Smart grid development in the Middle East


Investing in innovation, smart technologies and digital operations has become one of the main utility focuses to fulfil energy transition and carbon emission reduction goals.

Whilst utilities in developed economies in Europe and North America have over the past decade intensified the implementation of smart grid programmes, lack of adequate funding and poor planning has restricted adoption in developing regions, including the Middle East.

This article was originally published in Smart Energy International 1-2019.   You have access to our digital magazine here.

High non-technical losses due to energy theft, the inability of utilities to stabilise energy supply and demand, as well as poor consumer energy efficiency have prevailed in the region.

However, governments in the Middle East have realised the need to modernise their grid networks to line up with international standards, address energy challenges and improve utility revenue collections. Grid modernisation will also help in diversifying economies under efforts to reduce dependence on oil and gas and coal energy generation.

A number of governments in the Middle East have recently implemented subsidy reform policies and established mechanisms to provide funding towards energy modernisation. Such policies are paving the way for collaboration between local utilities, technology firms and governments with international smart grid vendors and early adopters.

“Electricity prices remain heavily subsidised across the region, straining government budgets. Tariffs must be raised to achieve the full value of smart grid infrastructure, and several countries are now enacting subsidy reform policies,” says Ben Gardner, president of market intelligence firm Northeast Group.

Despite the potential growth, which the region’s smart grid market has, Northeast Group says political risk remains a challenge to market expansion across the Middle East. This is evidenced by the entrance of multiple smart utility solution providers, including CyanConnode and Kamstrup in the Iranian utility market when the Obama Administration and the European Union lifted economic and trade sanctions on the oil-rich country in 2016.

However, the renewal of sanctions on Iran by the Trump Administration has resulted in some EU and North American smart grid vendors withdrawing from the market. This is after the US government issued a warning that firms that do business with Iran could face repercussions.

US Ambassador to Germany Richard Grenell was quoted by as welcoming the decision made by German companies to stop doing business with Iran, in compliance with US sanctions.

According to Gardner, Saudi Arabia will be the largest smart grid market among MENA countries, with an imminent tender for the supply of advanced metering infrastructure (AMI) of 8.3 million smart meters to be deployed by 2027, and a total smart grid market of $3.6 billion over the next decade.

However, with countries like Germany, Turkey, the US and other EU countries threatening to pose sanctions on the region’s largest economy for the death of Jamal Khashoggi, the country’s smart grid ambitions are expected to be disturbed.

Jamal Khashoggi was a Saudi journalist for The Washington Post and was allegedly killed at the Saudi consulate in Istanbul, Turkey, on 2 October 2018 by agents of the Saudi Arabian government.

Smart metering and factors driving rollout

“The largest individual market segment in the MENA region will be AMI, which will see $9.5 billion in investment between 2018 and 2027, with 55.4 million meters deployed,” adds Gardner.

Despite market challenges, countries including Kuwait have started developing roadmaps for smart grid rollout by launching pilot initiatives.

The Kuwait Ministry of Electricity and Water (MEW) has entered into a partnership with local telecommunications firm Zain, smart grid vendor SAP, system integrator Ericsson and business consultants Oliver Wyman to deploy some 1.1 million smart meters for water and electricity.

The partnership is helping Kuwait to overcome some of challenges hindering smart grid development – such as huge upfront investments required to update old infrastructure, clear regulations around IoT and data security, and focus on the gap that needs to be bridged.

Some 800,000 units will be installed for energy customers and 300,000 for water consumers as part of the New Kuwait Vision 2035.

Dr Meshan Alotaibi, assistant undersecretary of consumer affairs at MEW, said: “By partnering with global technology companies, realtime utilities usage and billing will help our customers to save time and enhance our utilities maintenance and sustainability – all in line with the Kuwait National Development Plan’s smart government goals.” Smart Energy International spoke with a Zain spokesperson about its participation in a pilot in which some 5,000 units will be deployed.

According to Zain, some of the challenges being faced by utilities in Kuwait include untimely bill issuance (leading to accumulated unpaid consumption charges), complicated and manual customer-facing processes (requiring customers to come to the ministry and queue to finish their paperwork/transactions) and excessive consumption (which is putting a toll on the existing infrastructure, overloading the networks and increasing the risk of failures).

The smart meter pilot is expected to help Kuwait develop a business model to ensure timely and accurate billing, better network and demand monitoring, address undetected meter malfunctioning or tampering and ensure a fully digital customer experience.

Telcos and grid modernisation

Zain and the telco industry in general are building communications infrastructure to enable smart grids and ensure timely, safe and secure transfer of data. The telco is the leader of the consortium delivering the smart meters project and will also provide datacentre build-up and hosting and several payment channels.

The smart meters procured by Zain for this project come from 3 different manufacturers and will be fully owned by MEW.

The deal which paved the way for the implementation of the pilot was signed in June 2017 and spans 7 years over two phases:

• Phase 1 covers the full design and buildup of the smart meters solution with an expected Go-Live of Q2-2019.

• Phase 2 will cover the operations and maintenance of the overall solution until 2024.

Smart grid future

Structured and tight partnerships between the public and private sectors in the region will be key to resolving a lot of the above challenges.

However, considering the quick uptake of smart meter projects around the region, especially in Kuwait, UAE, and the Kingdom of Saudi Arabia, a very prominent future for smart grid technologies in the region is probable. As such technologies become more affordable and general IoT adoption increases, expansion into smart grids is likely to be the next natural move. SEI