Energy subsidies discourage going green in Abu Dhabi

The rat race to be more or energy efficient is accelerating as people scurry to cut costs, and Abu Dhabi will need to pick up its pace or be left behind.

Electricity is something that many take for granted, and that is especially true in Abu Dhabi. The main reason is the subsidised cost of power – Emiratis in the capital pay half the price that their peers in Dubai do.

And while many people would like to be more eco-friendly, very few are willing to invest in techniques that do not offer immediate savings. That is why coal, despite being a top source of carbon dioxide emissions, produces 41 per cent of the world’s electricity. According to the International Energy Agency, coal is cheaper than most forms of power generation.

Enova, a joint venture between Majid Al Futtaim Ventures and France’s Veolia, said it has business cases for energy efficiency techniques that make a lot of sense in Dubai, but it’s a tougher case to make against the subsidised prices of Abu Dhabi. “Contracts in Dubai can have an energy savings of 30 per cent and payback within two to six years – which is very attractive. But in Abu Dhabi, you can’t have the same payback because the price of energy makes it different,” said Francisco Silverio Marques, Enova’s director of business development and marketing.

In a time when cost-cutting is becoming the norm, energy service companies are rising in numbers to help consumers slash electricity bills. The Dubai company Smart4Power guarantees savings of 23 per cent on average, but is currently in the range of 27 per cent. That is, of course, if you live in Dubai.

Jesus Gutierrez, the co-founder and co-managing director of Smart4Power, said that the past two years have not been as profitable for many UAE companies because of the lull in oil prices to about US$40 per barrel from the highs of $110 per barrel in the middle of 2014. “Revenue is going down, maybe 10 per cent last year and another estimated 10 per cent this year – so how do you keep profitable? You need to reduce your [operational costs],” he said.

Simply put, that means cutting down how much you spend on power.

Some Abu Dhabi companies are getting interested in more energy-efficient techniques such as the Swiss company ABB in its office at the Aldar headquarters. “These are usually multinational companies with clear targets [to reduce energy consumption] from their headquarters,” he said. “So the payback comes in second for them.”

But going green isn’t just for companies. Residents can get on board too.

Smart4Power conducted a pilot project on six villas in Dubai’s Arabian Ranches, The Meadows and The Springs. The company focused on two main areas of energy consumption. It started with coolant systems, which take up about 65 to 70 per cent of a power bill. The second major factor was water irrigation – Mr Gutierrez said a villa on average can consume about Dh25,000 annually for electri­city and water.

So with an initial investment to implement more energy-efficient technologies at about Dh4,000 to Dh5,000, savings were between 22 and 24 per cent.

Whether it is changing out a power-guzzling air conditioner or simply installing light-emitting diodes, a consumer can reap the benefits in a short time depending on the price of electricity. “In Dubai, we see a payback in 2.1 years, but Abu Dhabi is far from that,” said Mr Gutierrez.

At 5.5 years, the payback per­iod for Abu Dhabi is more than double that of Dubai.

The capital’s price of electricity for expatriates begins at 21 fils per kilowatt-hour, with Emiratis paying 5 fils per kWh. This pales in comparison to the price for power in European countries, with all residents in Germany paying 29.5 euro cents (Dh1.20).

“The problem is that most UAE residents are transient, so they don’t want to invest in any­thing. They have short-term vis­ion,” he said.

In places where the price of electricity is so low, there really are no ways to shore up savings by being smart with energy usage. And without this, how many people really care about being green?

LeAnne Graves covers the renewables beat for The National.

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