Kuwait Power Report Q4 2012

BMI View: Kuwait is likely to remain dependent almost exclusively on oil and gas for its energy needs
for the foreseeable future. Following the 2011 Fukushima tragedy in Japan, nuclear energy has largely
dropped out of usage, while renewable energy remains only a very minor segment of the country’s energy
mix. Much of the planned new generating capacity is gas-fired, with oil often used as a back-up fuel. The
aim is to make more of the country’s oil available for export, even if this leads to a growing reliance on
imported gas. Hints at a major renewables programme have yet to convince industry insiders. Low power
costs mean that project economics are unlikely to attract foreign investors, so Kuwait looks set to go it
alone in meeting growing power demand.
Conventional thermal sources are likely to remain the dominant fuel for electricity generation in the
coming years. Following the Fukushima tragedy in 2011, Kuwait has ordered the National Nuclear
Energy Committee to be dissolved and has officially announced that it will abandon the pursuit of civil
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 due to use gas. The electricity and water ministry wishes to more than double generating and
desalination capacity by 2017 and an estimated US$2.5bn is expected to be invested over the medium
term to cater for the projected power demand until 2015. Renewables could become part of the solution,
particularly given the vast solar potential of the desert state, though there has been minimal progress made
thus far.
Key trends and developments in the Kuwaiti electricity market:
? Kuwait is aiming to generate 10% of its electricity from sustainable sources by 2020, according
to Eyad Ali al-Falah, assistant undersecretary for technical services at the Ministry of Electricity
and Water. To meet its clean energy target, which is among the most ambitious in the region,
Kuwait next must gather data on hours of sunshine and wind speeds.
? Over the 2012-2021 period, Kuwait’s power generation is expected to increase by an annual
average of 4.1%, reaching 74.6 terrawatt hours (TWh). Gains in gas and oil-fired electricity are
set to drive this growth, with other sources of energy unlikely to feature heavily over the medium
term.
? Following an estimated 5.7% increase in 2011 real GDP, BMI forecasts average annual growth
of 3.4% between 2012 and 2021. The population is expected to rise from 2.89mn in 2012 to
3.45mn by 2021, with net power consumption to increase from 46.1TWh to 65.3TWh over the
same period.
? Thanks partly to the forecast rise in net generation, the forecast growth of which slightly
outpaces the underlying demand trend, Kuwait could end up with a shrinking longer-term power
supply shortfall. A gradual decline in the percentage of transmission and distribution (T&D)
losses from an estimated 13.2% in 2011 to 12.5% in 2021 should help balance the market.
? The construction of new power projects in Kuwait has been beset by persistent delays, largely
owing to a highly inefficient political process. In May 2010, for instance, the government
approved a 1.5GW (gigawatts) power project at al-Zour that would be the first in Kuwait to
involve private-sector investment. However, delays during the tendering process – caused in the
main by political gridlock in parliament – have seen the project fall significantly behind
schedule, and it is unclear when construction will be completed.

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Kuwait Power Report Q4 2012