Several Middle East states are making diligent bilateral and multilateral efforts to bolster cooperation and integration on electricity sharing to provide adequate power supplies. Their cooperation is driven by an expected rise in electricity demand in the coming year due to forecasted higher population and economic growth. Most recently, on April 7, 2017, fourteen Arab countries signed a memorandum of understanding at the 12th session of the Arab Ministerial Council for Electricity at the headquarters of the General Secretariat of the Arab League, to boost efforts to create a pan-Arab common market. The MoU stand out among the serious initiatives launched to boost electricity-sharing. Tunis, Libya, Turkey and Libya also intensified their efforts to back plans to create a common power grid with the region and Europe.
Success of some regional countries in supporting power integration within the region or with European countries is likely to yield multiple economic and commercial benefits. Most importantly, the region’s persistent and severe electric power crises would be eased while reducing the capital burdens of building electricity grids and generation stations and creating electricity production savings.
Despite the fact that the region is adequately capable of achieving cross border electricity interconnection, their experience indicates that challenges lying ahead need to be pre-empted. These include failure to carry out electricity links on the ground as well as security and geopolitical challenges that may very well obstruct future projects.
Persistent Motives
Electricity demand in the Middle East is expected to increase in the coming years, which means regional electric power integration projects can be one way of providing stable and adequate supplies in the future. However, weak investment in power generation in countries such as Libya and Iraq would factor in to make the need for integration even more urgent.
In these countries, security and political turbulence did slow down the construction of new power stations and at the same time, their production capacity was severely destroyed. Electricity demand in this region was forecast to increase by 147 gigawatts (GW) over the period from 2016 to 2020, while the current capacity stands at 315 GW.
To meet this demand, the region needs to invest US$334 billion over the same period. Iran, for instance, is investing $63 billion to produce an additional 23 GW to increase its capacity to reach 93 GW over the next five years, while Iraq needs to invest $40 to double its capacity to 29 GW.
Various Frameworks
Several frameworks for electricity linkage emerged over the past months at both the bilateral and multilateral levels. The following stand out in this regard:
1- Pan-Arab integration is seen as the most significant framework for inter-Arab electric power integration and interconnection and was materialized in the April 7 MoU signed at the Arab League. Without a doubt, the move will provide more technical and executive support for inter-Arab and regional integration that was initiated as far back as the mid-1950’s. These include a project to interconnect eight Arab countries and another to interconnect the five members of the Arab Maghreb Union.
2- International Power Grid. Turkey is among the first regional countries to rely on Europe to secure adequate power supplies. Turkey’s sources were Greece, Bulgaria and Georgia, in addition to Iran. Morocco and Spain have an electricity-sharing grid with a capacity of 1400 megawatts (MW), accounting for around a fifth of Morocco’s domestic electricity demand.
However, there are more opportunities to increase electricity-sharing cooperation between the region and Europe, where increasing generation capacity in the southern part of the continent provides an opportunity for power imports into the Middle East. For instance, Tunis and Libya increased their efforts to import electricity from Italy, Greece and Cyprus.
Within this context, the General Electricity Company of Libya (GECOL) announced plans to set up electricity interconnection with Italy and Greece to erase running domestic power deficit. The Tunisian government too sought to revive an interconnection project with Italy, with an initial capacity of 600 MW to diversify the country’s energy mix. To finance the project, Tunis requested a loan of 600 million Euros from the European Union in October 2016.
3- Bilateral Cooperation. Bilateral electric power integration represents one of the mechanisms of bolstering cooperation on providing adequate electricity supplies. For instance, Libya imports 200 MW from Tunisia and Egypt.
Multiple Benefits
Theoretically speaking, electricity interconnection projects yield economic, commercial and technical benefits for involved countries. Interconnecting multiple power grids would reduce the reserve capacity of each involved grid thus curtailing capital burdens as well as costs of operation and maintenance (O&M) of power stations, while promoting integration would enable countries to benefit from lower generation costs of neighboring countries, as is the case with Morocco which is importing cheaper electricity from Spain.
According to the World Bank, in MENA regional integration of electricity networks could reduce the need for additional generation capacity from 135 GW to 102 GW, representing a substantial decrease in the investment needed by 2020. The Arab Fund for Economic and Social Development pointed out that the economic and capital benefits of interconnection projects can mount to $3.7 billion that can be saved over the next 15 years due to eliminating the need for an additional generation capacity of 6.5 GW.
Existing Challenges
Despite the efforts being made by Middle East countries to enhance electricity interconnection, the limited electricity trade among Arab counties has not exceeded 2 per cent of the total generation capacity of all Arab countries. In the past, inter-Arab of electric power integration faced multiple challenges, most significantly a failure in mechanisms of carrying out projects in this sector and a lack of needed capital. Currently, additional challenges include weak economies of some of involved states, alongside security and political conflicts. The World Bank, in a study released in 2013, noted that projects of integration of electricity networks in the Arab world faced obstacles including limited generation reserve margins in some countries and the absence of a harmonized regulatory framework with clear rules for electricity trade among Arab countries.
In light of the above, the multiple obstacles may continue to block inter-Arab and regional integration of electricity networks in the future, driven by economic and political pressures on some countries. It can possibly be safe to say that some regional countries will bet on reliance on Europe in the future to address electricity supply shortages, which will generate economic and geopolitical benefits for both parties.
