Monday, November 9, 2009

GCC Interconnection Grid

The vision of an interconnected power system for the states of the Gulf Cooperation Council (GCC) is nearly as old as the 27-year old organization itself. The introduction of the concept in 1982 has, in recent years, proven extraordinarily prescient. Today, the GCC Interconnection project is nearing completion just as electricity demand projections appear set to take off.

The countries of the GCC have experienced increases in demand driven by population growth, urbanization and industrialization. According to some sources, demand for electricity in Oman has been growing at 6-7% per year. Demand growth is forecasted at 15% annually until 2020

The GCC Interconnection Grid is a crucial element of the GCC’s plans to meet the growth in demand. The linking up of electricity systems between Gulf states will reduce long term investment costs for generation by reducing required levels of reserves, adding efficiencies and creating opportunities in energy trading.

Phase I of the interconnection was completed in July 2009, linking Bahrain, Saudi Arabia, Qatar and Kuwait in what is referred to as the GCC North Grid. Phase II of the plan, also complete, involves the internal connection of the electricity grids in the UAE and Oman, known as the GCC South Grid. Phase III will bring the project to completion with the linking of the North and South grids. The final of the three phases of the USD 1.407 billion interconnection project is scheduled for completion in 2011.

According to GCC Interconnection Authority (GCCIA), the body responsible for constructing, operating and maintaining the interconnection, each GCCIA member state will be capable of importing up to the value of its interconnection size. In Oman’s case, potential imports amount to 400MW. As a result, operational reserves in the region are expected to fall.

Additionally, lower operating and management costs to consumers will be achieved by using energy from the most economic generation unit available for dispatch in the interconnected system.

Further, available spinning reserves will be shared to cover emergency conditions and provide emergency support to any system experiencing a blackout.

The benefits of interconnection, however, could stretch far beyond cost savings. If all goes according to plan, the Interconnection Grid will enable the export of power to the Mediterranean basin and to Europe.

Legal Framework for Interconnection
Just as crucial as the technology behind the GCC Interconnection Grid are the legal arrangements making interconnection possible. In the words of GCCIA spokesman Hassan Al-Asaad, “legal agreements are the basis for the entire project – without them there we have no interconnection.”

The members of the GCC Water & Ministerial Committee have undertaken to sign the General Agreement of Power Interconnection Grid with the GCCIA. The General Agreement lays out the fundamental agreement between member states with regard to use of the interconnection. The General Agreement includes provisions relating to connection fees, rights of interconnection, performance, defaults, termination, and governing law, as well as the regulatory principles committed to by the parties.

Regulation of use of the interconnection will initially be carried out by the GCCIA Board. At a later stage, authority will be transferred to a Regulatory & Advisory Committee that will ensure compliance with regulatory principles and performance standards. Finally, when member states take the step of forming a regional energy regulator, permanent authority will vest in that body.

In addition to the General Agreement, state utilities must enter into a Power Exchange and Trading Agreement (PETA) which sets out the terms on which the parties may connect and have access to the grid and the terms by which parties may schedule transfers of power. The PETA is made up of three separate components:

  1. the Trading Agreement, which sets out the terms on which the parties may use the interconnection for scheduling transfers of power;

  2. the Interconnection and Use of System Agreement, which sets out the terms on which the parties will connect and have access to the interconnection; and

  3. the Transmission Code which sets out the technical rules that govern connection and access to the grid.