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Energy Insights: Energy News: Arab world faces crisis of increasing electricity demand

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Arab world faces crisis of increasing electricity demand


25-03-2014


A tree stands amid electricity pylons in the desert in Dubai, Nov. 20, 2009. (photo by REUTERS/Steve Crisp)


Arab world faces crisis of increasing electricity demand


According to the International Energy Agency (IEA), the electricity sector will represent more than half of the global increase of energy until 2035. In its annual report for 2013 on "Exploring the Future of Global Energy," the IEA said that developing and emerging countries will benefit from most of the expected increase. China's share of the increase will be around 30%, India 13%, Southeast Asia about 8% and the Middle East about 6%.


While government subsidies have led to an increase in demand for electricity, outdated infrastructure, wars and corruption have prevented the authorities from properly addressing these issues.

The IEA expects the power stations that are to be built to add new electrical energy of about 9.76 terawatts (TW) in 2035, taking into account that the production of 1.94 TW of energy will be stopped in obsolete plants going offline during this period.

Furthermore, $17 trillion is expected to be invested in the production of global electric energy during 2013-15, knowing that the construction of plants will cost about 58% of the total expenditure, whereas the rest of the cost will cover the expenses of delivery stations and distribution networks.

As for the Middle East, the IEA expects a production of new electrical energy of about 281 gigawatts (GW) during 2013-35, noting that the production of about 69 GW will stop in obsolete stations. The IEA expects that natural gas will be used to generate 153 GW of power in the Middle East, while oil will be used in plants to generate 31 GW. Moreover, 26 GW will be generated from wind power, 46 GW from solar energy and 7 GW from nuclear energy. Currently, the United Arab Emirates is building two out of four reactors for this purpose. Saudi Arabia is considering generating electricity from nuclear power.

Hisham Khatib, an Arab expert in the electricity sector, warns against the high and rapid increase of demand for electricity in the countries of the Middle East and North Africa. These rates increase by about 6-8% annually, while the rate of global demand for electricity increases by about 2.3% annually.

The Arab Petroleum Investments Corporation (APICORP) expects an increase in the annual demand rate for electricity in the region by about 8.4% during the period 2014-18.

Khatib raises questions about the reasons behind this annual increase in the region's countries, since it exceeds global averages by far. He added that economic and population growth lead to an increase in demand for electricity. In Arab countries, the annual economic growth rate ranges between 3% to 4% annually, which is not much different from the annual economic global growth.

Khatib added that the population growth rate in the Arab world is higher than the global growth rate. He also said that the economy and demography do not offer convincing answers for the reasons behind the increase in electricity consumption in the Arab world. Most of the increase in electricity consumption is the result of consumption in households and apartment buildings rather than industrial plants. This means that electrical consumption in the Arab world is the result of the increase in the well-being of people, and not necessarily due to the industrial growth of the country.

What are the reasons behind the high increase in demand for electricity in the absence of an industrial boom in the region? Some of the main reasons are the governmental subsidies to varying degrees for electricity consumers in all countries. Some countries provide electricity for their citizens almost free of charge. Moreover, in addition to this subsidization policy, there are no educational programs to rationalize consumption, which is not surprising because it is difficult to convince citizens to save power while they are receiving it at relatively low prices. Subsidies lead to wasteful energy consumption. Arab officials and experts believe that subsidies are one of the main risks facing the electricity sector, according to Khatib.

The high annual electricity consumption leads to costly investments and to the consumption of large amounts of fuel. Some Arab countries with limited oil reserves are compelled to import oil products, which encumbers the commercial balance and causes an increase in emissions that are harmful to both the environment and citizens.

Regional and civil wars exacerbated the crisis of the electricity sector in various Arab countries. The reasons behind electricity outage varied: Electricity institutions neglected the establishment of new stations to meet the increased demands. Also, many power stations were bombarded or sabotaged during military conflicts. Necessary investments to fix or build new stations and networks were not available.

Corruption plagues the electricity sector, as it does the rest of the sectors in many Arab states. Some countries relied on the import of natural gas from neighboring countries that suddenly cut off the supply. Furthermore, there is mismanagement as some oil countries witness high electricity outages during summer year after year, without making any plans or being prepared for the peak of consumption during this season. Some countries are infested with chaos, where electricity institutions cannot collect monthly bills. This in addition to negative factors: clear stagnation in developing the electricity sector in terms of the participation of the private sector with the governments in investing in electricity generation and distribution, network development and collection of monthly bills.

In light of the aforementioned, the accumulation of Arab political problems and the expected steady increase in electricity consumption, it is clear that we are heading toward delicate periods in the future and the electricity problem will be getting worse.

www.al-monitor.com/

 

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