Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration - Shahid Hasan, Turki Al Aqeel, Iqbal Adjali ...

 
Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration - Shahid Hasan, Turki Al Aqeel, Iqbal Adjali ...
Abu Dhabi Electricity Sector:
Features, Challenges and
Opportunities for Market
Integration

Shahid Hasan, Turki Al Aqeel, Iqbal
Adjali, Yagyavalk Bhatt
February 2019                                                             10.30573/KS--2019-RT02

Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration   1
Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration - Shahid Hasan, Turki Al Aqeel, Iqbal Adjali ...
About KAPSARC
The King Abdullah Petroleum Studies and Research Center (KAPSARC) is a
non-profit global institution dedicated to independent research into energy economics,
policy, technology and the environment, across all types of energy. KAPSARC’s
mandate is to advance the understanding of energy challenges and opportunities
facing the world today and tomorrow, through unbiased, independent, and high-caliber
research for the benefit of society. KAPSARC is located in Riyadh, Saudi Arabia.

Legal Notice
© Copyright 2019 King Abdullah Petroleum Studies and Research Center (KAPSARC).
No portion of this document may be reproduced or utilized without the proper attribution
to KAPSARC.

Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration   2
Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration - Shahid Hasan, Turki Al Aqeel, Iqbal Adjali ...
Key Points

T
        he emirate of Abu Dhabi was the first in the Gulf Cooperation Council (GCC) to design and
        implement reforms aimed at moving away from a wholly government-owned vertically-integrated
        electricity market structure. From 1998, several policy, legislative, structural and institutional reforms
were introduced to Abu Dhabi’s electricity sector and the related water desalination industry. The key
features of the emirate’s electricity market and the challenges and opportunities associated with increased
participation in cross-border electricity trading are summarized as follows:

    Maintaining national self-sufficiency in power on an economically competitive basis is likely to remain
    the core criterion for the emirate’s supply-side planning. Accordingly, any possible reduction in the
    overall cost of electricity procurement for Abu Dhabi by using regional interconnections is seen as a
    big emerging driver for market integration. This is in addition to the savings that could accrue at the
    regional level.

    With lower peak demand growth projections for the near future and the commissioning of a 5.6 gigawatt
    (GW) nuclear power plant scheduled for 2021 or 2022, Abu Dhabi’s electricity sector is likely to produce
    larger power surpluses, particularly during the winter months. Abu Dhabi sees many opportunities
    from developing an integrated electricity market in the Gulf region. Providing open access to the
    transmission grid should encourage electricity trading opportunities. The existing regulatory provisions
    in Abu Dhabi allow for the use of its transmission network for cross-border electricity trading on the
    same terms as for other eligible users within Abu Dhabi.

    The current single-buyer (SB) model provides limited ‘implicit’ competition in the procurement of bulk
    supply. As power generation companies (generators) do not have direct market access (i.e., whereby
    they can also sell their power to any buyer other than the SB, this creates little or no pressure on
    generators to compete with others in day-to-day operations.

    The prospects of undertaking electricity trading are also hampered by the lack of volume and time-
    specific marginal costs for trading opportunities. However, for facilitating cross-border electricity
    trade, the realistic assessment of volume and time-specific marginal costs assumes significance.
    Efforts are being made to develop and test a robust system for determining the volume and time-
    specific marginal costs that would enable the SB (or generators as the case may be) to offer bids for
    trading surplus electricity.

    At the generation end, the emirate’s electricity and water producers do not receive explicit fuel
    (natural gas) subsidies. However, despite significant reforms to Abu Dhabi’s electricity sector and the
    introduction of higher and, in some cases, cost-reflective tariffs for various customer categories over the
    past two decades, electricity tariffs are still heavily subsidized for many residential consumers.

    Abu Dhabi is exploring several options to further liberalize its electricity market. These include
    relaxing the conditions of 100% off-take guarantees offered to generators through SBs. Another
    option is to allow generators to participate in future wholesale markets when their contracts expire.

Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration                      3
Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration - Shahid Hasan, Turki Al Aqeel, Iqbal Adjali ...
Key Points

      Electricity trading is likely to be recognized as a separate licensed activity, which is expected to give
      fresh impetus to electricity trading within Abu Dhabi, across the United Arab Emirates (UAE) and
      throughout the Gulf region. To encourage the effective utilization of surplus capacity through electricity
      trading, a future price discovery process, such as a forward electricity market (both medium term and
      long term) would complement the current day-ahead scheduling for wholesale electricity.

Figure 1. Abu Dhabi electricity demand and fuel consumption.

                                                                                                                         Gas use in power
  Peak demand                                                                                                              generation

                                                                                         Al-Ouhah                Al- Waseet
                                                                                         (UAE)       400 MW      (Oman)

                                                                                                                                                 830 trillion Btu
                                                                                                    220 kV d/c
                               Salwa (Saudi         Shuwaihat

                                                                                                                              464 trillion Btu
                     18.8 GW

                               Arabia)              (UAE)
           14.8 GW

                                          900 MW
                                         400 kV d/c
  6.6 GW

                                                                  Abu Dhabi (UAE)
 2007 2017 2024                                                                                                               2007               2017

                                                                UAE - Saudi Arabia interconnector
                                                                UAE - Oman interconnector

Source: Collated from multiple sources based on information available in the public domain. The map showing regional
interconnections is for representational purposes and does not show the exact transmission corridor between the countries.

Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration                                                                         4
Introduction

K
        APSARC has initiated a research project          gaps for policymakers in the region and to facilitate
        to develop insights that can facilitate the      ongoing efforts toward regional electricity market
        creation of a well-functioning integrated        integration.
electricity market comprising the member states
of the Gulf Cooperation Council (GCC). This              The first phase of the project addresses the
project aims to identify and examine the key issues      features of, and the challenges and opportunities
affecting electricity market integration within GCC      for, the electricity sectors of several countries in the
countries and the wider Middle East and North            region. The analysis discusses reform initiatives,
Africa (MENA) region and suggests potential              restructuring activities, key market players and
enablers that could facilitate market integration.       associated issues. It provides a deep analysis of the
Policy, legislative, regulatory, market design, system   main themes of the electricity sectors and will serve
operation and governance aspects of the electricity      as the backbone for a subsequent comprehensive
market will be examined for each GCC country,            study focusing on aspects of market design. The
to identify good practice arrangements that can          subsequent study will also propose a pragmatic
encourage efficient regional electricity trade. A        approach to guide the transition towards more
number of power systems around the world have            effective regional market integration. This report
combined to form regionally-integrated electricity       focuses on Abu Dhabi’s electricity sector. Future
markets. Their experiences will also be studied for      reports will look at market design-related and market
their potential application in the GCC region. This      structure-related issues in the context of developing
research project will help to fill existing knowledge    an integrated regional electricity market.

Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration                      5
Demand and Supply Outlook

W
            ith nearly 16,622 megawatts (MW) of                                                                                              forecasted electricity demand in the emirate would
            generation capacity and 14,788 MW of                                                                                             grow by 7% to 8% per year until 2020.
            peak demand in 2017, Abu Dhabi ranks
first among the United Arab Emirates (UAE) and                                                                                               The Abu Dhabi Transmission and Despatch
third among GCC countries in terms of generation                                                                                             Company (TRANSCO) expects the compounded
assets and peak demand. Abu Dhabi’s rising                                                                                                   future annual growth rate of peak demand to be
population and growing economy have been the                                                                                                 3.4% (base case scenario) for the period 2016-
key factors driving the increase in peak demand                                                                                              2030, significantly lower than the actual increase
(Figure 2), which grew by an average of 8.33%                                                                                                in the past 10 years. Lower expectations for gross
per year between 2007 and 2017. The growth in                                                                                                domestic product (GDP) and population growth,
demand has largely come from a range of industrial                                                                                           increased energy efficiency and reduction in
and business sector activities (OBG 2014) and                                                                                                subsidies are likely to be potential factors behind the
increased exports to the smaller Northern Emirates                                                                                           lower peak demand growth forecast. The electricity
of Ajman, Umm Al Qaiwain, Ras Al Khaimah, and Al                                                                                             peak demand (including supplies to Abu Dhabi and
Fujairah. Real peak demand growth has been close                                                                                             the Northern Emirates) is projected to increase from
to the projection made by the Abu Dhabi Water and                                                                                            14.2 gigawatts (GW) in 2016 to 20 GW-26 GW by
Electricity Company (ADWEC) for 2009-2030, which                                                                                             2030 (TRANSCO 2017).

Figure 2. Historical and projected electricity peak demand.

                                     25000

                                                                                                                                                                                                                                                21800
                                                                                                                                                                                                                                    21100
 Peak demand and availability (MW)

                                                                                                                                                                                                                          20100
                                                                                                                                                                                                               19200
                                     20000
                                                                                                                                                                                                    18300                                   18789
                                                                                                                                                                                            17600                                 18167
                                                                                                                                                                                                                       17578
                                                                                                                                                                                16200                       16982
                                                                                                                                                                        16622                   16384
                                                                                                                                                        15220                           15831
                                                                                                                                                                           15304
                                                                                                                                             14590              14788
                                     15000                                                                               13721
                                                                                                                                  13958              14234
                                                                                                  13254       13591                       13691

                                                                                   10804                                     12093
                                                                                                                 11243
                                                                           10043                      10618                                                       10876
                                                                                                                                                       10518
                                                                                                                                            10172
                                                                                           9749
                                     10000                   8683
                                                                                                                                 8983
                                                                               8563                                   8599
                                                    8086                                                  8278
                                                                    7563                     7683
                                             6644     6620                         6885
                                                                      6255
                                                           5616
                                               5286
                                     5000

                                        0
                                             2007 2008 2009                   2010 2011              2012 2013               2014       2015 2016 2017 2018 2019 2020                                   2021 2022 2023 2024

                                                                                             Global UAE                          Abu Dhabi System                          Availability

Source: (i) ADWEC Statistical Report 1999-2016, (ii) ADWEC Statistical Leaflet 2017, and (ii) 2017 Electricity Seven Year Planning
Statement (2018-2024) Main Report by TRANSCO

Note: Yellow bars indicate peak demand projections.

Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration                                                                                                                                                             6
Demand and Supply Outlook

Figure 3. Historical variations in demand.
                    Peak demand and availability (MW)   18000

                                                        16000

                                                        14000

                                                        12000

                                                        10000

                                                        8000

                                                        6000

                                                        4000

                                                        2000

                                                          0
                                                                Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16    Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16

                                                                             Abu Dhabi      Western region            Global UAE

                                                                             Al Ain         Abu Dhabi system          Availability at system peak

Source: ADWEC Statistical Report 1999-2016

Note: Abu Dhabi system demand represents the combined peak demand of Abu Dhabi municipality (also referred as Abu Dhabi
region), Al Ain municipality (also referred as Al Ain region) and the Western region (also known as Al Gharbia municipality). Global
UAE peak demand also includes the peak demand that is served by the emirate of Abu Dhabi in the Federal Electricity and
Water Authority (FEWA) and Sharjah Electricity and Water Authority (SEWA) regions. In line with the presidential decree in 2010
the majority of all customer demand in the Northern Emirates is now met by Abu Dhabi’s generation fleet and supplied through
TRANSCO’s transmission network. Likewise, total availability at the time of system peak also includes generation facilities located
in FEWA and SEWA regions.

With 15.22 GW of available capacity in 2016 and a                                                       sector now represents the highest electricity
predictable pattern of seasonal variations in peak                                                      consuming category in Abu Dhabi, at 52.1%.
demand (Figure 3), surplus power capacity exists
during the winter months of November to February.                                                       Maintaining internal self-sufficiency in power
With the commissioning of a 5.6 GW nuclear power                                                        generation through competitive tendering has been
plant and other renewable energy projects under                                                         core to supply-side planning in the emirate of Abu
development, plus a moderate increase in peak                                                           Dhabi, and is likely to be an important consideration
demand, Abu Dhabi’s surplus available capacity will                                                     for future growth strategies. The current fuel mix
further increase in the coming years. The effective                                                     for electricity generation in the emirate is heavily
utilization of this surplus capacity will require the                                                   dominated by natural gas, which accounts for
exploration of electricity trading opportunities in the                                                 99.7% of the fuel used for power generation and
region. The share of the residential sector in Abu                                                      water desalination in Abu Dhabi (ADWEC 2017).
Dhabi’s electricity consumption declined from 45.3%                                                     While natural gas consumption for electricity and
in 2007 to 25.6% in 2016. This decline has been                                                         water production has increased sharply, from 360.9
compensated for by a steady increase in electricity                                                     billion cubic feet (Bcf) in 2005 to 807.2 Bcf in 2017,
consumption by the commercial and industry sectors                                                      domestic natural gas production has shown a smaller
over the same period (Figure 4). The commercial                                                         increase, rising from 2,069.6 Bcf in 2005 to 3,096.2

Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration                                                                 7
Demand and Supply Outlook

Bcf in 2017 (SCAD 2017). Abu Dhabi’s growing                         objective, the Abu Dhabi Department of Energy
reliance on natural gas imports for its gas-based                    (DoE) (formerly the Regulation and Supervision
power generation and to improve its environmental                    Bureau [RSB]) has emphasized the need to develop
credentials has made energy diversification a national               regulations and the necessary sector initiatives to
priority, with clean energy becoming an important part               encourage and integrate non-conventional power
of the government’s energy strategy. The government                  generation, including renewable energy technologies,
plans to reduce the dominance of gas in its energy                   in the coming years.
mix by expanding into renewable and nuclear
energy resources. In 2007, Plan Abu Dhabi 2030                       Abu Dhabi is also developing the four-unit 5.6
acknowledged the need to use the emirate’s available                 GW Barakah nuclear power plant. The first of the
hydrocarbon resources cautiously, and to explore                     four reactors is likely to be commissioned in mid
the use of non-hydrocarbon resources (mainly solar                   2019. According to the Emirates Nuclear Energy
and wind) to augment the growing energy needs                        Corporation, the new nuclear power plant will supply
of its economy (ADUPC 2007). The Shams 1 (100                        up to 25% of the UAE’s electricity needs once it is
MW) concentrated solar power (CSP) project and                       fully operational in 2021/2022 (ENEC 2018). When
the Masdar City (10 MW solar photovoltaic [PV])                      fully commissioned, the electricity generated from the
project are both operational, while the 800 MW                       facility’s four nuclear reactors will require it to explore
Sweihan PV project is under development. Abu                         trading opportunities for excess power capacity, both
Dhabi is committed to increasing its renewables-                     within and outside the UAE, in particular during the
based production capacity to 7% of the country’s                     winter months when power demand is lower in the
total production capacity by 2020. To support this                   Gulf region (Trichakis et al. 2018).

Figure 4. Share of electricity by consumption categories.

                    100%

                     90%

                     80%

                     70%

                     60%

                     50%

                     40%

                     30%

                     20%

                     10%

                     0%
                                 2007                  2012                    2015                 2016

                                         Domestic             Commercial          Government

                                         Agriculture          Industry            Other

Source: Energy and Water Statistics 2016, Statistics Centre, Abu Dhabi

Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration                                   8
Reform Initiatives and Timelines

A
        bu Dhabi was the first in the GCC to initiate            1997, leading to the enactment of a new law for the
        power sector reforms, moving away from the               power and water desalination sectors in 1998, and
        traditional state-owned vertically integrated            partial deregulation of those utilities in 1999. Private
monopoly model. Recognizing the need for private                 sector participation in power generation and water
sector participation in the electricity sector amid              desalination was encouraged as an alternative
growing power demand, the government of the                      to government-financed plants, freeing up public
emirate created the Privatization Committee in                   resources for use in other growth areas.

                                             Key reform milestones

  Decision No. 1                                  Law No. 2
  Crown Prince’s Decision                         Regulation of the Water
  Concerning the                                  and Electricity Sector in
  Establishment of the                            the Emirate of Abu Dhabi                             Law No. 11
  Privatization Committee                         (as amended by Law No.                               Establishment of the
  for the Water and                               19 of 2007 and Law No. 9                             Department of Energy
  Electricity Sector                              of 2009, among others)                               (DoE)

       1996                      1997                     1998                   1999                        2018

                            Decree No. 7                                      Restructuring
                            Concerning the                                    Partial unbundling and
                            Privatization Committee                           creation of Abu Dhabi
                            for the Water and                                 Water and Electricity
                            Electricity Sector                                Authority (ADWEA)

                            Decision No. 4
                            Establishing the
                            Privatization Committee
                            for the Water and
                            Electricity Sector

Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration                                   9
Restructuring of the Electricity Sector:
Roles and Entities

U
         ntil February 2018, Abu Dhabi’s electricity                               power and water in the emirate while improving the
         sector was governed and regulated by Law                                  cost-efficiency of the sector through private sector
         No. 2 of 1998. This legislation paved the way                             participation and other demand-side interventions.
for the creation of various entities responsible for
activities across the supply chain (Figure 5), initially                           ADWEA retained ownership of the share capital
owned by the Abu Dhabi government through the                                      of the Abu Dhabi Power Corporation (ADPC). In
Abu Dhabi Water and Electricity Authority (ADWEA).                                 addition to managing the emirate’s public sector
                                                                                   entities, as part of the privatization program, ADWEA
Policy, development and                                                            was allowed to form joint ventures under the build-
privatization                                                                      operate-transfer (BOT) or build-operate-own (BOOT)
                                                                                   models for water and electricity production. Article 19
ADWEA replaced Abu Dhabi’s Water and Electricity                                   of the 1998 legislation exempted ADWEA from the
Department and is responsible for all matters                                      public tendering and procurement laws applicable
relating to the formulation, development and                                       in Abu Dhabi and empowered it to issue its own
implementation of policy relating to Abu Dhabi’s                                   regulations to regulate tenders and procurement
water and electricity sector, including privatization.                             activities. Its other functions included (i) the
ADWEA was created as a government-owned                                            promotion of research, conservation and the efficient
entity with legal and administrative independence.                                 use of electricity and water, and (ii) the publication of
Its remit was to ensure a sustainable supply of                                    information or advice on matters of public interest.

Figure 5. Abu Dhabi electricity industry structure (1999-February, 2018)

                                                                       Fuel suppliers

                                                                  Dolphin Energy
                                                                  ADNOC

                                                                          Fuel supply
                                                                          agreements
                                                                            (FSA)

                   Generation                                           Single buyer                     Distribution & supply
                                               Power & water
                                                 purchase
                                                agreements                    ADWEC
          IWPPs                                  (PWPAs)
                                                                                                                                     Customers
                                                                                                        Abu Dhabi Distribution Co.
          Joint -Venture between
          ADWEA and private
          companies                                                    Transmission                       Al Ain Distribution Co.

                                                                  Abu Dhabi Transmission &
          Al-Mirfa Power Company                                     Despatch Company

                                            Regulated by Regulation & Supervision Bureau

                              Privatised entities, partially owned by ADWEA             Entities wholly owned by ADWEA

                              Denotes direction of payments

Source: Abu Dhabi Transmission & Despatch Company (TRANSCO).

Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration                                                      10
Restructuring of the Electricity Sector: Roles and Entities

The single buyer                                            operates Abu Dhabi’s power transmission network,
                                                            which comprises a mixture of 400-kilovolt (kV),
The state-owned Abu Dhabi Water and Electricity             220-kV and 132-kV lines. TRANSCO also operates
Company (ADWEC), was created in 1998 to ensure              the load despatch center and is responsible for
sufficient potable water and power capacity in the          developing (i) procedures for the economic and
emirate and to buy all water and electricity produced       technical despatch of production facilities, and (ii)
in the Emirate of Abu Dhabi. In late 2018, the              a system for the settlement of payments for the
Emirates Water and Electricity Company (EWEC)               providers of production capacity, delivered electricity
was established to replace ADWEC, with a wider              output and ancillary services.
mandate to cover the Northern Emirates in addition
to the emirate of Abu Dhabi. EWEC is wholly-                Planning for the transmission infrastructure is
owned by the government-owned ADPC. EWEC is                 carried out by TRANSCO, based on the investment
responsible for procuring and supplying natural gas         requirements consistent with the government’s
to all water and power generation companies. The            vision. A seven-year electricity planning statement
single-buyer (SB) model encapsulated by ADWEC               (known by the abbreviation E7YPS) is prepared
created a high level of certainty for producers and         annually for network development and presents
for ADWEC through long-term power and water                 a forward view of an integrated generation
purchase agreements (PWPAs), commonly referred              transmission system expansion plan. While
to as off-take agreements. These agreements are             preparing the network development strategy,
awarded through a competitive tendering process             TRANSCO (i) relies on the assessment of the
based on the lowest levelized unit cost of electricity      demand forecast and commensurate generation
production. However, such PWPAs also eliminate              capacity requirements by EWEC, which are part of
the possibility of developing a competitive bulk            its duties under the law, and (ii) undertakes its own
supply market as ADWEC purchased all power                  techno-economic and risk analysis in accordance
output. The costs of purchasing power, water and            with the relevant grid codes and standards,
natural gas, plus EWEC’s operational costs, form            consistent with international best practice. Ensuring
the basis of the bulk supply tariff (BST). This tariff is   system security in grid operation is the basic
in effect the wholesale power and water tariff for the      criterion in assessing the bulk transmission system
sector, and is calculated by EWEC and approved              capabilities. It also solicits feedback from users
by the DoE each year. The BST represents                    seeking the use of the transmission system. E7YPS
between 50% and 60% of total sector costs. EWEC             is reviewed by the Abu Dhabi electricity regulator
calculates the BST, including the cost of electricity       and amended as required. Existing transmission
imports, and it is then reviewed and approved by the        facilities with no significant additional cost may be
regulator as per the tariff determination process.          able to accommodate the first large-scale solar
                                                            power projects being developed at Sweihan in
Transmission and despatch                                   Al-Ain region of the emirate (TRANSCO 2017).
                                                            The transmission capacity reinforcement needed
The Abu Dhabi Transmission and Despatch                     to enable power evacuation from the under-
Company (TRANSCO), a wholly owned subsidiary                construction 5.6 GW Barakah nuclear power plant
of ADPC, carries out the transmission and despatch          (located in the western region) was included in
of power in the emirate. TRANSCO owns and                   TRANSCO’s 2017 E7YPS.

Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration                    11
Restructuring of the Electricity Sector: Roles and Entities

Abu Dhabi’s power transmission system is                suppliers of natural gas to the emirate’s IWPPs.
connected to the Northern Emirates and Dubai            However, IWPPs are incentivized to consume fuel
through the Emirates National Grid, referred to         efficiently through a bonus-penalty mechanism
within the UAE as regional grid interconnections.       under the PWPAs, based on benchmark (or
Abu Dhabi is also connected to the electricity grids    reference) heat rates, and minimum requirements as
of Saudi Arabia and Oman through international          set by the regulator, where applicable. No subsidies
grid interconnections established through the GCC       are included in the assessment of the fuel cost.
Interconnection Authority (GCCIA). The GCCIA            Gas is offered at a competitive price, but below the
grid provides an alternative source for operating       market price for power production (Graves 2016).
reserves and support during power shortages or
emergencies. These regional and international           TRANSCO prepares a day-ahead generation
grid interconnections offer yet untapped electricity    schedule for various generating units, largely
trading opportunities between neighboring countries     within the bounds of power purchase agreements
in the Gulf region, lowering power procurement          between EWEC and the IWPPs, and takes note of
costs for participating countries, and offering         other relevant technical considerations. There is
additional savings such as reducing and/or deferring    an implicit competition in day-ahead scheduling as
investment in new generation capacity at the            the most efficient plants are despatched first in the
regional level due to the further integration of the    unit commitment schedule, wherein it optimizes the
electricity market (TRANSCO 2017).                      production costs for the next 24-hours. Operational
                                                        timescales for system operation and despatch
Abu Dhabi’s electricity market has been designed        follow day-ahead generation schedules with hourly
under the capacity market model, where electricity      scheduling. There are no separate ancillary and
generators are paid their capital recovery and fixed    balancing services markets as the existing power
operation and maintenance (O&M) costs on the            producers are required to provide these services
basis of committed or declared power availability       under the main power purchase contracts, which
from a power plant, irrespective of whether and         define the conditions and requirements for providing
how much the plant produces. This addresses the         such services.
perceived risks associated with under-recovery of
investors’ fixed costs. Additionally, a variable O&M    Unlike many wholesale electricity markets that
cost is paid by TRANSCO to cover the generating         follow a single market clearing price (i.e., the price
plant’s variable costs and other cost elements such     of the highest accepted offer), each generator
as back-up fuel costs.                                  in Abu Dhabi is paid a separate price based on
                                                        its power contract or PWPA, when despatched
The expected fuel consumption for a range of            according to TRANSCO’s economic scheduling
loading conditions and efficiency norms over            model. Conceptually, a truly competitive wholesale
the plant’s life is provided by generators through      market (where no single buyer or seller is large
PWPAs. Their performance and actual fuel cost           enough to influence the market) can incentivize
are monitored regularly by EWEC with inputs from        both short-run efficiency (i.e., efficient despatch
TRANSCO. This cost (i.e., fuel cost) is paid directly   with electricity production at least-cost throughout
by EWEC to the Abu Dhabi National Oil Company           the day) and long-run efficiency (i.e., investments
(ADNOC) and to Dolphin Energy, the two main             in new generation to maximize profits). However,

Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration                 12
Restructuring of the Electricity Sector: Roles and Entities

such competitive pressures are not present in a          responsible for the import and export of electricity
market design characterized by a SB model with           are often reluctant to disclose and share their
guaranteed power off-take, a feature common in           marginal costs with counterparts across borders and
most Gulf countries.                                     actively engage in cross-border electricity trading.
                                                         Given this reluctance, there is a good case for the
Currently, the SB buys all the power, the system         establishment of a regional, neutral, entity that can
operator follows a day-ahead scheduling process          help member states develop a robust methodology
aimed at the aggregate optimization of electricity       for assessing the marginal cost of electricity
procurement costs in accordance with the relevant        production, reflecting the fair value of the commodity
PPAs, and the SB pays the fuel cost directly.            for trading purposes. Designing and implementing
Therefore, the need to accurately know the volume        an acceptable and transparent regulatory approach
and time-specific marginal costs of electricity          for cost-reflective marginal pricing will be an
production for trading opportunities is considered       important enabler for cross-border electricity trade.
unimportant. However, in order to facilitate cross-
border electricity trade, it is important to have a      Distribution/supply
realistic assessment of volume and time-specific
marginal costs.                                          Electricity distribution and supply functions in Abu
                                                         Dhabi are carried out by two companies, the Abu
The lack of accurately determined marginal               Dhabi Distribution Company (ADDC) and the Al Ain
costs of electricity production for specific trading     Distribution Company (AADC), also wholly-owned
opportunities has been highlighted as one of the         by ADPC (formerly ADWEA). Their responsibilities
key barriers to Abu Dhabi (and other GCC member          include the ownership, operation and maintenance
states) undertaking cross-border electricity trades.     of the country’s water and electricity distribution
From both buyers’ and sellers’ perspectives,             network assets, meter reading, and services
knowing the marginal costs of production is an           relating to the supply of water and electricity in their
important enabler of cross-border electricity trading.   respective areas. AADC is the sole distributor and
Efforts are being made to design and test a more         supplier of water and electricity in the eastern region
robust pricing system that would help SBs (or            of the emirate, focusing on the city of Al Ain and
generators as the case may be) when placing their        surrounding rural areas. ADDC supplies water and
bids, and which would be more reflective of the          electricity to customers in the rest of the emirate
opportunity costs linked to specific volumes and         and is the largest of the two electricity distribution
times of providing electricity for export.               companies in Abu Dhabi.

Moreover, the existence of either implicit or explicit
                                                         Independent water and power
fuel subsidies for electricity production continues
to distort the real cost of electricity production
                                                         producers (IWPPs): selection,
in the region. Therefore, the current approach           ownership and PPAs
of supply-side pricing may be unsuitable for
trading purposes and may send incorrect price            A number of independent water and power
signals to potential competitors. As a result, the       producers (IWPPs) have been established in the
nodal agencies in GCC member states that are             emirate since the start of electricity and water sector
                                                         liberalization in 1998, and they account for nearly all

Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration                  13
Restructuring of the Electricity Sector: Roles and Entities

of Abu Dhabi's power generation and desalination          payments, such as start-up and shut-down
capacity. The privatization of these utilities            costs, and back-up fuel costs are also paid to the
had strong political support from the emirate’s           producers by EWEC. EWEC pays gas suppliers
leadership (Ameri 2017). This political support and       for the natural gas consumed by each IWPP,
the business-friendly environment of Abu Dhabi            insulating power producers from market- and
boosted the confidence of potential private players,      gas supply-related risks. Once the projects are
leading to the successful privatization of the            awarded, the sale price of electricity, off-take
emirate’s power generation business.                      obligations and the gas price are defined in the
                                                          contractual agreement between each IWPP
The greenfield power generation and water                 and EWEC. The power and water purchase
desalination projects are awarded through a               agreements usually have a term of 20 to 25 years
competitive bidding process based on the lowest           from the start of commercial operations.
levelized tariffs for the sale of water and electricity
to EWEC (formerly ADWEC). The divestment of
                                                          In daily operational scheduling, the current market
existing projects relies on maximizing the asset
                                                          design does not allow IWPPs to compete for their
value for a given tariff (RSB 2013). The levelized
                                                          dispatch at shorter operational (e.g., a sub-hourly
tariff is calculated based on the given assumptions
                                                          basis) timescales, and does not incentivize them
about availability, production, fuel prices and
                                                          for offering various other products/services linked
other factors. In the past, a nominal internal rate
                                                          with the time and scarcity of resources (e.g.,
of return (IRR) of 13% on equity was guaranteed
                                                          ancillary services and demand response). It was
to prospective private producers in the base case
                                                          noted that investors “might simply walk away”
scenario. This rate has been reduced in recent
                                                          if they had to compete in the day-ahead market
tendering processes for new IWPPs, reflecting
                                                          (Al-Sunaidy 2011). EWEC (formerly ADWEC)
current market conditions. However, a reasonable
                                                          manages the entire bidding process for power
IRR is assured to ensure the financial viability to
                                                          and water desalination projects through the pre-
private investors.
                                                          qualification of bidders, issuing requests for
EWEC (formerly ADWEC) uses a two-part tariff              proposals and selecting successful bidders for
structure for making payments to IWPPs under              water and power projects, which can be a single
PWPAs. The capacity (or availability) payments            company or a consortium of companies. The
cover the fixed costs of the plant comprising of          ownership of the IWPPs is split 60:40 between the
return on capital, depreciation and fixed operating       government (through its subsidiaries) and private
and maintenance (O&M) costs, to be paid against           sector (domestic and/or foreign) investors. The
the declared availability of power, irrespective of       60% government shareholding is 10% held by
whether and how much the plant produces. The              ADPC (formerly ADWEA) and 90% held by the Abu
second component of the tariff allows for the             Dhabi National Energy Company (more commonly
recovery of variable O&M costs, payable only              known as TAQA). A few project companies
for the electricity produced by the plant. Various        have other ownership structures. To limit market
payment rates are subject to annual indexation            concentration, joint venture partners are not
against United States and UAE inflation and/or the        allowed to collectively own more than 25% of the
dollar-dirham exchange rate. Other supplemental           market capacity.

Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration               14
Restructuring of the Electricity Sector: Roles and Entities

Regulation, price control and                                    Open access to transmission and
price reforms                                                    distribution network
RSB was established as an independent regulator,                 In the current market arrangement, all generators
and its powers, duties and functions were set out in             of electricity are connected to the transmission
Law No. 2 of 1998 and subsequent amendments.                     grid and are only allowed to sell their electricity to
RSB’s key functions included: (i) price control covering         the SB. Further, companies that intend to generate
EWEC, TRANSCO, ADDC and AADC, (ii) issuing                       power and/or desalinate water primarily for their
licenses to conduct regulated activities, (iii) monitoring       own consumption may offer for sale surplus
the performance and compliance of licensees, and                 electricity or water in excess of their requirements
(iv) making regulations as it saw fit for the regular,           to the SB only under a ‘self-supply’ license. While
efficient and safe supply of electricity in the emirate.         access to the transmission and distribution network
Law No. 19 of 2007 changed the bureau’s reporting                is available to all potential users within Abu Dhabi,
structure and expanded its authority to license and              TRANSCO’s network can also be utilized by
regulate entities carrying collecting, treating and              intended users (single/principal buyers and/or any
disposing of sewage and wastewater.                              other eligible party) from across the border for any
                                                                 potential cross-border electricity trading activities
The price controls for the network companies have                on payment of wheeling charges, subject to the
been in the form of the consumer price index-X factor            availability of the transmission network. Further,
(CPI-X) revenue caps. The RSB set the maximum                    in all such cases, intended users from outside
allowed revenue (MAR) for each company or business               Abu Dhabi are required to pay the same level of
for each year of the price control period. MAR is                wheeling charges as paid by other eligible users in
made up of an estimate of operating costs, regulatory            Abu Dhabi. TRANSCO calculates the transmission
depreciation and regulatory returns (i.e., return on             wheeling charges, which are then approved by
capital). Despite making progress in reforming the               the DoE (formerly RSB). This is a positive first
emirate’s electricity sector, retail tariffs are still heavily   step, indicating a willingness to provide non-
subsidized for local citizens. However, Abu Dhabi’s              discriminatory access to transmission to encourage
residential electricity tariffs for expatriates have             cross-border electricity trading. However, unless
increased significantly in the past decade and are               the current SB model is changed to a multi-buyer
now close to the cost of supply (Figure 7). The UAE              and multi-seller wholesale market design, open
is almost unique in having a very large expatriate               access to the transmission grid will have limited
population and a relatively wealthy, small, population of        relevance in promoting competition and facilitating
nationals (Boersma and Griffiths 2017).                          electricity trading within or outside the country.

Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration                        15
Restructuring of the Electricity Sector: Roles and Entities

Figure 6. Abu Dhabi generation capacity by company.

                                               12850

                                                                                                            11332
                                                                                                10919
                                                                         10493

                                                                                    9399

                                                                                                                                      7924

                                                                                                                                                   7806
                                                            5161

                                                                                                                         3577
                                                                                                          2220

                                                                                                                                    2114
                                             1991

                                                                       1671

                                                                                                                                                              1702
                                                                                              1627

                                                                                                                                                 1647
                                                                                  1615

                                                                                                                        861
                                                           760
                                       365

                                                                                                                                                                             257
                                      199

                                                                                                                                                                            50
                                      AMPC   APC           ECPC        GTTPC     SCIPCO       RPC         TAPCO        ESWPC        FAPCO        SAPCO        MIPCO     SHAMS 1

                                                                        Generation capacity (MW)                 Generation (GWh)

Source: ADWEC Statistical Leaflet 2017
AMPC (Al-Mirfa Power Company), APC (Arabian Power Company), ECPC (Emirates CMS Power Company), GTTPC (Gulf Total
Tractebel Power Company), SCIPCO (Shuweihat CMS International Power Company), RPC (Ruwais Power Company), TAPCO
(Taweelah Asia Power Company), ESWPC (Emirates SembCorp Water and Power Company), FAPSCO (Fujairah Asia Power
Company), SAPCO (Shuweihat Asia Power Company PJSC), MIPCO (Mirfa International Power & Water Company), Shams 1
(Shams Power Company)

Figure 7. Abu Dhabi: Power supply cost versus residential electricity tariffs.

                                 35
                                                                                         32
                                                                                                                                                                     30.5
                                 30
     Tariff and cost (fils/kWh)

                                                                                                                                                   26.8

                                 25

                                 20

                                                                        15
                                 15

                                 10
                                                                                                                                6.7
                                                       5
                                 5

                                 0
                                                                       2011                                                                        2017

                                                                 Residential- UAE nationals             Residential-expats                 Actual unit cost

Source: (i) (Collins 2012), and (ii) Water & electricity tariffs 2017 for ADDC and AADC.

Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration                                                                                        16
Recent Developments – The Establishment
of the Department of Energy (DoE)

L
        aw No. 2 of 1998 provided the mandate to              Licensing activities in the energy sector and
        ADWEA and the RSB to deal with policy                 monitoring their compliance.
        matters and to regulate the water and
electricity sector. Hydrocarbon sector activities             Proposing fees, tariffs, and prices and submitting
were administered by other concerned state-                   them to the Executive Council for approval.
owned entities and the Supreme Petroleum Council
(SPC). In February 2018, a series of new laws was             Encouraging investment from and partnership
issued by the government of Abu Dhabi to revamp               with the private sector.
past economic reforms. This included Law No. 11
                                                              Representing the energy sector within and
of 2018 to revamp earlier energy reforms in the
                                                              outside the UAE.
emirate through the establishment of the Abu Dhabi
Department of Energy (DoE) and consolidating all
                                                              Promoting energy and water efficiency initiatives
energy policy and regulatory functions under one
                                                              and programs.
entity. The DoE replaced ADWEA and RSB. In
addition to the electricity and water sector, the DoE’s
                                                          (DoE 2018)
mandate also includes the production, processing,
storage, transmission, distribution, supply, sale and     At the time of writing, Law No. 11 of 2018 was not
purchase of natural gas, petroleum, and related           yet available in the public domain, so further details
by-products without prejudice to the SPC’s mandate.       on its scope and approach for the energy sector
The DoE’s mandate is to develop and implement             are unclear. However, we understand that all of
public policies that drive the future direction and       RSB’s and ADWEA’s assets, rights and obligations
provisioning of the emirate’s energy sector in all        have been transferred to the DoE, and that the DoE
its forms. It is tasked with developing strategic         will henceforth be responsible for executing all the
initiatives aimed at diversifying and securing energy     functions previously carried out by ADWEA and the
sources for economic, environmental, and social           RSB. The Abu Dhabi Power Corporation now owns
sustainability in Abu Dhabi. Its responsibilities         all the subsidiaries of the former ADWEA. It is also
include:                                                  possible that electricity trading may be recognized
                                                          as a separate licensed activity and that TRANSCO
    Developing strategic plans to grow the energy         may be granted the license to carry out such
    sector and monitoring the execution of these          activities in addition to its continuing role as owner
    plans.                                                and operator of the transmission infrastructure.
                                                          Other entities such as the SB (now through EWEC),
    Regulating all aspects of the energy sector           TRANSCO, ADDC and AADC will continue to
    through developing policies, codes, standards,        perform their respective roles.
    rules, resolutions and circulars.

Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration                   17
Summary and Insights

T
        he reform initiatives that started in Abu         regulator was assigned the sole and exclusive
        Dhabi in 1998 seeking to promote a bigger         authority to regulate the emirate’s electricity
        role for the private sector in the emirate’s      and water sector, covering the economic and
electricity production and to improve the regulation      technical aspects of all licensed power and water
and governance of the country’s electricity sector,       operators. In regulating the electricity sector, the
have come a long way. The introduction of the Law         RSB followed the CPI-X revenue cap regulation
No. 2 of 1998 was a key first step which provided         model, defining the MAR for each year of the price
direction for the liberalization of Abu Dhabi’s power     control period, and adjusting it by CPI inflation less
industry and future market design. Law No. 11 of          factor X to reflect various considerations including
2018 has further expanded the scope of reforms to         revenue profiling and potential cost savings.
provide an objective and coherent approach to the
development of the emirate’s energy sector. The key       Challenges to the price control regime have been
features, challenges and opportunities for further        addressed through changes to the regulatory
market integration are summarized below:                  price control mechanism over the years, but the
                                                          basic form of price control has remained broadly
Policy, legislation and governance                        unchanged since it was established. Various
                                                          regulations framed by the RSB for regulating the
Law No. 2 of 1998 presented the new design for the        sector were designed to drive improvements in
electricity and water sector and clearly articulated      sectoral efficiency. These include capital cost
the functions and powers for the new entities to be       efficiency, operational efficiency, and customer
created under the law, stipulating roles ranging from     service. In addition to the typical roles discharged
policy design and implementation, to regulation and       by electricity regulators around the world, Abu
governance, and the planning, production and supply       Dhabi’s RSB also on occasion prepared and
of electricity and water. The enactment of this law       presented its vision for the electricity sector,
arguably helped build confidence among prospective        identifying priority areas for the coming five years
private investors in the Abu Dhabi power and water        and the initiatives required to drive progress in
industry and supported the government’s vision for        these areas. The RSB encouraged competition
the privatization of the utility sector in the emirate.   through competitive tendering, benchmarking,
The RSB also contributed to matters related to sector     market share limits (to protect the sector from
policies by developing policy proposals for expanding     market dominance by one or a few companies) and
private sector involvement and implementing               private sector investment.
economic tariffs. The DoE has now assumed the
wider policymaking role for the energy sector.            While access to the transmission and distribution
However, the SPC continues to be responsible for          network is available to all potential users within
setting and regulating petroleum-related policies,        the emirate, TRANSCO’s network is also made
objectives and activities in Abu Dhabi.                   available for use in any potential cross-border
                                                          trading activities on payment of the same level of
Regulation                                                wheeling charges as paid by other eligible users
                                                          in Abu Dhabi, subject to the availability of network
The 1998 law paved the way for the establishment          capacity. Such regulatory provisions should
of the regulator, the RSB (now DoE). The new              encourage cross-border electricity trading.

Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration                  18
Summary and Insights

As part of the 2018 restructuring of Abu Dhabi’s           Regarding the timescales for system operation and
electricity industry, as set out in that year’s Law        despatch, TRANSCO prepares only day-ahead
No. 11, ADWEA and the RSB were replaced                    generation schedules based on the declared
by the newly-created DoE. The DoE is now                   availability received from generators for each
responsible for the overall development of the             generating unit. The day-ahead scheduling creates
emirate’s energy sector and performs all of the            implicit competition as the most efficient plants are
policy and regulatory functions previously carried         despatched first in the unit commitment schedule.
out by ADWEA and the RSB. The 2018 reform                  The schedule aims to optimize the aggregate
aimed to consolidate all energy sector policy and          electricity procurement cost in accordance with
regulatory functions under one government entity           the relevant PPAs for the next 24 hours. There is a
and to formulate coherent strategic plans for              need to develop a future price discovery process,
developing the emirate’s energy sector, including          such as a forward electricity market, where forward
oil, gas and renewable energy.                             electricity contracts with delivery and withdrawal
                                                           obligations can be traded (both medium term
Market design                                              and long term) to complement the existing day-
                                                           ahead scheduling for wholesale electricity and
In line with the provisions of the electricity law         to encourage the effective utilization of surplus
and RSB’s vision, all new generation projects are          capacities through electricity trading. A shorter-
awarded through a competitive bidding process              term market, i.e., intra-day, can help in addressing
based on the lowest levelized tariffs for the sale         intermittency issues by offering greater flexibility
of electricity to EWEC (formerly ADWEC), a SB.             in an electricity market that is expected to have a
The levelized tariff is calculated based on the            larger share of renewables in the future.
assumptions of availability, production, generator
fuel prices and other factors. As competition is           Access to the transmission network at reasonable
restricted at the entry level, optimization of the         prices is important not only to encourage cross-
production cost for various generating units is            border electricity trading but also to utilize any
largely done within the bounds of PPAs between             surplus power capacity effectively. In this regard,
EWEC and IWPPs, subject to demand and other                allowing access to TRANSCO’s transmission
technical constraints.                                     network for cross-border electricity trading on the
                                                           same terms as other eligible users within Abu
Abu Dhabi’s electricity market design is based             Dhabi is a positive step. Moreover, the transparent
on the capacity market model. The electricity              mechanism followed in publishing the transmission
generators are paid capital recovery and fixed             use of system charges makes it easier for any
O&M costs on the basis of committed availability of        intended users (within and outside Abu Dhabi) to
their production facilities, in addition to the variable   evaluate the economics of open access.
O&M and fuel costs. While this market model
has been able to address the perceived risks               Market integration
associated with under-recovery of the IPPs’ fixed
costs, the exclusivity provisions in single buyer          With lower peak demand growth projections for the
PPAs could make developing a more competitive              near future and the commissioning of a 5.6 GW
wholesale electricity market more challenging.             nuclear power plant, the Abu Dhabi electricity sector

Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration                   19
Summary and Insights

will likely witness bigger power surpluses in future,    marginal cost becomes important. In this regard,
particularly during the low-demand winter months.        efforts are being made to develop and test a robust
The surplus capacity will provide an incentive to        system to determine the volume-specific and time-
trade electricity both within the UAE and across the     specific marginal costs that can enable SBs (and
wider Gulf region. Electricity trading is likely to be   generators as the case may be) to make bids for
recognized as a separate licensed activity, which is     trading their surplus electricity. More efficient price
expected to give fresh impetus to electricity trading    signals (or at least clear bilateral contracts) will likely
both within the country and throughout the region.       be needed to facilitate cross-border electricity trade.
                                                         Further, the nodal agencies in Gulf states that are
Natural gas in Abu Dhabi is offered at a competitive     responsible for exporting electricity have typically
price for industrial users but the price remains below   been reluctant to disclose and share their marginal
free-market levels for power production. Although        costs with their counterparts across the borders
this does not equate to an explicit gas subsidy for      due to implicit or explicit fuel subsidies offered for
electricity producers, the concern that power exports    electricity production.
from Abu Dhabi represent an implicit wealth transfer
is unlikely to arise as a barrier to cross-border        In this regard, a case can be made for the
electricity trade.                                       establishment of a neutral regional entity that can
                                                         help harmonize necessary regulations, wherever
In the current market arrangement where electricity      relevant, to encourage cross-border electricity
is sold to the SB, the fuel cost is paid by the SB       trade. This may also include developing a robust
directly to gas suppliers and day-ahead scheduling       methodology for assessing the marginal cost of
aims to optimize costs over the next full-day.           electricity production, reflecting the fair value of
The need to accurately determine the marginal            the commodity for trading purposes. Designing
costs of electricity production for specific trading     and implementing an acceptable and transparent
opportunities is considered unimportant. However,        regulatory approach for cost-reflective marginal
in order to facilitate cross-border electricity trade,   pricing is expected to be an important enabler for
the realistic assessment of volume and time-specific     cross-border electricity trade in the region.

Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration                     20
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Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration                           21
About the Authors

                     Shahid Hasan

                     Shahid is a research fellow at KAPSARC working on topics related to
                     the future development of a regional electricity market in the GCC. He
                     previously consulted extensively on policy, regulatory and market design
                     issues for governments, electricity regulators, public utilities and the
                     electricity industry in India and Southeast Asia.

                     Turki Al Aqeel

                     Turki is a research associate at KAPSARC focusing on electric
                     power system economics, policy and regulatory aspects of electricity
                     markets, renewable energy, and smart grids. He has worked for several
                     multinationals including ABB and Woodward. Turki holds a Ph.D. in
                     Electrical Engineering, and an MBA from Colorado State University.

                     Iqbal Adjali

                     Iqbal was formerly a senior research fellow at KAPSARC specialising in
                     energy systems modelling, with a focus on electricity sector transitions. He
                     holds a Ph.D. from Oxford University and an MBA from Cranfield University.

                     Yagyavalk Bhatt

                     Yagyavalk is a senior research analyst at KAPSARC. His research
                     interests include evaluating energy policies, with a focus on renewable
                     energy. He previously worked as a researcher, providing sustainable
                     development and decentralized renewable energy system solutions to the
                     rural areas of north India.

About the Project
Mindful of the potential opportunities that could be harnessed by developing a common
electricity market in the GCC and wider MENA region, KAPSARC has initiated a regional
electricity market integration research project. It examines a range of issues relating to electricity
market integration, including experiences of other power pools and their potential application
for this region. The project will focus on understanding and examining the policy and legislative,
market design and structure, regulatory and system operation dimensions of electricity markets,
to identify good practice arrangements and to provide insights into policy and regulatory issues.
The various outputs are intended to fill existing knowledge gaps and facilitate ongoing efforts
toward regional electricity market integration.

Abu Dhabi Electricity Sector: Features, Challenges and Opportunities for Market Integration              22
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