BMI View: B lackouts across Kuwait have drawn attention to the significant challenges the Kuwaiti power sector is facing. With power generation struggling to keep up with growing demand, much greater levels of investment are urgently needed. It appears the state is addressing the situation having earmarked USD9.9bn for infrastructure projects including power. Over the last three months there has also been a visible shift to a more positive attitude over foreign investment in the power sector.
Significant changes are on the cards in the Kuwaiti power sector over the coming years, as the government attempts to spur investment into the country's ageing infrastructure. Kuwait's first public-private partnership (PPP) for the construction of the 1.5-gigawatt Al-Zour power and desalination plant has the potential to set a precedent for greater private sector engagement within Kuwait's infrastructure and power industries, which has the potential to lead to an influx of investment. At the same time, the government is attempting to scale back its generous regime of energy subsidies, which have led to overconsumption and waste. Despite the potential, significant roadblocks continue to lie in the way, not least those presented by the emirate's dysfunctional political establishment.
Conventional thermal sources have long been the dominant fuel for energy generation in Kuwait and despite some government efforts to diversify the sector, oil and gas will remain the dominant energy source over the coming years. Following the Fukushima tragedy in 2011, Kuwait ordered the National Nuclear Energy Committee to be dissolved and officially abandoned its pursuit of nuclear power. However, the country is nevertheless aiming to reduce its domestic oil consumption in an effort to free up additional barrels for export, with many power projects that are planned or under construction set to use gas.
The electricity and water ministry is aiming to more than double generating and desalination capacity by 2017 to cater for growing demand and an estimated USD2.5bn is expected to be invested over the medium term. In addition to sanctioning the Al-Zour PPP, the government has set ambitious targets with regard to the use of renewable energy and has announced a number of new projects to build the country's capacity in this regard.
Over the last three months there has been significant progress in allowing for private investment into the country, which could be a positive signal for the power sector.
Key Trends And Developments
Kuwait's finance ministry has given approval for building a series of power plants, desalination facilities and other infrastructure projects totalling about KWD3bn (USD9.9bn). The planned projects will boost capacity by nearly 3,580MW besides waste treatment and developments for the education ministry. The projects include construction of a second phase of the gas-fired Az-Zour North power and desalinated water plant that has an initial capacity of 1,800MW, first phase of the Khairan power plant with 1,500MW of capacity and the Al Abdaliyah power plant with a capacity of 280MW. The ministry has not set a timeline for the projects, except for the sewage plant that will start by 2020. It has also not provided any information regarding funding beyond stating that 50% of the funds will be raised through stock market offerings.
The Kuwait Authority for Partnerships Projects (KAPP) has prequalified seven bidding groups to develop the Al-Khairan independent water and power project (IWPP) at the AlKhairan site on the Arabian Gulf coast in Kuwait. The shortlisted bidders are Abengoa; a consortium of International Company for Water and Power and Al Mulla Group Holding Company; Korea Electric Power Corporation; a team of Marubeni Corporation and Fouad Alghanim & Sons Group of Companies; Mitsubishi Corporation; Mitsui & Co; and Sumitomo Corporation. The winning bidder will be required to design, engineer, build, own, operate, maintain and transfer the facility for 25 years. The project will include a conventional thermal steam power plant with a minimum capacity of 1,800MW and a sea water desalination plant with a minimum capacity of 125mn imperial gallons per day.
Spanish engineering and construction company TSK signed a contract worth KWD116mn (USD383.7mn) in September 2015 to construct a 50MW solar park in Kuwait, reports Agence France Presse. The solar park, to be built in the Shagaya desert zone, is slated to begin electricity generation in December 2017, according to the Kuwait Institute for Scientific Research's Energy Research Head Salem al-Hajraf.
The Kuwait Institute for Scientific Research (KISR), which is spearheading much of the country's drive to invest in renewable energy, has launched three projects to produce power from renewable energy sources. The projects include a thermal station with capacity of 50MW, a photovoltaic solar station with capacity of 10MW and a wind power station with a capacity of 10MW. The government has also announced it intends to build a 70MW solar power facility in the Al-Shaqaya area, to become operational by 2016. Additionally, the country aims to build 100 new solar-powered fuelling stations by 2020, at a rate of 20 per year.
During the period 2015-2024, Kuwait's overall power generation is expected to reach 95.3T terawatts (TWh). Driving this growth are annual gains in gas-fired and oil-fired generation, with the former expected to outpace the latter as the government looks to focus the power sector on gas in an effort to free up oil for export.