The trial operations of the $1.2bn GCC electricity grid, which will link the power networks of all Arab Gulf states and help meet the region’s rising energy needs, will soon begin, said Gulf Co-operation Council Interconnection Authority (GCCIA).

The project, aimed at reducing the cost of power generation in Saudi Arabia, Qatar, Bahrain, Kuwait, Oman and the UAE, would be carried out in three phases.

The first phase of the GCC interconnection grid, which will ultimately link the power networks of all six GCC states, will be fully operational in the first quarter of 2009 once all tests have been completed, said a top GCCIA official.

“By year end we will start trial operations, which will continue until next January. We’re hoping that by first quarter of 2009 we will start normal operations,” Ahmed Ali Ebrahim, GCCIA director for system operation and maintenance, told Zawya Dow Jones.

The first phase of the project will see the interconnection of Kuwait, Bahrain, Qatar and Saudi Arabia, with Oman and the UAE to be connected by the end of 2010 in two subsequent phases.

The system is aimed at helping Gulf states meet runaway electricity demand, which is soaring on the back of an economic boom that has seen billions of petrodollars flow into infrastructure, tourism and real estate projects across the region.
 
Industry estimates put the amount of investment needed for the GCC power and water sectors at as much as $120 billion over the next 10 years.

The grid will allow the transfer of electricity between GCC states to utilize excess capacity and limit the need for new investments in additional power generation capacity, Ebrahim said.

The network will boost efficiency and reliability by ensuring uninterrupted electricity supplies, he added.

The project’s second phase, the connection of the UAE and Oman, has already been completed, with phase three, covering the construction of an electrical substation and an overhead line in Abu Dhabi emirate, under implementation, Ebrahim said.

As part of phase three, the GCCIA has awarded National Contracting Company (NCC), of Saudi Arabia, an estimated $70 million contract to build the overhead line from Sila in western Abu Dhabi to the capital, he said.

A contract for the construction of a substation at Sila is under tender and expected to be awarded within a month, Ebrahim added. Both contracts are set to be completed in the second half of 2010, providing the grid’s final link.

Once up and running, the grid is set to pave the way for the development of a regional energy market, which in turn could lead to lower electricity prices, Ebrahim said.

“Once you have an energy market and it will be an efficient energy market, we can see prices go down,” he said, adding that this should help reduce government subsidies for the regional power sectors.

The GCCIA is also in the final stages of awarding a contract for the utilization of the grid’s fiber optic cables for telecommunications purposes, Ebrahim said.

Under the plan, the authority would lease cable capacity to telco providers to generate additional revenues. “We are discussing with serious companies in the GCC communications market. We hope to finalise a deal before operations (of the grid) start,” he added.