Industry consultants Frost & Sullivan expects new power generation projects in the Middle East to regain lost traction in 2011 in the wake of a relaxation in the credit markets, especially since demand is expected to maintain its upward spiral.
"Going ahead, the power generation in the region is set to radically change with demand is expected to nearly double in this decade," Frost & Sullivan said in its outlook for the Middle East power industry, reports Khaleej Times.
"With planned regional investments of more than $100bn, led by Saudi Arabia, the UAE, Egypt and Iraq, in power generation, and more than $60bn towards power transmission and distribution (T&D) in the next 10 years, the region's power sector is on the verge of change," it said.
Additionally, with oil prices crossing the $80 mark once again, investments in renewable energy are also expected to gain traction over the year, the report said. This observation is based on announcements by many countries to reduce their dependence on traditional fuels for power generation, and also work towards managing carbon emissions, it said.
"In 2011, countries in the region will also re-look at the subsidised tariffs that have been prevalent so far, with an aim to discourage wasteful consumption and manage peak demand usage. This, along with other management," Frost & Sullivan said.
Over the decade, nuclear power is expected to gain prominence, while private involvement in power generation and T&D is expected to increase. "The contribution of renewables to the total energy mix is set to increase over the next 10 years, looking at the planned targets announced by many countries in the region," it added.
The Smart Grid, although slow on the off take in the region, is also expected to gain momentum before the close of the decade while grid interconnectivity is expected to expand beyond the GCC, and encompass other countries in the region, with Egypt being the most likely to be linked up, it said.
Looking back at 2010, the report said the year has been "a tumultuous year" for the region's power generation, and power transmission and distribution industry. "Issues with project financing, feedstock, ageing infrastructure, increased demand largely attributable to industrialisation and urban development, and the emergence of alternate sources of energy were the major causes for disruption of the business environment for the power sector in the Middle East," it said.
"The last two years witnessed a number of cancelled greenfield projects, primarily owing to issues with project finance as well as feedstock. The global recession led to a highly cautious environment with respect to project finance, which in turn led to a downturn in availability of funds for projects with higher risks attached to them.
"A self-inflicted reduction in oil production on part of oil exporting countries in the region, resulted in a decline in production of associated gas, leading to curtailed and insufficient supply of gas.
"This issue, compounded by an ageing and overloaded Power Transmission and Distribution infrastructure, led to the region witnessing power outages, especially at peak periods. This was clearly visible through the experiences of Saudi Arabia, Sharjah, Bahrain, Jordan, and Egypt in 2010. On the other hand, the demand for power continued on its upward march, further burdening the power infrastructure," the report said.