28 Jul 2022
In 2017, the UAE launched its energy strategy 2050, which aims to increase the contribution of clean energy in the total energy mix from 25 per cent by 2050 and to reduce the carbon footprint of power generation by 70 per cent making the future more sustainable. The UAE both are the keratin level and the Emirates level laws and regulations that govern its renewable energy sector. The main purpose of this policy is to diversify the economy and take it away from total dependence on the oil and gas sector. Furthermore, the UAE launched its first policy in 2017 a comprehensive energy policy for the whole country. The main aim is to provide clean, affordable and safe energy, reducing greenhouse gasses. However, renewable energy policy has also been set at the Emirates level. For example, Dubai has also come up with energy strategy 2050. It is pertinent to note that UAE has no statutory definition of renewable energy. The agencies that deal with the renewable energy sector are the same that provide traditional electricity to the consumers in UAE. The electricity services are governed by Article 120 of the constitution. There are however different authorities that are responsible for the distribution, power generation and transmission of electricity within different Emirates. Therefore, there is an authority at the federal level, Federal Electric Water Authority (FEWA), established in 2004 Law Number 2, which generally deals with the demand in the Northern Emirates and the development of renewable energy. They also have the capability of developing power generation plants.
Governing Body
At the Emirates level, the driving force behind the renewable energy sector is the Abu Dhabi Department of Energy (DOE), established in 2018, pursuant to Law Number 11. Law Number 20 of 2018 replaced Abu Dhabi Water and Electricity Company with The Emirates Water and Electricity Company (EWEC). The DOE is responsible for issuing generation and production licenses. It also develops policies and set standards, and regulations to supervise and license the energy sector, including the renewable energy sector. Dubai, on the other hand, has the Supreme Council of Energy (SCE), established in 2009, Law Number 19, which is the regulatory authority, responsible for compliance of energy sector providers, and issuing of public and private licenses for transmission and distribution and amicable resolution of disputes. The Dubai Electricity and Water Authority (DEWA), established in 1992, Dubai Law Number 1. It is the main functioning body for setting up, managing, and maintaining electricity and water distribution in the country.
The 2050 Vision
The governments both and the Emirates and Federal level have a controlling share usually, 40% to 49 % with the private sector in the power generation area. As mentioned above the UAE 2050 vision, the target is to produce 50 % of the energy through clean sources, which would include 44 % from renewable sources, 6% from Nuclear energy and 38% from natural gas, 12 % from fossil. However, Dubai is currently running on 9 % renewable energy. They have a target by 2030 to achieve 30-75% renewable energy. Since UAE is globally a top producing Oil and Gas country, it is heavily dependent on Hydro carbon energy production. However, it is fast moving towards a low carbon mix, decreasing the reliance on natural gas that produces two-thirds of UAE energy. Additionally, the strategy focuses on three areas, efficiency, diversification and security of energy and integration and transport of new energy, based on a sustainable solution model. The transmission and distribution of energy are state-owned in UAE. For example transmission entities in Abu Dhabi, TRANSCO, Abu Dhabi transmission company, ADDC and Al Ain distribution AADC, are all owned by FEWA and is similar to DEWA and SEWA. In order to improve the efficiency of transmission and accommodate renewable energy into the national grid Emirates national grid (ENG) is responsible for integrating emirates wide authorities to share the power in the seven emirates. It is pertinent to note that nuclear power is playing an important role in power generation since 2020 and the Barakah plant will supply up to 25% of UAE energy needs.
All electricity and water authorities in UAE operate on a single buyer model. All projects are tendered under IPP Law Abu Dhabi, number 2 and Dubai IPP Law number 6. So, all utility-scale renewable power generation capacity is purchased under EWEC in Abu Dhabi, and sold to ADDC and AADC under annually adjusted bulk supply tariff. The same is the case with DEWA in Dubai, however, In Dubai, projects coming under IPP law are exempt from the application of Dubai Law number 22 on public-private partnership. This does not include the Side sales system; sales of water and electricity by the entities licensed to produce other than EWEC shareholders are subject to AD DOE. Sharjah and Northern emirates also operate on a single buyer model. It is important to note that currently there are no financial or regulatory incentives offered for utility-scale renewable power. Recently, Abu Dhabi launched a clean energy certificate scheme which is primarily being offered to attract investment in the sector. As of August 2021, Abu Dhabi DOE has launched a regulatory policy for clean energy certificates (CEC). It sets out to implement regulations and principles for implementing a clean energy scheme which is based on internationally recognized certification by International Renewable Energy Certificate Standard Foundation (I REC Standard). The DOE issues the certificates, and the I-REC standard is a single registry platform and EWEC will act as the registering authority for electricity coming into the grid, produced by businesses, consumers or end customers and DOE ensures all plants producing clean energy are listed with I-REC. The Certificates are issued by DOE in units MW/h, upon receiving a request from EWEC, as the clean energy is fed into the grid CEC is traded to claim the environmental and social benefits of low energy consumption. However, the main source for financing and development of utility-scale renewable power projects developed under IPPs is that businesses can get long-term financing from local or international commercial banks or export credit agencies.
Small-scale solar PV energy was issued in 2017, it entails a net metering system, whereby, owners are credited for any surplus electricity produced. The owners can feed any access power produced into the grid. The Solar power regulation is applicable to distribution companies, and producers other than the electricity and water authorities. Dubai has encouraged both residential and commercial buildings to install solar panels, as per executive council resolution number 46 in 2014, known as shams Dubai. Under the resolution, the producers produce electricity through solar panels and send excess into the grid. On the financial and regulatory incentives, Dubai has established Dubai Green Fund loans to companies in the clean energy sectors. However, it is worth noting that distributed renewable energy is privately funded. Also, microgrids are not permitted to operate. It is notable that the Abu Dhabi distribution company is responsible for certification in solar PV integrators and in Dubai under resolution 46 any entity supplying, installing or operating painting solar PV system must be registered as a consultant/contractor under the Dubai department of economic development. Similarly, Dubai's carbon centre of excellence is the issuer of renewable energy certificates along the lines of I-REC. A license from Abu Dhabi DOE, Dubai RSB or FEWA needs to be obtained which is project specific. It also includes and assesses environmental impact construction and building permit and trade license requirements, along with relevant NOC from civil defence, CAA and Etisalat. As per law, the DOE is responsible for licensing entities, companies and individuals working in the energy sector. Monitoring all aspects of transmission, distribution and storage of renewable energy. Under article 9 of DOE law, a company or individual is not allowed from any activity in the energy sector in Abu Dhabi under the license issued by DOE. Similarly, in Dubai as per RSB resolution and Dubai IPP law, RSB is the regulator for public-private entity energy activity (DEWA being exempt) and is the license issuing authority.
Foreign Investment
The UAE government-owned renewable energy business Masdar has opened its first independent solar power facility in Azerbaijan with international investment. Up to 500 million kilowatt-hours of power will be produced annually by the project, which is scheduled to start operating in 2023. An estimated 110,000 houses might be served by this electricity. Emissions will be reduced by more than 200,000 tons annually with this production capability. The facility is in accordance with Azerbaijan's ambition to reach a 30% share of renewable energy sources in installed electricity capacity by 2030. The UAE Ministry of Foreign Affairs Directorate of Energy and Climate Change, the Masdar Institute in the UAE, and the International Renewable Energy Agency (IRENA). The examination of the UAE's potential for renewable energy is a component of re map 2030, IRENA's plan to double the proportion of renewable energy sources in the world's energy mix. The installation of solar panels by Total energies on its glass-producing facilities in the United Arab Emirates, Emirates Glass and Lumi glass Industries is anticipated to reduce carbon emissions by around 1,200 tons yearly, or the equivalent of planting about 30,000 trees.
To contribute to the country, the University of Science and Technology in Khalifa University of Science and Technology, a top-ranked academic institution with a strong concentration on the strategic economic sectors of the United Arab Emirates, is now collaborating with DEWA on water desalination in order to share our knowledge in this important field. As part of our effort to connect with crucial economic sectors like utilities, which serve as the foundation for developing future smart cities, we are also investigating potential future cooperation in solar energy, sophisticated materials, and Industry 4.0. Such industry-academia partnerships lay the groundwork for a successful knowledge-based economy in which each sector contributes to the other in a symbiotic relationship, enhancing the benefits of the communities.
Furthermore, the most significant change in the Federal law number 2 of 2015 (commercial companies’ law) that companies must be owned by a majority share by a UAE national was amended by Federal decree Law number 26 2020. The decree amended 51 articles, the most substantive change being the doing away of UAE nationals as sponsor or agent on the license and to own 51% of the company. Clearing the way for foreign investors to own 100% of the company. Power generation, distribution, transmission, solar and wind instruments can be 100% owned. India's additionally green hydrogen and energy storage companies can also be owned 100% by foreign investors. The most obvious requirement for working in UAE is a valid work permit and visa. Increasingly Emiratization has both statutory and contractual requirements to hire and train UAE nationals. There are restrictions on terminating the employment of UAE nationals. There are other contractual obligations under long-term IPP power agreements to give preference to UAE nationals.
Governmental authority and regulatory authority are responsible for the regulation of competition and antitrust in the renewable energy sector. Under UAE Federal Law number 4 of 2012 the regulation of competition became enforced in 2013. The competition law regulates restrictive agreements, abuse of market and merger control. As of 2016 cabinet design number 13 it is mandatory to notify a merger and acquisition if their market share of the entity in the market exceeds 40%, and the concentration may affect the competition. However, under the competition of law which entails agreement, practice or business related to product or services and under another law gives organizations of its competition rules to sectoral regulatory body is exempted from the application of competition law. Such exclusion includes renewable energy sector. Since the renewable energy activities are regulated in the case of DOE Abu Dhabi and RSB Dubai, the provisions of competition law should not apply. For example, in Abu Dhabi DOE, the law may impose fines for breach of the law license exemption conditions, including notices, mandatory financial suspensions or cancellation of license, temporary or permanent closure. Similar is the case in Dubai RSB which has the power to cancel or suspend the license. The criteria to determine whether an entity practice is anti-competitive the single buyer transmission and supply are controlled through price reviews.
Dispute Resolution
Moreover, disputes are governed in accordance with the terms of the applicable contract. UAE Federal Law Number 6, the Arbitration law came into force in 2018 which is based on the UNCITRAL Model Law. This law governs any arbitration concluded within UAE unless specifically mentioned by both parties to conduct the arbitration in a different country. The Arbitration Law sets proceedings and enforcement of arbitration awards. It also incorporates general international arbitration principles such as the doctrine of separability. Additionally, both the DIFC and Abu Dhabi Global Markets (ADGM), operate under common law, both having the privilege of arbitration laws. There are however alternative dispute resolution clauses in the renewable energy sector, such as power purchase agreements including tiered resolution with amicable dispute resolution to technical expert decisions to arbitration. The UAE Arbitration laws also provide interim or emergency relief that courts can order, with the request of the party or on its own motion such as preservation of evidence, maintenance of assets and funds, restoration of status quo and prevention of any potential harm or prejudice to the process. Both Dubai and Abu Dhabi have recognized and enforced foreign arbitral awards in accordance with the New York Convention since November 2006 but in a non-binding precedent. The amendments to the commercial law may have limited impact in relation to the renewable energy sector as far as public procurements are concerned but in the long run, it encourages and gives tremendous impetus to foreign investment.
Conclusion
Renewable energy sources are becoming a significant part of the global energy consumption portfolio as a result of ongoing concerns about climate change. By substituting renewable energy sources for fossil fuels in the transportation and power generation industries, CO2 emissions could be reduced. The development and promotion of renewable energy supply technologies as well as the demand for renewable energy are required due to the detrimental and irreversible externalities associated with the generation of conventional energy. To reduce the cost per unit of production, more power should be produced using renewable energy sources. The amount of energy used varies on a number of variables, including population growth, energy pricing, climate, and technology. Get in touch with us to know more about the latest amendments in UAE.