$220 billion annually over the next five years, according to the World Energy Congress. The first phase of the ENPARK project is set to be completed by 2010.
TECOM Investments has been working on green building, as well as energy and water conservation programs throughout 2006-2007 for optimizing resource usage.
Masdar Project in Abu Dhabi
Abu Dhabi, although producing around 95% of the UAE’s oil, is particularly devoted to renewable energies, aiming to extend the life of the oil and gas sectors by finding and creating renewable energy alternative sources.
‘Masdar’ is the Abu Dhabi’s new energy vision, and US$1.5 million has been invested into it in the first stage alone. The initiative will focus on developing and advancing innovative ‘green’ technologies in (Hannover Messe (2006) p37):
renewable energy
energy efficiency
carbon management and monetisation
water usage
desalination
The project will include a graduate-level scientific institute, a research and innovation centre and in 2009 a special ‘green-economic-zone’ designed to host environmentally clean companies with a target of a net CO2 balance of zero. This zone will also foster companies engaged in the development and production of renewable technologies and products and aims to attract some1, 500 companies. The Masdar Clean Tech Fund, a US$ 250 million private equity fund, has been created with Credit Suisse and Consensus Business Group to acquire stakes in clean energy, water and environmental companies (England, 2007).
Future Prospects
In the next 10 to 15 years Al Tayer (DEWA) expects only one per cent of the electricity produced to come from renewables in Dubai. This percentage, however, is expected to grow rapidly in the long-term due to the potentially higher competitiveness of renewable energy usage. The Department of Renewable Energy predicts that up to half the UAE's required energy will come from renewables by 2050 as the UAE wishes to maintain its position as a net exporter of energy.
Opportunities for enhancing bilateral cooperation with the business sector
The UAE should make the most of the Clean Development Mechanism (CDM) set up by the Kyoto Protocol, to have local renewable energy projects funded by foreign countries. Under the Kyoto Protocol, the UAE is classed as a developing country and has no targets to comply with regarding the reduction of carbon dioxide emissions. Within this framework countries working towards cutting their own emissions can receive credit for cutting down emissions abroad.
"The clean development mechanisms are incentives for the UAE to get free technology, create jobs and a way to shift and diversify energy resources by trying to attract a country to fund or partly finance a project," said Mohammad Raouf, senior environment researcher at the Gulf Research Centre. The UAE is a receiving or host country. Therefore, if another country funds a wind power project here to reduce carbon dioxide emissions, then the investing country will get an emissions reduction certificate for their home country, whilst the UAE will gain through advancements in technology.
References
England, A. (2007) Abu Dhabi eyes renewable energy future, (April 5 2007), The Financial Times, UK
EIA, (2004), International Energy Annual 2004, US
ESCWA (2001), Energy Options for Water Desalination in Selected ESCWA Member Countries, Paper 17, United Nations, NY
Hannover Messe, (2006), Wind and Solar Powered Seawater Desalination, Export Forum Renewable Energy, Hannover, Germany
BP Statistical Review of World Energy (June 2006)
Tzen, E., (2005), Successful Desalination RES Plants Worldwide, Centre for Renewable Energy Sources, Tunisia
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