Dubai: Pioneering a Sustainable Energy Model for Sustainable Development and Security of Supply

Dubai: Pioneering a Sustainable Energy Model for Sustainable Development and Security of Supply

10th May 2017

First published in Cornerstone, Volume 4, Issue 4

By Taher Diab, Senior Director of Strategy & Planning, Dubai Supreme Council of Energy

The Emirate of Dubai is one of the fastest growing cities in the world and a regional hub for tourism, logistics, and finance. The Dubai government is implementing an innovative strategy to manage demand, diversify fuel sources, secure its energy supply, and foster green growth. One strategic aim is to continue to fuel Dubai’s economic growth and maintain its regional and global prominent position.

Dubai’s installed generation capacity is about 10 GW. The main source of this power is from imported natural gas, which makes Dubai a net energy importer. Therefore, energy security is a high priority with forecasted electricity demand for the next decade projected to increase annually by 5–6%. In addition, the Emirate is pursuing a sustainable development path and plans to use clean energy technologies.

The economic success story of Dubai demonstrates how it managed to design and implement an energy strategy that captures the key levers driving its economy: energy security, demand-side management, and sustainable growth. Dubai is a living model of a coherent and cohesive energy strategy that meets future energy needs through an optimal energy mix that delivers affordable, sustainable, and clean energy to its citizens and residents.

JOURNEY TO A SUSTAINABLE FUTURE: DUBAI’S ENABLING ENVIRONMENT

The Emirate’s energy model originates from the Dubai Integrated Energy Strategy (DIES) 2030, which was launched in 2011 by the Dubai Supreme Council of Energy (DSCE) and is reviewed periodically. The DIES strategy was recently extended until 2050 with a detailed roadmap on how to achieve various CO2 free generation source targets by 2030 and 2050 (Figure 1).

FIGURE 1. Dubai Integrated Energy Strategy 2050.

The strategy builds on a world-class regulatory framework to accelerate the diversification of the energy mix, ensure security of supply, and facilitate effective demand-side management, as shown in Figure 2 with Dubai’s Integrated Energy Strategy up to 2030.

FIGURE 2. Dubai Integrated Energy Strategy – 2030.

The DIES includes the following elements:

    • Governance and Policies: To achieve the DIES targets, the policy and regulatory regime in Dubai’s energy sector has been overhauled. New principles such as public–private partnerships have been put in place to increase market participation in key projects, including clean coal and solar power generation. The regulatory framework for district cooling and energy service companies (ESCOs) is also supporting the implementation of DIES 2030.

Dubai is undergoing an energy transition.

  • Energy Efficiency and Demand Reduction: Demand reduction through energy efficiency is a focus of Dubai’s policy interventions to rationalize the use of power and water. The demand-side management (DSM) strategy has led to nine different programs and technical levers for energy efficiency and demand reduction. This has resulted in savings in capital, operational, and opportunity costs (as discussed in the next sections).
  • Energy Security and Sustainable Cost of Gas: Diversification of Dubai’s energy sources is a key focus of DIES 2030. This has led to several projects to increase future energy security including the proposed building of a clean coal power plant, solar, and encouragement of Independent Power Producer (IPP) projects. The Mohamed bin Rashid Al Maktoum Solar Park is an example of Dubai’s commitment to renewable energy. Other important elements in development include the use of imported nuclear energy, clean coal, waste-to-energy, hybrid and electric vehicles, and the distributed solar program (Shams Dubai).
  • Financial Mechanism and Capacity Building: DIES 2030 has launched measures and projects targeting DSM, renewable power, energy service contractors, Green Building Codes, and energy efficiency technologies. Financial mechanisms, such as the announced Dubai Green Fund currently under development, will encourage deployment of clean energy technologies in Dubai.

MARKET TRANSFORMATION

A market-based approach using public–private partnerships (PPPs) has been developed to meet the fast-growing demand for infrastructure in Dubai. The PPP approach leverages funding sources and helps balance the risk between the government and private investors. By fostering partnerships with leading international firms in clean energy, Dubai also aims to expand its local capacities through transfer of knowledge and skills.

Since the DSCE’s inception, it has rolled out a series of step-by-step regulatory reforms and policies to open the electricity market for independent power producers. This involved establishing the Regulatory and Supervisory Bureau (RSB) for the electricity and water sector in 2010. The RSB’s responsibilities include licensing of new entrants in the power sector.

One of the pillars of the DSEM, and a crucial factor in transforming Dubai’s energy market, was the review of the electricity and water tariff structure. In 2011, the Dubai Electricity and Water Authority (DEWA) introduced cost-reflective tariffs to incentivize lower consumption and more efficiency in the use of electricity and water. This sent positive signals to clean energy investors as the market became economically attractive for clean technologies, allowing for successful PPPs. Dubai’s robust regulatory framework provided investors with three key elements for long-term investment: transparency, longevity, and certainty.

SECURITY AND DIVERSIFICATION OF DUBAI’S ENERGY SUPPLY WHILE MAINTAINING SUSTAINABILITY

After evaluating the options to provide supply security of supply for Dubai, the government decided to shift from dependency on fossil fuel and to increase the renewable energy share. This culminated in a target of 25% of clean installed capacity by 2030 and 75% by 2050 using CO2-free generation sources. To achieve these targets, Dubai is taking progressive strides to integrate solar power into an energy mix portfolio that is currently dependent mainly on imported natural gas.

The robust regulatory framework and commercial terms have attracted international and regional investors resulting in the lowest levelized cost of electricity (LCOE) for 200 MW at 5.64 US cent/kWh and recently DEWA announced an 800-MW solar photovoltaic (PV) power plant at 3.0 US cent/kWh. This development marked a turning point in the journey to diversify Dubai’s energy mix and demonstrated the value proposition of strategic PPPs for procuring energy at a record low price.

The transformation of the energy sector in Dubai is also occurring on the customer side. Residents can generate their own electricity using solar panels that can also feed extra energy to the Dubai power grid. This step will gradually transform the consumers to “prosumers”, a term used to describe consumers that also generate part of their own energy consumption. Dubai currently deploys a simple net-metering system wherein customers achieve savings by generating their own electricity.

CLEAN COAL IN THE DUBAI CLEAN ENERGY STRATEGY 2050

For Dubai to diversify its energy mix, a decision was made to integrate clean coal to reduce dependency on imported natural gas and meet rising energy demand. Several reasons led to the decision to develop coal as an energy source. Coal is highly competitive with its low prices, dispatchability, and baseload compatibility. In addition, the combination of technological advances that allows both for higher efficiencies and reduced pollutants and emissions make it an ideal option to meet Dubai’s future energy needs.

In fact, Dubai’s commitment to a clean future stipulates the clean energy targets of the DIES 2050 strategy do not include clean coal without carbon capture and storage (CCS). Dubai has some of the most stringent emission standards and limits in the world for flue gas emissions. The deployment of clean coal technology will require meeting aggressive emissions and international environmental standards set for flue gas emissions. The limits are stricter than those in the Industrial Emissions Directive (IED) of the European Union and in the International Finance Corporation (IFC) guidelines. Dubai’s clean energy targets also include achieving CO2-free generation sources of 25% of its installed capacity in 2030 and 75% in 2050.

In 2016, Dubai awarded the first phase of the Hassyan Clean Coal Power Project comprising four 600-MW units. The ultra-supercritical technology to be deployed will aim for 50% high heating value (HHV) efficiency compared to only 35% efficiency in the current pulverized coal-fired plants. The first 600-MW unit will be commissioned in 2020. The full project size is 2400 MW; it will be the first clean coal power plant in the Gulf Cooperation Council (GCC) region. The electricity from the coal-fired power plant will be utilized during the high peak demand periods of the summer season to ensure security of supply at a reasonable cost.

Dubai has developed attractive commercial terms to secure the lowest levelized cost of electricity (LCOE) of about 4.5 US cent/kWh for the Hassyan project based on an IPP procurement model on a build-own-operate (BOO) basis. The project is 78% debt and 22% equity financed. This IPP model also fosters partnerships with leading international firms in clean energy, leverages funding sources, and helps balance the risk between the government and private investors.

DEMAND-SIDE MANAGEMENT

DIES 2030 also has an objective to reduce 30% of Dubai’s energy demand from the current business-as-usual scenario. To achieve this reduction by 2030, a detailed DSM strategy for electricity and water has been implemented, which is the first of its kind in the region. The DSM strategy has opened up new business opportunities for sustainable and efficient businesses by outlining policies, regulations, awareness schemes, technologies, and finance schemes.

The strategy is based on nine programs with a specific database, reduction targets, and enablers to influence behavior and encourage well-thought-out measures. To ensure that the measures are effective, the government has engaged key stakeholders for consultation on the proposed programs, reduction measures, and timeline with a clear roadmap targeting 30% consumption reduction of water and electricity by 2030. The stakeholders’ engagement and global benchmarking will provide information and knowledge in the following areas: building regulations, building retrofits, district cooling, standards and labels for appliances and equipment, water reuse and irrigation, outdoor lighting, change of tariffs, demand response, and distributed solar.

GREEN MOBILITY IN DUBAI

To accelerate the uptake of hybrid and electric vehicles (EVs), the Emirate established the Green Mobility Initiative to lead the world in becoming more sustainable using smart technologies. The initiative complements the spirit of Dubai Plan1 2021 by providing alternative modes of transportation that reduce fuel usage and CO2 emissions. Road transportation is the third largest source of Dubai’s greenhouse gas (GHG) emissions. This initiative is an important contributor to Dubai Carbon Abatement Strategy 2021, which aims to reduce carbon emissions by 16% in 2021 compared to the business-as-usual scenario in 2021.

The Dubai Supreme Council of Energy and its entities have developed a comprehensive approach founded on the principle of “leading by example”. A detailed analysis was undertaken by the government of the market potential of hybrids and EVs. Based on this analysis a decision was made that the government vehicle fleet would be 10% hybrid or EVs by 2021.

In addition to creating a market for hybrids and EVs, leading by example will enable the government to build the learning curve necessary to expand the deployment of such vehicles in the arid climate of Dubai. The Road and Transportation Authority (RTA) has already demonstrated the successful use of hybrid vehicles. The RTA employed over 140 hybrid taxis in 2015 and reported that around 30% fuel savings were achieved and found no performance challenges with the vehicles. The RTA is currently planning to convert 50% of its fleet to hybrid taxis by 2021 and is monitoring feasibility of hydrogen cell vehicles based on recent advancement in this technology.

DUBAI CARBON ABATEMENT STRATEGY 2021: LOCAL ACTION…GLOBAL CHANGE

In a short time, the Emirate has created a platform to find solutions for energy challenges by development of specific programs and projects. The first-in-the-region Dubai Carbon Abatement Strategy 2021 details programs that integrate alternative and renewable energy to diversify Dubai’s generation mix. This strategy will allow the Emirate to manage its energy demand, to increase efficiency, and to develop sector-based GHG reduction targets.

To design a performance-based program for carbon abatement, the strategy defined major sectors contributing to carbon emissions, referred to as “high-impact sectors”. Based on the carbon emissions profile for 2011, these sectors are power and water, manufacturing, road transportation, and waste. An unpublished technical evaluation of the emissions reduction potential for these high-impact sectors was carried out with the support of the Dubai Carbon Centre of Excellence, resulting in a target of 16% reduction of GHG by 2021 in comparison with the business-as-usual estimations for the same year.

In 2015, members of the Dubai Carbon Abatement Strategy saved 5.7 million tons of CO2e, which is equivalent to 10.6% reduction from business as usual in 2015.

BECOMING a ROLE MODEL IN ENERGY MANAGEMENT AND SUSTAINABILITY

The efforts of the UAE and Dubai to spearhead clean energy development in the region contribute greatly beyond the borders of the UAE. In a rapidly changing world, Dubai has seized the opportunity to follow a sustainable development pathway as it continues to grow. The clear and supportive vision of its leadership paved the way to develop a long-term strategy and deliver phased, but steadily implemented progress to achieve the goals of its DIES 2030. The strategy has resulted in investment certainty for the private sector and in several successful PPPs that resulted in low-cost solar energy, with positive ramifications for the future of solar not only in Dubai but the entire region.

The Emirate’s model as illustrated in Figure 3 is becoming a benchmark for the transition to a clean energy future in a region historically perceived as a synonym for “oil”. By 2030, Dubai expects to turn its sunny days into a sustainable fuel for generations to come and deliver strategic programs to support its Green Agenda to become a role model in energy management and sustainability in the region.

FIGURE 3. Dubai’s Sustainable Energy Model.