Kuwait Power Report Q2 2013 - New Market Report

Kuwait is set to remain dependent almost exclusively on oil and gas for its energy needs for the foreseeable future. Following the 2011 Fukushima accident, plans to move towards nuclear energy have been largely abandoned, while renewable energy remains only a very minor segment of the country's energy mix. Much of the planned new generating capacity is gas-fired, with oil often used as a back-up fuel. The government's goal is to make more of the country's oil available for export, even if this leads to a growing reliance on imported gas. Building new capacity is likely to become an increasing priority in the years ahead, as power consumption runs up against available capacity. Nevertheless, extremely low domestic power prices mean that projects are unlikely to attract foreign investors, leaving Kuwait to go it alone in meeting its growing power demand. Conventional thermal sources are likely to remain the dominant fuel for electricity generation in the coming years. Following the Fukushima tragedy in 2011, Kuwait ordered the National Nuclear Energy Committee to be dissolved and abandoned its pursuit of nuclear power. However, the country is nevertheless aiming to reduce its domestic oil consumption in an effort to free up additional barrels for export, with many power projects that are planned or under construction due to use gas. The electricity and water ministry wishes to more than double generating and desalination capacity by 2017 and an estimated US$2.5bn is expected to be invested over the medium term to cater for the projected power demand until 2015. Renewables could become part of the solution, particularly given the vast solar potential of the desert state - and the government has set ambitious targets in this regard - though there has been minimal progress made thus far.

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Key trends and developments in the Kuwaiti electricity market:

* Over the 2013-2022 period, Kuwait's power generation is expected to increase by an annual average of 4.2%, reaching 88.7 terawatt hours (TWh). Gains in gas and oil-fired electricity are set to drive this growth, with other sources of energy unlikely to feature heavily over the medium term, despite ambitious government targets for the use of renewable energy.
* Following an estimated 5.2% increase in 2012 real GDP, BMI forecasts average annual growth of 3.6% between 2013 and 2022. The population is expected to rise from 2.89mn in 2012 to 3.52mn by 2022, with net power consumption to increase from an estimated 53.4TWh to 81.8TWh over the same period.
* Thanks partly to the forecast rise in net generation, the growth of which slightly outpaces the underlying demand trend, Kuwait could end up with a shrinking longer-term power supply shortfall. A gradual decline in the percentage of transmission and distribution (T&D) losses from an estimated 9.2% in 2012 to 7.8% in 2022 should help balance the market.

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