His Majesty King Hamad bin Isa Al Khalifa has a prosperous vision for the nation. The Government is looking to the future with the goal of transforming the kingdom into a world-class competitive, sustainable, diversified and knowledge-driven economy. Education, foreign investment, youth employment, technology and infrastructure are leading the Vision 2030 agenda. What are the roles of the electricity and water sectors within this Vision?
The Vision 2030, as far as energy focus is concerned, requires that the Government of Bahrain needs to diversify away from its reliance on revenues from the oil and gas sector. Also it requires the diversification of investment in green energies. Although Bahrain was the first country where oil was discovered in 1932, we do not have the production levels compared to our neighbours like Saudi Arabia, UAE, Kuwait and Qatar. The wise leadership has invested proceeds from the natural resources to develop the human capital. Bahrain ranks number one in human capital development in the region, and in the freedom of trade index Bahrain ranks quite well.
Coming back to the Vision 2030, the concept goes around three core values, which are sustainability, competitiveness and fairness.
On the “sustainability focus”, Bahrain has been relying on fossil fuels for the past few decades to generate electricity and water. All of our electricity and water is generated with natural gas. We have not, in the past, looked at alternative sources of energy. Now we are looking into alternative energy, renewable energy such as solar energy. We have two pilot projects coming up in solar energy, one of them is going to be operational this year, and the other one we are going to tender for this year. The reason for that is we want to change the mix of the source of energy, not only relying on fossil fuel but on renewable energy as another source.
Due to rapid demand rises and the limited availability of natural gas for power generation, we are now looking into alternative sources of energy for generating electricity and water. In the future it is possible that we will be targeting some 10% of the available capacity to be from renewable energies. That will not happen overnight, it is going to take time, maybe by over the next 10 to 15 years, up to the year 2030.
The Vision 2030 is very much in line with what we are doing in the energy sector in electricity and water. The vision also focuses on energy efficiency and on intelligent buildings and the use of the latest technological advances in energy conservation. We have a number of projects now, which are addressing this issue.
All the buildings in future should have insulation. We have a project with the World Bank and the Ministry of Finance to replace all the domestic lights in the houses from the old tungsten to CFL/LED. Hopefully, in the first quarter of next year 2 million bulbs will be distributed to the residents free of charge to encourage them to switch to more energy saving bulbs. After that, the import of old tungsten bulbs will be banned.
On the air conditioning side, more than 60% of electricity consumption comes from air conditioning. During the summer people use air conditioning on a big scale. We are also introducing more stringent requirements and specifications to advance what we have in place at the moment. This is because we want to make sure that customers refrain from buying low efficiency, cheap air conditioning, which have high consumption of electrical energy. We wish to demand better standards for this.
As a matter of fact, Vision 2030 puts a special emphasis in empowering locals and foreign investors to independently operate at their best capacity. In this context of business integration and diversification, what would be the role of the private sector?
First let us look at the role of the private sector in total. Now, electricity generation in Bahrain is some 80% privatized, run by three IPP and IWPP consortiums; three private power plants that generate electricity for Bahrain. On the water side, almost 71% is sourced from the private sector generation. These are not local investors; these are international consortiums that have competitively bid and won these long-term PPAs and PWPAs.
On the local side we want to encourage local partners; for example when we talk about the bulbs and so on we will be introducing legislation or regulation to avoid import of lower quality bulbs in the future. The private sector has to contribute by encouraging the use of high efficiency bulbs and high efficiency air conditioning, and hopefully they can also participate in these projects with international consortiums in future electricity generation. The energy conservation side is also key to look at because if it is managed correctly, we will be saving a lot of energy which we can be diverted for the use of industrial expansion in the future.
What is your perspective on the never-ending debate in the Gulf that energy conservation is not a demand-driven problem, it is a supply problem given that due to the cheap price of oil, people are not going to demand something more sustainable. How would it be best to tackle this problem? Cutting down the supply? Educating to raise demand?
Studies and analyses have proven beyond doubt this is true. One challenge that all the GCC countries are facing is the question of subsidies. Many of the daily used commodities are subsidised. In energy, for example, if you look at the gasoline for cars or diesel for ships and so on, all of it is subsidised. When we come to electricity, 80% I said is produced by the private sector; they charge the Government at commercial rates. We sell it to the domestic users and non-domestic users at subsidised rates. The system makes the product very cheap for the consumers and if it is very cheap, there will be abuse and loss of attention on conservation.
We want to encourage conservation and one way of doing that is to increase awareness. Another way is to directly affect the pocket of the end-users if they misuse it. All this is coming together. We are blessed because we have the GCC network interconnection and if we need additional electricity we can get it through the GCC network. The entire interconnected network has been one of the main achievements of the GCC countries; the fact that all six countries can utilise the network in case of emergency is priceless.
The next phase now is to talk to the trading side, to make use of surplus in one country and sell it to another country. The means are already there to do that; it just requires the implementation of transparent regulatory requirements which will ensure an efficient operation of an energy market in the GCC and beyond.
On the water side, there is a plan by the GCC to have a similar network for water connection. Currently, with the drinking water that we have, more than 90% of it is desalinated water from the Arabian Gulf. Kuwait, Qatar and other countries as well use the Gulf Sea. If a major pollution takes place in the waters of the Arabian Gulf, whether it is because of the nuclear reactor in Busher, Iran, or whatever it is, we will not have access to clean water, suitable to be desalinated. The plan is to have sources for desalination outside the Gulf, over the Arabian Sea on the Omani shores. These desalination plants will be built there and there will be pipelines connecting to all the GCC countries.
The study has been recently completed and updated, and thoroughly addressed and discussed in the last meeting of the ministers of electricity which was held in Bahrain in September 2013, which Bahrain chaired. The study results were presented and there were a number of questions by the member countries. The consultant was requested to address all the raised queries and issues. That has been in principal approved by the GCC summit, which is composed by the leaders of the GCC, the kings and rulers.
When can we expect to see the first results of this inter-water connection in the GCC?
It is going to take time but like the GCC electricity grid, after more than 10 years, it became operational in July 2009. This time hopefully it will be faster because we have experience with the GCC electricity grid.
What is the current state of different projects that are going on in Bahrain right now like the 300 new 11 KV outlets. Are they going to be ready by 2015?
If we look at the capacity that we have to generate electricity, we have up to a peak of 4000MW. The peak load, which was recorded in summer 2013 was on September 4 2013, was 2917MW, i.e. less than 3000 MW. This means we presently have a surplus of some 1000MW, and in addition we also have a backup in the GCC in case it’s needed, of 600MW. We don’t have a shortage in electricity generation at the moment. However, with the present rate of growth at 4.5 to 5.5% per annum, this reserve capacity will be depleted in no time. We are planning now to build the next phase before this 1000MW surplus is diminished.
If we go at this rate, most likely we will need the new power plant to be operational by the end of summer 2016. The estimate for this phase is between 1.5 to 2 billion US dollars. We are working closely with the Ministry of Finance to find the best option of financing this development.
In terms of business and investment, the low cost of electricity has been a comparative advantage for companies to establish their facilities in Bahrain. What is the outlook for the price of energy for the next five years if a company has to plan its finances in terms of energy cost? What would be the price that they would have to expect?
That is why we have GCC electricity ministerial meetings on areas like electricity and water. We all agree, as a GCC, that maybe because we have the comparison of the costs, the cost of generation and subsidy that is provided by each country. So we know what Saudi Arabia or Kuwait or Qatar do with their prices, and they know the same about us.
One idea that was presented in the GCC is to have a study done on how to bridge the gap between these subsidies so that no country increases the price and the other one reduces it at the same time. People would be looking at each other in the GCC and saying why are you increasing the price to us while our neighbours are reducing it.
However, what is being done, because the subsidy now is enjoyed by everybody whether they are rich or poor, companies who report a lot of profits or the visitors or the foreigners. Everybody is enjoying the subsidy. Some of them don’t need the subsidy as it was meant to help the needy or people with limited income. The government policy in the future is to redirect that subsidy so it goes to the people who really need it. That is the new direction of the Government of Bahrain. That is the way we would be going in electricity tariffs.
The implementation of meters has started to draw a line in terms of control. How is technology being implemented to conserve energy and educate the people?
We had one firm, I think it was British, who said they are now using new technology. The person who consumes electricity knows how much he has consumed, whether it is too high or too low, compared to the benchmark. He builds in his own awareness and eventually the children will learn it; they will try, as part of their culture, to conserve it for the future.
Now electricity and water are cheap, people keep the tap open and running knowing that it is not going to cost them much. If you make it part of the culture – e.g. in some countries you have limited time for a shower and you do have to finish your shower in that time. Or when you brush your teeth, some people open the water tap and do not bother to close it while brushing their teeth. The water is running and when you look at millions of people doing this, it is adding up to a large sum.
This culture needs to be brought where people and companies realize that water is very precious and so is electricity. Nobody can live without electricity and water.
Taking advantage of the fact that you have held so many high positions in several key institutions in the country, your vision has a unique focus and a complete different emphasis. What is your own Vision 2030? How do you expect this cultural change to take place and how do you expect the different sectors to evolve and walk in the same direction?
I think the political leadership in Bahrain, when they introduced the Vision 2030, which they initially called 2020, then in the discussions we had, because this was developed by the Economic Development Board which was chaired by His Highness the Crown Prince, we said 2020 is too close to make major changes so we made it 2030.
The idea is that as we go along and strive to go towards the Vision 2030, there are a lot of changes that need to take place. Nobody accepts change; usually people resist change but because now it is embodied and it is a directive by the political leadership and it was adopted by the Cabinet of Bahrain and by the various NGOs in Bahrain.
Gradually, people, as they go along, the younger generation will be more attuned to changing the culture. This maybe translates into fewer subsidies, because if you give too many subsidies people waste resources. People realise that they must not only take from the state but give something back and that is where the culture change needs to happen. I guess in the Gulf, in the past because of abundance of natural resources, the states have been very benevolent in pampering the citizens. That will not last forever.