Exclusive: GE Steam Power's global CCO on the GCC's energy diversification strategy - Gulf Business
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Exclusive: GE Steam Power’s global CCO on the GCC’s energy diversification strategy

Exclusive: GE Steam Power’s global CCO on the GCC’s energy diversification strategy

Dr. Sacha Parneix dissects the complex world of energy diversification – and what is coming ahead in the region

It’s no exaggeration to say the energy sector has served as the key engine that has powered the rapid rise of GCC economies in the last few decades. Holding almost 30 per cent of the world’s proven crude oil reserves, and approximately a fifth of global gas reserves, the GCC countries have fuelled robust economic growth by developing and exporting fossil fuels.

But with industrialisation and an exponential rise in population, the demand for energy has also risen dramatically in the region. During the 2000s, regional energy consumption grew at an average of 5 per cent per annum, faster than India, China and Brazil, according to the International Renewable Energy Agency (IRENA). Domestic consumption grew to about 28 per cent of production in 2014, compared with 17 per cent in 2000.

Meanwhile macro-economic factors have also had an impact on the balance of the oil market and prices. The collapse of oil prices in mid-2014 contracted the region’s oil revenues, and with continuing volatility in the market due to slowing global demand amidst geopolitical uncertainty, an urgent need emerged for energy diversification. Driven by the need for greater energy security, GCC economies have developed strategies for a broader energy mix, including nuclear, coal and renewable options such as solar and wind.

“When it comes to diversification, there is no ‘one size fits all’”, explains Dr. Sacha Parneix, chief commercial officer of GE Steam Power. “Every country needs to find its individual energy mix, which may depend on a number of factors. One of them is the available fuel sources: existing gas or oil reserves, but also the wind conditions, as well as the hours of sunshine and available land space for solar power plants. Other factors may include access to project financing, foreign exchange reserves, and political considerations.”

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Tackling diversification

While some of the Gulf states, such as the UAE, had already embarked on diversifying their energy sources, the oil price collapse in 2014 served as the final push for many of the others to take the leap. Announcing Saudi Arabia’s ambitious Vision 2030 strategy in 2016, Crown Prince Mohammed bin Salman said the kingdom aimed to end its “oil addiction”.

“Looking at it from a long-term economic point of view, if you have other ways of generating electricity rather than using oil and gas, that would save the fuel for something else. And maybe that’s something that can bring more value to the country than just to produce electricity,” explains Parneix.

“For example, liquid fuel can go into refineries or be sold outside the country. So Saudi Arabia has a great opportunity to optimise the overall system. This optimisation has started, as the kingdom has already awarded several projects for solar plants and wind power stations, and they are also discussing nuclear. Offering a portfolio that spans the entire energy value chain, GE is part of those discussions and ready to provide the right technology and services to support each country’s individual energy strategy,” he adds.

GE, which has been active in the Middle East, North Africa and Turkey (MENAT) since the 1930s, currently supports the generation of more than 50 per cent of Saudi Arabia’s electricity and more than two-thirds of the region’s power needs.

The big green question

In addition to greater energy security, there is another driver behind the tectonic transformation of the region’s energy ecosystem: climate change. Across the GCC, governments have included sustainability targets in their national agendas. In addition to increasing the efficiency of existing plants, heavy investment is being made into the renewable energy space, driven by the abundance of solar power in the region. According to IRENA, by 2030, the region could save 354 million barrels of oil equivalent (a 23 per cent reduction), create more than 220,500 jobs and reduce the power sector’s carbon dioxide emissions by 22 per cent based on the renewables targets already in place.

However, energy sources such as solar and wind have their limitations, since it is impossible to control or predict them.

“As the penetration of renewable energy sources increases on the grid, then you start to feel the impact of this intermittency on the stability of your system,” explains Parneix.

“In most places in the GCC, people are used to 24/7 on-demand power. But how do you maintain that when you add more and more renewables which deliver power with huge variation? Energy storage is an obvious thought, but while storage technology has advanced for small and mid-scale applications, it is not viable for national grid scales, like for example the UAE’s total power generation capacity of 27GW. So, the natural solution to balance renewables is to build dependable capacity based on traditional fuels, such as coal, gas or nuclear energy, and to use modern technology to do this in the cleanest and safest way,” he states.

In the UAE, GE is part of the international consortium working on the $3.2bn Hassyan coal energy project in Dubai, a key component of the emirate’s clean energy strategy 2050, which aims to diversify the energy mix and includes a 7 per cent target from coal. Hassyan, the first-of-its-kind in the region, is considered to be one of the world’s most cost-competitive coal fired power projects and features GE’s “ultra-supercritical” (USC) technology. When fully operational in 2023, the plant will deliver 2,400MW net power capacity, producing the equivalent electricity to power approximately 1.3 million people.

Talking about coal naturally brings up the point of sustainability. In recent years, with environmental concerns rising across the globe as the effects of climate change become more apparent, the energy industry – specifically energy generated using non-renewable means – has started to witness greater scrutiny over the key role it plays in exacerbating the issue.

“For the UAE, having a coal power station was important from a fuel supply diversification and security perspective. But they were not ready to compromise on the environmental impact. The USC technology can deliver up to 47.5 per cent efficiency rates – significantly higher than the global average of 34 per cent. In a coal-fired power plant, a one percentage point improvement in efficiency means a two-percentage reduction in CO2 emissions. So with GE’s USC technology, the carbon footprint of a coal power plant can be reduced by more than 25 per cent compared to the average.

“For local emissions, the reference that the UAE set for themselves was gas power – which is typically considered clean. That’s how the project has been specified. And that’s why they turned to companies like GE. Our technologies can remove up to 99 per cent of local emissions. We encourage them to make use of the best, most efficient, and cleanest technologies available on the planet,” explains Parneix.

At Hassyan, GE’s USC technology will help the plant achieve local emissions limits far more stringent than the industrial emissions directive of the European Union and International Finance Corporation guidelines. It will adhere to the most stringent environmental impact mitigation standards ever adopted for a coal-fired power plant.

“In the 1970s, if you went to a city like Los Angeles, you couldn’t see the sky because of the pollution. Today, you can make a coal power station as clean as gas. We just launched an operation in Turkey of a power station with similar technology, and in the cities around, some people still believe that the project is delayed. That’s because although it’s been operating for 18 months, they haven’t seen black smoke and ashes, and the nearby sea water is fully clear. So that’s the type of technology that’s available today,” states Parneix.

Even gas power plants can be made more sustainable. In nearby Kuwait, technology upgrades installed by GE at the 2,000MW Sabiya West gas turbine power station this year have increased output without requiring additional fuel, leading to emissions savings equivalent to taking 8,000 cars off Kuwait’s roads.

Talking nuclear

The UAE will create history in the GCC when its Barakah nuclear power plant begins operations. Construction of the four units of the power plant – located in the Al Dhafra region of Abu Dhabi – was more than 93 per cent complete as of the end of March 2019, with the project anticipated to begin operations in 2020.

Another GCC state that has announced nuclear plans is Saudi Arabia, with plans revealed for two nuclear plants. The kingdom is expected to award the tender in 2020, with US, Russian, South Korean, Chinese and French firms involved in preliminary talks. In September, the Saudi’s new energy minister Prince Abdulaziz bin Salman also revealed plans to enrich uranium for Saudi Arabia’s nuclear power programme. Following recent incidents such as the 2011 Fukushima nuclear disaster in Japan, when an earthquake triggered tsunami struck the plant, there has been apprehension about heading down the nuclear route. Following the disaster, German chancellor Angela Merkel announced the country would completely move away from nuclear energy by the end of 2022.

But Parneix stresses that it is key to study the facts and look at the bigger picture.

“First of all, nuclear reaction is not carbon-based. So it’s carbon neutral. So when you think about global warming, nuclear has a play, because it doesn’t produce CO2, and at the same time, it provides very strong dependable power [unlike solar and wind].

“Secondly, one gram of uranium in energy is equivalent to one tonne of coal. The amount of energy that you have in uranium is tremendous. So the operating and maintenance cost is actually very low, because you obviously need a team to operate the plant, but the fuel required is a very tiny amount. The main difficulty for nuclear power stations is the capital cost, because of the risk that it entails, and the additional level of security, check, design and redundancy that is being poured into the construction of the power station to avoid the incidence of an accident,” he explains.

All these factors contribute to creating a longer timeline for the setup of nuclear power plants in comparison to traditional or renewable energy stations.

“Obviously, nuclear power plants have to come with the highest level of safety. And I think that’s part of the challenge for the nuclear industry, and new safety guidelines were introduced over the past couple of years,” says Parneix.

Regional clout

Business this year has not been easy with the upheaval across the energy industry globally, admits Parneix.

“The power industry is in transition, and it will require a lot of flexibility from power producers and technology providers to adapt and turn the challenges into success.”

“The future is difficult to predict – the only thing we can predict is that it will change. But I believe GE is well positioned to play a very active role in the GCC’s energy transition. Because we cover the entire spectrum from traditional sources like gas, coal and nuclear to solar and wind, we can provide support on the big picture as well as the details. And we are already working on the next generation of innovative technologies that will serve the needs of the future energy ecosystem, such as synchronous condensers.”

Looking at the MENAT region, it has historically been one of the largest outside the US for GE. The company has a presence in 24 countries in the region and recorded orders worth $14.2bn in 2018.

Headquartered in Dubai, the regional division employs more that 14,000 people with 3,000 customers.

Parneix, who took on the role of global CCO in July, previously served as the regional sales leader for GE Steam Power MENAT, based in Dubai. He has chosen to stay on in the emirate because of the “extraordinary opportunity” it offers to maintain partnerships with people across the world, he says.

“The capability to develop partnerships is going to be key for success, and for that, you need to meet people. Dubai has extremely effective airlines – you fly direct everywhere – [and] you’re not really jet lagged whether you travel to the east or the west. And Dubai’s not just a tourist hub; it’s becoming a business hub. So for me, it makes sense to actually be based here.”


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