Future of the Electricity System in the GCC Countries
About the Project
The goal of this project is to understand how policy can expedite renewable energy transitions in a cost-effective way, while allowing competitive national industries to develop. In line with this objective, a wide range of policy instruments, designed and implemented to promote renewable energy, are being assessed. Furthermore, the project takes a holistic approach by analyzing how the competitive dynamics between renewable technologies and incumbent technologies evolve.
In addition, the project focuses on how new technologies in distributed energy resources (DER) are transforming customer/provider relationships. Advances in distributed generation technologies and associated cost reductions are providing customers with potentially attractive alternatives to standard electric utility services, perhaps turning them into ‘prosumers’. Utilities around the world are re-evaluating their business models, and regulators are considering multiple market reforms. The project aims to develop analytical tools and techniques to help address the key market, regulatory and energy policy issues in a power sector with high penetration of DER.
Global electricity markets are facing substantial changes from both the demand and supply side of the industry. These structural shifts are also affecting Gulf Cooperation Council (GCC) countries, which need to adapt by developing new electricity models. Moving to a new power system will require significant reforms in the Gulf states. These countries may have to transform: state-run companies to private entities, monopolies to competitive markets, fossil fuel generation to a diversified electricity mix and from regulated to liberalized prices.
Renewable energy can be an economical option to diversify a country’s existing electricity mix. Recent tenders for solar photovoltaic (PV) suggest that renewable technology is competitive or, at least, they confirm that renewables can compete successfully under certain conditions.
As the current business model of pricing electricity, which is based on the marginal cost of production, is becoming obsolete, new models must emerge; and one example is the use of markets that value reliability and flexibility of electricity supply.
Electricity reform efforts in the GCC might incorporate three important characteristics. First, a credible economic plan with a rational time schedule to develop the regulations needed to achieve stated objectives. Second, price and subsidy reform to ensure long-term viability. Third, renewable energy to be added to the generation portfolio, while natural gas can act as the most effective back up to the system.
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