United Arab Emirates
With a power score of 1.95, the United Arab Emirates ranks number 33 among emerging markets and number 56 in the global ranking.
- Emerging markets
- Middle East & Africa
1.95 / 5
Net-zero goal and strategy
The United Arab Emirates was the first Middle Eastern country to announce a net-zero target in October 2021 under the UAE Net Zero 2050 strategic initiative. The emissions target is only limited to carbon, despite the presence of a sizeable oil and gas industry which is likely to be a substantial source of methane emissions. However, the government has yet to submit a long-term strategy to the United Nations Framework Convention on Climate Change.
Nationally Determined Contributions (NDC)
The UAE in December 2020 updated its Nationally Determined Contribution (NDC), a non-binding plan to achieve the goals set out in the 2015 Paris Agreement. The document targets a 23.5% decrease in emissions below business-as-usual levels by 2030.
Fossil fuel phase-out policy
the federal government ended fuel subsidies in 2015 when petrol prices were reset in accordance with global oil price benchmarks, but gas remained subsidized to the tune of $5 billion per year. Since then, the government has responded to the rise in the cost of living by reintroducing some fuel subsidies in July 2022.
The UAE’s flagship renewables target aims to achieve an electricity generation mix composed of 44% renewables, 38% gas, 12% “clean” coal and 6% nuclear. A federal target for a 24% renewables share by 2021 will not be met. The UAE’s federal structure affords each of the emirates considerable autonomy in implementing their own renewables targets, incentives and procurement schemes. Abu Dhabi and Dubai have had considerable success in running large-scale, competitive auctions to procure solar power. However, success has been varied in certain areas. Abu Dhabi has, for instance, struggled to replicate the success of Dubai’s net-metering scheme even as it has proven its ability to pull off large-scale renewables auctions.
Power prices and costs
Developers of solar utility-scale projects benefit from excellent irradiation levels, economies of scale and low development costs. Yet rock-bottom auction prices are also made possible by implicit subsidies, such as the fact that developers need pay for neither land nor a grid connection. Headline-grabbing bids have resulted, including a near-world record of $13.50 per megawatt-hour for Abu Dhabi’s last solar auction in July 2020.
Moreover, state utilities retain majority stakes in all utility-scale projects, reducing the cost of debt. Renewables are increasingly able to undercut fossil-fuel generators, for which fuel subsidies were removed in 2015. However, fossil-fuel generators continue to receive indirect support in the form of subsidized retail tariffs. For instance, residential prices have remained unchanged in Dubai over much of the last decade.
The UAE’s grid is fragmented among the various emirates, but gas remains the dominant form of power generation across the board. Representing 8% of installed capacity in 2019, renewables penetration is starting to ramp up. In the absence of a wholesale market, developers sell their power through take-or-pay contracts – their output is purchased regardless of demand. Independent power producers account for most of the commissioned capacity, although the publicly owned utilities retain a major equity share in all projects. For its part, Abu Dhabi’s state utility – which is also active in the northern emirates – has been unbundled, although Dubai’s remains vertically integrated. Both retain single-buyer status, while generation is the only sector open to private participation.
Installed Capacity (in MW)
Electricity Generation (in GWh)
Which segments of the power sector are open to private participation?
Wholesale power market
Does the country have a wholesale power market?
Doing business and barriers
Power demand has risen rapidly in recent decades, growing from 17 gigawatts to 23 gigawatts over 2010-2021. There is a lack of visibility on tenders going forward, and much of the power fleet is relatively young. A high number of power purchase agreements for combined-cycle gas plants will come to an end in 2030, but many could be extended. Meanwhile, a transition toward less power-hungry reverse osmosis plants will contribute to decoupling the water and electricity sectors.
Currency of PPAs
Are PPAs (eg. corporate PPAs and all other types) signed in or indexed to U.S. Dollars or Euro?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Fossil fuel price distortions - Subsidies
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) down through subsidies?
Fossil fuel price distortions - Taxes
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) up through taxes or carbon prices?
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