UAE Law and Practice Contributed by: Brendan Hundt, Dan Feldman, Sam Anastasiou and Saiesh Kamath, King & Spalding LLP
model to adapt to technology choice and procure- ment structure in order to preserve security of supply while continuing the longer-term transition to a lower- carbon power system.
tral feature of ordinary commercial electricity supply to UAE end-users. The UAE is connected internally through the Emirates National Grid, which links the principal UAE electricity authorities, and regionally through the GCC Interconnection Authority, which connects GCC member-state grids and facilitates scheduled energy transfers, reserve sharing and set- tlement of unscheduled exchanges. Although imports and exports are technically pos- sible through the UAE’s interconnected grids, inter- emirate electricity trading is not generally permitted and emirate-level regimes remain structured around their own utility or single-buyer models. For example, power and water projects in Dubai may not sell or supply electricity or water to any entity inside or out- side Dubai other than DEWA. This means that a Dubai IPP cannot ordinarily sell its output directly to EWEC or to an emirate. In Abu Dhabi, EWEC’s role as sole procurer and supplier, together with the Department of Energy licensing framework, means that any export structure would need to be assessed against the project licence, PPA, grid connection arrangements and approvals from the relevant utility and regulator. Inter-emirate exports should therefore be viewed as bespoke, utility- or government-led arrangements and remain an exception. Cross-border flows are most relevant to system secu- rity, emergency support, regional optimisation and future GCC electricity-market development. Trade takes place under the GCC Interconnection Authority Power Exchange and Trade Agreement and the GCC Electricity Market Platform, through which the GCC Interconnection Authority organises tenders for inter- connection transmission capacity, supports bilateral contracts, and settles both scheduled and unsched- uled energy exchanges. As there is no regional spot price or nodal market, pric- ing is bilateral and contract-based. The GCC Intercon- nection Authority operates a bilateral trading system giving each country visibility over available capacity in other member states and allowing them to place bids on yearly, monthly or daily options, with the platform supporting bilateral contracts and settlement.
2. Market Structure, Supply and Pricing 2.1 The Wholesale Electricity Market
The UAE does not have a liberalised wholesale elec- tricity market with merchant trading, nodal pricing or retail competition. Utility-scale generators normally sell to a government-owned or government-related offtaker under long-term power purchase or energy purchase arrangements, rather than selling directly into a spot market. To illustrate, in Abu Dhabi, EWEC will purchase capacity and/or energy for a tariff typi- cally set following a competitive tender process. This is akin to a purchase of energy on wholesale terms. Subject to the below regarding industrial consumers, the energy is then typically distributed to end-users by TAQA Distribution for a pre-set, published tariff, with the price difference retained within the Abu Dhabi sector. Consumers with large electricity demands such as data centres and industrial consumers (eg, ADNOC) secure their power supplies through long-term PPAs from single offtakers like EWEC and DEWA rather than through direct access to a wholesale generation mar- ket. For generators, the commercial focus is on the tariff or payment structure under the power purchase agree- ment (which is typically set as part of a competitive tendering process), the indexation and change-in- law regime, availability or performance deductions, dispatch risk and the treatment of curtailment. For customers, the focus is on the relevant utility tariff, connection capacity and any special sustainability or reliability requirements. Pricing is therefore primarily a product of these contractually agreed tariffs rather than day-ahead pricing or real-time market clearing. 2.2 Electricity Imports and Exports Imports and exports are permitted in principle through interconnection arrangements, but they are not a cen-
351 CHAMBERS.COM
Powered by FlippingBook