Oman Energy and Water Conference 2016
May 2016
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Oman Power & Water Procurement Company SAOC
Muscat Electricity Distribution Company SAOC
Majan Electricity Company SAOC
Mazoon Electricity Company SAOC
PWP pays Production Facilities for •Capacity and Output in accordance with terms of PPA/PWPA •Ancillary Services
United Power Company SAOG
Al Rusail Power Company SAOC
Wadi Jizzi Power Company SAOC
Al Kamil Power Company SAOG
ACWA Barka SAOG
Al Ghubrah Power & Desalination Company
SAOC
Future Projects
Direction of payments
Discos pay PWP for •bulk purchases of electricity charged at a cost reflective Bulk Supply Tariff (BST); •Electricity BST includes PWP’s costs of electricity procurement activities
Oman Electricity Transmission Company SAOC
Production Facilities & Others pay OETC for
•Connection to Transmission System
Discos pay OETC for •Connection to OETC’s Transmission System (Distribution business) •Use of OETC’s Transmission System (Supply business)
Water Departments
Water Departments pay PWP •for bulk purchases of desalinated water charged at a cost reflective Bulk Supply Tariff (BST); •Water BST includes the PWP’s costs of water procurement activities
Sohar Power Company SAOC
All intra sector transactions: (i) regulated & (ii) cost reflective (no direct subsidy)
Subsidy
Customers
Market Structure and Regulatory Framework
SMN Barka Power Company SAOG
Al Suwaidi Power Company SAOC
Al Batinah Power Company SAOC
Dhofar Generation Co
SEMBCORP SAOC
Dhofar Power Company SAOC
Muscat Desal. SAOC
Phoenix SAOC
Sharqiyah Desalination
Ownership Structure in the Electricity Sector
Growth Trend in the Electricity Market
Growth Trend in the Desalinated Water Market
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Key Challenges for the Sector
• Provide adequate capacity to meet rapid growth trends • Manage increasing gas needs, considering the best
economic use of domestic resources • Align needs for new plants with national policy for land
use and environmental protection • Improve coordination among counterparts, to assure
efficiency in infrastructure development • Take advantage of technological developments while
minimizing risks to capacity adequacy and cost control
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Managing Gas Consumption for Electricity
Efficiency improvements have reduced the per-unit consumption of gas by 31% since 2005 New high-efficiency turbines Increasing share of combined cycle plants Displacement of older plants Improvements in economic dispatch
22-25% additional efficiency improvement in gas utilisation from 2015 to 2021, due to Additional combined cycle plants Displacement of MSF water desalination
While economic development has driven a high 10% annual growth rate in electricity generation, efficiency improvements have held the annual growth rate in gas consumption by the power sector to 6%
Coordinate with Counterparts and Neighboring Systems for Best Economic Advantage
Strategic Project 1: 20-Year Plan/Land Bank 20-year capacity requirements Coordination with MOH for land use planning Coordination with OETC, OGC for infrastructure
planning, for optimum investment plans Streamlined planning process to improve project time
Strategic Project 2: Trade via GCCIA Interconnector Improved grid stability via access to emergency reserves Economic trades for lower cost resources Firm capacity trade as contingency resource
Strategic Project 3: MIS-PDO-Duqm-Dhofar Interconnector Reduced gas use for spinning reserves Coordinated dispatch among systems for fuel savings Improved grid stability for Duqm and Dhofar Optimization of capacity planning Grid access to renewable energy potential in Al Wustah
Improve Procurement Competitiveness and Economic Efficiency in Supply
Strategic Project: Develop an Electricity Spot Market Improve incentives for efficient generation and dispatch Gain access to new supply sources, in addition to P(W)PAs, via an
efficient, market-driven process Reduce prices and improve risk allocation
Timeline for Spot Market Development 2013-14: High level design developed with AER support 2015-16: Detailed market rules being developed, for AER approval 2017-18: Development of IT systems and Market Operations
organization 2019-20: Market Trial followed by Market Operational Launch
Electricity Market Evolution
Pre-2005 2005-Present 2020: Proposed
Spot Market
Renewable Energy Development while Managing Cost Exposure
Preparation for Renewable Energy (RE) Development Resource Options Studies: OPWP conducts studies of RE costs and cost
projections to assess RE vs. conventional resource competition Solar Data Collection: OPWP operates solar instrumentation sites to
collect and publish information for assessing solar power output Dhofar Wind Project: OPWP is finalising a Power Purchase Agreement
with RAECO for a 50 MW project in Dhofar
RE Policy Development RE projects are currently competitive with diesel-fired generators, such
as in RAECO supply areas. Projects are under development. In areas with access to gas for generation, RE projects must be
competitive on the basis of the economic price of gas. AER and OPWP are coordinating to develop an appropriate evaluation methodology.
Provide Adequate Capacity for Varying Demand
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OPWP must procure sufficient generation capacity to meet peak demand: the highest demand in the year
Much of installed capacity is underutilized:
Average summer load is more than double the average winter load
On any given day, peak demand is much higher than minimum demand
Generally the higher cost generation operates only during peak periods in summer
Demand Management
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International Trends: Many countries provide incentives for consumers to alter
the demand profile, to reduce the need for new generation capacity or to reduce electricity consumption
Often less costly than generation supply
Energy Efficiency (EE) Improvement:
Reduces overall energy consumption, though not necessarily evenly over the demand profile
Approaches include tariff reform, EE labels for consumer appliances, EE building codes, etc.
Impacts often take years to achieve AER is leading program planning for the sector
Demand Response (DR): Targets load reduction for a specific time period Typically shifts consumption to another time period, with
no net effect on total consumption OPWP is developing DR with large industries
OPWP’s Demand Response Target
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Observations: The load duration curve indicates a target
for load reduction Similar to most power systems, peak
demand conditions on Oman’s Main Interconnected System last a short time 500 MW was needed only 100 hours in
2014 300 MW was needed only 10 hours
The equivalent of an entire power plant, a large investment, is needed to meet extreme peak conditions which occur on only a few days each year
OPWP’s Demand Response Opportunity
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Opportunity: If customers can reliably
reduce their load for only a few hours on peak days, OPWP could avoid contracting for additional generation capacity
Only around 10 “instances” of demand reduction may be needed to achieve at least 300 MW of demand response
Key elements of successful DR programs: 24-hour advance notice of demand
reduction instruction to customer Commitment to limited number of DR
“events” in a year (e.g., less than 20) Limited duration of reductions, to
minimize disruption to customer Transparent remuneration
OPWP’s DR Initiative
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2015: Initial evaluation
2016: Program development
Design elements for pilot program
“Proof of Concept” trials
Assessment, refinement of program design
Regulatory approval
2017: Program implementation
Recruitment of participants
Evaluation of results
2018: Program expansion
Thank you.