Renewable and Sustainable Energy Reviews 116 (2019) 109429

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Renewable and Sustainable Energy Reviews

journal homepage: http://www.elsevier.com/locate/rser

Market design for successful implementation of UAE 2050 energy strategy

S. Al Naqbi a, I. Tsai b, T. Mezher a, *
a
Khalifa University, Abu Dhabi, United Arab Emirates
b
Tongji University, Shanghai, China

A R T I C L E I N F O A B S T R A C T

Keywords: In order to implement a renewable energy (RE) strategy in any country, there is a need for a good market design
Market design in order to have successful outcomes. Market design depends of several factors such as Infrastructure, Human
Energy transition Capacity and Institutions. This paper explores the literature on RE market design factors and sub-factors and
Renewable energy
selects the most acceptable framework for market design analysis. UAE (United Arab Emirate) 2050 Energy
Business model
UAE
strategy calls for reduction on carbon dioxide emissions by 70%, increasing clean energy use by 50% (RE 44%
and Nuclear 6%), and improve energy efficiency by 40% by the middle of the century. The paper analyses the
current RE market design in UAE and proposes improved policies and mechanisms in order to achieve the
proposed targets. In addition, it will look at the transition strategies needed from all relevant stakeholders
especially the main UAE utilities, ADWEA (Abu Dhabi Water and Energy Agency) and DEWA (Dubai Water and
Energy Agency). The paper will show the business models of these utility companies that will help in the
transition of UAE from fossil fuel economy to a harmonic fuel mix with cleaner sources of energy.

1. Introduction
In 1972, the United Nations (UN) held its first international confer­
ence devoted to global environment where there was an urgent need to
address social, environmental, and economic issues in economic devel­
opment of countries. The concept of sustainable development was
formalized when the Brundtland report was published in 1987 [1]. The
UN has held many conferences on environment and development
starting with the Earth Summit in Rio de Janeiro in 1992 and more
subsequent conferences where held to follow up on the progress and
implementation of the UN declarations [2]. In 1988, The Intergovern­
mental Panel on Climate Change (IPCC) was set up in 1988 by the World
Meteorological Organization (WMO) and United Nations Environment
Program (UNEP) to provide policymakers with regular assessments of
the scientific basis of climate change, its impacts and future risks, and
options for adaptation and mitigation [3]. The challenges that world is
facing are related to population growth, increase in energy demand, and
global warming due to greenhouse gases. In addition, many countries
are facing energy poverty and energy scarcity. Global energy production
and CO2 emissions are at the heart of climate change problem [4]. En­
ergy security is becoming a national priority for many countries around
the world [5,6].
The International Energy Agency (IEA) released its World Energy
Outlook report in 2007 where there was an appeal to the international
community to change its energy policies and reduce the reliance on
fossil fuel which undermine energy security and accelerate climate
change [7]. Many countries are going through energy transition path by
introducing clean alternatives in their energy mix and conservation
which are based on energy security, affordability, climate change miti­
gation, and environmental protection [8]. Itaoka and Chapman [9]
highlighted in their research the leaders and international precedent for
energy transitions. Germany was able to make the energy transition
through its feed-in tariff (FIT) and aggressive targets of 80% of elec­
tricity to be provided for Renewable Energy (RE) sources. This was
accompanied with research and development investments and the cre­
ation of RE industrial sector. Spain and Italy also implemented FIT and
net metering policies to encourage RE adoption and both countries were
able to meet their RE targets. In the United States of America, the gov­
ernment has adopted renewable portfolio standards (RPS), and
financing arrangement and strong capital investments to sustain RE
growth. China and India face the same challenges of rapid population
and economic growths which results in increase in CO2 emissions levels.
Both countries are deploying RE on a massive scale. China is using FIT
and annual target policies; and India is using renewable purchase obli­
gation targets along with FITs, depreciation benefits and tax rebates.
Many research pointed out several limits and vulnerability in the

* Corresponding author.
E-mail addresses: shaima.alnaqbi@ku.ac.ae (S. Al Naqbi), itsung@tongji.edu.cn (I. Tsai), toufic.mezher@ku.ac.ae (T. Mezher).

https://doi.org/10.1016/j.rser.2019.109429
Received 8 July 2018; Received in revised form 20 August 2019; Accepted 25 September 2019
Available online 1 October 2019
1364-0321/© 2019 Elsevier Ltd. All rights reserved.
S. Al Naqbi et al.
energy transition process. Land availability and high integration costs
may hinder the deployment of solar projects [10,11]. Other factors that
can hinder energy transition include the existence of old infrastructure,
the lack of the needed national institutions, and unavailability of
well-trained human capacity [12,13]. Other barriers include publicly
controlled energy sector, and incentives and subsidies for fossil fuel
[14].
In a free market economy, market types drive business profitability
depending on their market shares. The bigger the market share the
bigger the rate of return of firms. The Energy market in UAE, as in most
Gulf States, is publicly controlled. UAE has a federal system and consists
of seven Emirates. Every Emirate has its sole utility company (monop­
oly) and it is totally controlled by the local government. Energy strate­
gies are determined by each emirate’s regulatory body. The structure of
the electricity market in UAE is described in more details in the subse­
quent sections.
The objective of this paper is to analyse the current market design of
RE sector in UAE using a framework which encompasses three major
factors: infrastructure, institutions, and human capacity. In addition, the
paper recommends several policy strategies to improve the market
design of RE market. The paper starts by identifying the suitable
framework to analyse the RE market in UAE, then explores the barriers
that are hindering successful RE market adoptions. Then it explores the
current and future fuel mix strategies in UAE and their related policies,
targets, and institutions. Then, the paper examines the current business
model transitions of two major utilities in UAE, Abu Dhabi Water and
Electricity Agency (ADWEA) and Dubai Electricity and Water Agency
(DEWA) in order to understand the changes that were made in order to
adopt RE technologies and other cleaner ones. Finally, the paper makes
some energy strategy recommendations in order to successfully imple­
ment RE projects and meeting their targets.
2. Framework for Analyzing Energy Transitions
Many literatures discussed the critical factors that are important to
ensure successful energy transitions especially from fossil fuel energy
production to cleaner energy sources. A framework was developed to
assess the readiness of Gulf and North African countries. The main three
pillars for this framework are Infrastructure, institutions, and human
capacity [12,13]. The successful elements for energy sector market
analysis are: interest rates, financing institutions, demographic factors,
architects/engineers, general contractors, the demand for amenities,
and advertisers, codes and standards [15]. Resource availability, energy
policy and energy infrastructure are three main factors for successful RE
adoption [16]. Other best practices show that RE market design depends
on several aspects as financial aspect, fiscal aspect, legislative aspect,
political aspect, technological and environmental aspect [17]. A
framework that was developed for RE policy options for Abu Dhabi was
based on factors such as: energy policy and mechanisms, economic
environment, market technology, policy legislations, and cost of elec­
tricity [18]. The paper on determinants of RE technology adoption from
developing countries between the period of 1980–2008 shows different
criteria for developing RE market: available financing instruments,
enabling infrastructure, incentives for firms, regulatory compliance,
regularity policies, economic development, governance, openness to
foreign direct investment and trade, human capital, and financial
development [19]. Key Success Factors in Implementing RE Program in
Malaysia were to reduce the following risks: political, legal, foreign
exchange, force majeure, operating and technology, construction and
sponsor, commercial, economic inflation and environmental, financial,
and fuel supply [20]. Critical factors affecting the development and
diffusion of RE technologies (RETS) in Nigeria depend on institutional
framework, policy implementation, financing availability, socioeco­
nomic awareness, technological and environmental merits, and socio­
political and techno-economic dynamics [21]. Other factors influencing
the development of local RE strategies are political support, information,
2
Renewable and Sustainable Energy Reviews 116 (2019) 109429
education and awareness, funding or economic conditions, and social
acceptance of RE [22]. Geographical factors, current land use, legisla­
tion, environmental concerns, and availability of transmission lines are
important factors when doing feasibility study on RE generation [23]. A
study on promoting RE in UK shows that the critical factors to support
RE are: power, causal factors, economic, technological, social and po­
litical, and delivery of new grid infrastructure [24]. Factors affecting the
adoption of wind and solar-power generating systems on U.S. Farms
include: economic, institutional, and policy [25]. Finally, RE drivers
include: government policies and policy decisions, market conditions,
renewable resource availability [26]. As the above literatures show
various aspects of framework for RE market design some of them de­
pends on country, location, resource availability, technologies and
others. The following Table 1 shows the summary from all the literature
on market design frameworks which include the important factors and
their related sub-factors.
For the purpose of this paper, we have selected the first framework
[12,13] which is more comprehensive and the factors and sub-factors
are common to all the literature reviewed in Table 1. The main factors
are infrastructure, institutions, and human capital. The concept of
renewable energy infrastructure refers to the physical capacity of the
country to deploy those related technologies. These technologies are
evaluated through the availability of natural resources (conventional
fossil fuels and RE) such as the ability of the grid to transmit and
distribute additional power or electricity generated from renewable
sources to users. In addition, other factors are linked to infrastructure by
developing RE technologies: market infrastructure consisting of the
commodity market, reform of the power sector, RE technologies devel­
opment, and power off-take attractiveness. And also another factor is the
rate of access to electricity and the expected demand for electricity.
Institutional readiness provides an outline of the most important factors
such as: the existing institutional framework, as well as main long-term
policies, access to renewable energy financing and the microeconomic
environment for the diffusion of RE technology. The importance of these
factors is highlighted in the development of an effective and reliable
clean energy policy for sustainable energy development in any country.
In addition, they demonstrate the effectiveness of institutions in
implementing targeted RE projects and their sustainable development to
reach global targets. Public and private institutions related on RE will
have a strong impact on the development of relevant RE projects, and on
the development of sustainable development strategies as well as policy
and investment decisions. In the short and long period, human capital is
a critical engine for the sustainable development of RE technologies. In
the perspective of RE readiness, human capital refers to the provision of
human resources with the capacity to develop, manage, achieve, and
maintain RE projects in a particular country. It is a standard for
measuring the ability to select and operate the most appropriate tech­
nology towards sustainability. There is a need for factors such as tech­
nical and commercial skills, technology adoption and dissemination, as
well as increasing consumer awareness of the positive value of RE in
various areas for the development and promotion of human capital for
the diffusion of RE technologies.
3. UAE energy market transitions: A historical perspective
The United Arab Emirates, an oil rich country, has embarked on the
renewable energy (RE) journey when the Abu Dhabi Future Energy
Company (Masdar) was created in 2006 [27]. Abu Dhabi took the
leading role in adopting the first RE target, 7% of total power capacity by
2020 [18]. Since then Dubai, adopted an RE target to 5% by 2030 [28]
and revised its target to 7% by 2020 and 25% by 2030 [29,30]. In 2018,
UAE as a nation has decided to raise its clean energy target from 24% to
27% by 2021 as part of its commitment to global efforts to fight climate
change [31]. The country has great expectation in developing its RE
economic sector in order to meet its ambitious RE targets. The total
power capacity in 2021 for UAE is expected to be around 38 GW out of
S. Al Naqbi et al.
Table 1
Market design factors and sub-factors.
Papers
The GCC countries RE-readiness:
Strengths and gaps for development
of RE technologies [12]
and
RE readiness assessment for North
African countries [13]
Energy sector market analysis [15]
Renewable Energy: Markets and
Prospects by Region [16]
Review of policies encouraging
renewable energy & best practices
[17]
RE policy options for Abu Dhabi:
Drivers and barriers [18]
Determinants of RE Technology
Adoption – Evidence for Developing
Countries 1980–2008 [19]
Criteria
� Infrastructure:
- Assessment of natural resources (RE
potential, Energy security),
- Country over all infrastructure,
- System requirements (Grid capacity &
robustness), Market infrastructure
(Goods market efficiency,
- Market deregulations, RE supply
chain, Market distortions &
competitiveness),
- Energy access (Expected energy
demand growth, Electrification rate &
quality of electricity supply)
� Institutions:
- General institutions,
- Key policies (Institutional framework,
identified targets & policy
mechanisms, financial market
development, Macroeconomic
development).
� Human capital:
- Technical & commercial skills (Higher
education & training, capacity
building, Available RE experts, Labor
market efficiency),
- Technology adaptiveness & diffusion
(Technological adoption readiness,
Innovation & R&D),
- Awareness among consumers,
investors & decision makers
(Resources availability, consumer &
social acceptance)
- Interest rates
- Financing institutions
- Demographic factors
- Architects/engineers
- General contractors
- The demand for amenities
- Advertisers, codes and standards
- Retailers, manufacturers, and Energy
Star.
- Resource availability
- Energy policy
- Energy infrastructure in place
- Financial aspect: Public sector funding,
Private sector funding (Structural funds,
Favorable loans).
- Fiscal aspect: Environmental taxes, Tax
incentive for investments.
- Legislative aspect: Power purchase
legislations (FIT arrangements,
Tendering arrangements, Renewable
portfolio standards, Green pricing
schemes, Green certificates), Grid access
legislation.
- Political aspect
- Technological & environmental aspect
- Energy policy and Mechanisms
- Economic environment
- Market Technology: Accessibility to
credits, Technology performance
uncertainty/risk, Technical skills &
information, Commercial skills and
information, Non-existence of country
assistance strategies, Awareness/experi­
ence in social, rural, environment sectors
- Policy Legislations
- Cost of electricity
- Available financing instruments
- Enabling infrastructure
- Incentives for firms
- Regulatory compliance
- Regularity Policies
- Economic Development
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Renewable and Sustainable Energy Reviews 116 (2019) 109429
Table 1 (continued )
Papers
Key Success Factors In Implementing
RE Programme in Malaysia [20]
Critical Factors Affecting the
Development and Diffusion of RE
Technologies (RETS) In Nigeria
[21]
Factors Influencing the Development
of Local RE Strategies [22]
Feasibility Study on RE Generation
[23]
Promoting RE in the UK [24]
Factors Affecting the Adoption of
Wind and Solar-Power Generating
Systems on U.S. Farms [25]
Renewable Energy Drivers [26]
which 10.26 GW (27%) should come from clean energy, 5.6 GW from
nuclear and 4.66 GW from RE. As of today, only a total of 323 MW
(100 MW of CSP and 223 MW of PV), are installed and commissioned.
Therefore, by 2021, additional capacity of 4.38 GW of RE should be
installed which is going to be a challenge in the next 3–4 years.
Table 2 below shows all the factors and sub-factors in that are critical
Criteria
- Governance
- Openness to Foreign Direct Investment
and Trade
- Human Capital
- Financial Development
- Political Risk
- Legal risk
- Foreign Exchange Risk
- Force Majeure Risk
- Operating and Technology Risk
(technical risk)
- Construction and Sponsor Risk
- Commercial risk
- Economic Inflation & Environmental
Risks
- Financial risk
- Fuel supply risk
- Institutional framework
- Policy implementation
- Financing Availability
- Socioeconomic awareness
- Technological & environmental merits
- Sociopolitical & techno-economic
dynamics
- Political support
- Information, Education & Awareness
- Funding or economic conditions: The
financial mechanisms or financial
schemes to support the deployment & use
of technologies
- Social Acceptance of RE (Socio-political,
Community and Market acceptance)
- Geographical factors
- Current land use: The existence of sites
- Legislation
- Environmental concerns
- The availability of transmission lines
- Power (Multi-level, multi-actor gover­
nance, intergovernmental bargaining,
Action and resistance, Institutionalist
perspectives, Policy networks, instru­
ment choice and flanking conditions,
Socio-technical systems & energy transi­
tions, Regions and sustainability)
- Causal Factors (Political support &
problem framing, Leadership, Shape of
the Policy Community)
- Economic
- Technological
- Social and Political
- The delivery of new grid infrastructure
- Economic (Energy prices and resource
potential, the cost of energy, the
economics of a RE installation: the
resource potential available for energy
production)
- Institutional (high cost of maintaining
the infrastructure)
- Policy (Renewable Portfolio Standards,
Net metering, Interconnection, Financial
Incentives, etc.)
- Government policies & policy decisions
(e.g., tax credits, feed-in tariffs, and
renewable portfolio standards)
- Market conditions (e.g., cost, diversity,
proximity to demand or transmission,
and resource availability)
- Renewable resource availability
S. Al Naqbi et al.
for RE market design in UAE. As can be seen, UAE is leading in many of
these factors but lacking in others. UAE has the following gaps:
Table 2
Factors critical to RE market design in UAE.
Factors Sub-factors UAE
Infrastructure Natural resources Solar, wind energy, and waste.
Country overall UAE has the one of most advanced
infrastructure infrastructure in the world.
Existing grid capacity As of 2016, the grid capacity in UAE
was around 29 GW.
Market infrastructure In the past power generation,
transmission, and distribution are
publicly owned. Abu Dhabi was
leading in allowing the public-
private partnership in power
generation and water production
only. Recently, Dubai has followed
similar model.
Electricity access rate & 100% Electrification and It is
projected demand expected that power demand
capacity in UAE to be around 38 GW.
Human Technical & commercial UAE is weak in this area and strongly
Capacity skills needs human capacity to embrace
renewable energy, including
technical and commercial skills.
Technology adoption & RE companies through the RE value
diffusion chain are operating in UAE
including financial institutions.
Science and Technology institutions
are working with both public and
private sector to improve RE
technology transfer, adoption and
development to meet local context.
Awareness among The prestigious annual Zayed Future
consumers, investors & Energy Prize. The annual Abu
decision makers Dhabi Sustainability Week which
attracts national and international
investors throughout the RE value
chain. Annual Solar World Congress.
Annual Emirates Energy Awards.
Lack of needed research funds.
Institutions Public or private Government: Ministry of Energy and
institutions related on RE Industry. Abu Dhabi & Dubai Energy
Councils. Public utilities: ADWEA,
DEWA, FEWA, SEWA. Major private
player in RE: Masdar Company.
Key policies UAE key policy: 27% of Clean
Energy of the total energy mix by
2021. RE target of 44%, decreasing
carbon emissions by 70%, and
increasing EE by 50% by 2050. Abu
Dhabi key policy: 7% of electricity
from RE by 2020. Dubai key policy:
7% of electricity from RE by 2020,
25% of electricity from RE by 2025
and 75% of electricity from clean
energy by 2050. In 2010 enactment
of Estidama in Abu Dhabi, by
requiring building & natural
sustainability systems to reduce
energy and water consumption by
one-third and pricing reforms. In
Dubai, establishment of 30%
demand reduction target by 2030
through a mix of pricing reforms,
performance codes, and efficient
investments
Access to RE finance Private and international banks and
investors
Macroeconomic UAE has a stable and sustainable
environment economy. Many sectors are growing
in the country where RE industry
can benefit from. Still, RE industry is
growing slowly.
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Renewable and Sustainable Energy Reviews 116 (2019) 109429
� Market infrastructure: UAE is still weak in this area. In the past power
generation, transmission, and distribution were publicly owned. Abu
Dhabi was leading in allowing the public-private partnership in
power generation and water production only through independent
water and power producers (IWPP). Recently, Dubai has followed
similar model. But public utilities still own more than 51% of the
IWPPs. This mean that the public sector is still bearing the risks
associated with new RE projects.
�Technical and Commercial skills: UAE, like many countries who are
trying to transition the energy market, is facing challenges in having
a the well trained human capacity throughout the value chain of the
RE industry. Therefore, there is a need to develop both technical and
commercial skills especially at the managerial and high technical
skills levels in order help the transition process.
�Public or private institutions related on RE: UAE has gone through
many public sector restructuring but still coordination and collabo­
ration between all the major stakeholders in the energy and water
sectors are not adequate because of lack the experience in imple­
menting RE projects.
4. RE policies and targets in UAE
UAE was the leading country in the Gulf to initiate RE projects which
started in 2006 with the Masdar Company and Masdar City, the first
sustainable city in the region [27]. Masdar city faced many challenges
especially when UAE economy was impacted by the global financial and
economic crisis in 2008. This has slowed down the development of
Masdar City. Today Masdar City is thriving again and keeping its sus­
tainability goals by having 40% more energy and water efficient
buildings. Masdar City management developed a master plan for the city
and investors are constructing their projects based on rigid environ­
mental regulations and building codes developed by the city and the
local government [32]. Masdar City is still far from completion but
already there are many commercial and residential buildings that are
fully occupied including a shopping mall.
In addition, UAE was successful to host the headquarter of the In­
ternational Renewable Energy Agency (IRENA) in Abu Dhabi in 2009
[27]. Since then, public institutions in UAE and in each of the Emirates,
especially Abu Dhabi and Dubai, went through many institutional
restructuring and RE and EE targets. Table 3 lists all the RE and EE
targets and their related institutions [33]. As it can be seen that UAE has
taken seriously the Climate Change challenge and it is becoming a
benchmark for other countries regionally and globally.
5. Current fuel mix strategies for electricity and water
productions in UAE
UAE since 2006 started shifting its fuel mix strategies to adopt
alternative sources of fuel mix to include renewables and nuclear. The
next sections with summarize all the existing energy projects and the
potential new ones [33].
5.1. Nuclear
Building of the first nuclear power plants started in 2013. It is a part
of four new nuclear power plants, designed by South Korea. Each plant
has a capacity of 1.4 GW for a total of 5.6 GW. The first nuclear power
plant should be online in 2019 and the last one in 2022 which should
cover around 25% of the electricity demand. The Barakah plants are
located in Western Region of Abu Dhabi.
5.2. Solar
The United Arab Emirates receives more than 10 h of daily sunlight
for an average of 350-sunny days/year. The solar energy in UAE
received is estimated to be6.5 kWh/m2 per day, while the direct normal
S. Al Naqbi et al. Renewable and Sustainable Energy Reviews 116 (2019) 109429

Table 3
UAE clean energy and efficiency target and related public institutions.
2020 2021 2030 2050 Public Institutions related to Energy
and Water

Power Generation UAE 27% of clean RE target of 44%, decreasing Ministry of Energy and Industry, and
Fuel Mix Targets energy of the total carbon emissions by 70%, and Federal Electricity and Water
energy mix increasing EE by 50%. Authority (FEWA)
Abu 7% renewables, Department of Energy Abu Dhabi
Dhabi 19% nuclear
Dubai 7% renewables 25% renewables, 75% of energy needs will be met Dubai Supreme Council of Energy
7% nuclear from clean sources
Energy Efficiency Abu Enactment in 2010 of Estidama, mandatory building and landscape sustainability regulations to cut
targets Dhabi energy and water consumption by one-third and pricing reforms
Dubai Establishment of 30% demand reduction target by 2030 through a mix of pricing reforms, performance
codes and efficient investments (building regulations, building retrofits, district cooling, standards and
labels for appliances and equipment, outdoor lighting and change of tariff rates)

solar radiation is between 4 and 6 KWh/m2 per day, depending on two

Table 5
factors: location and time of the year. Solar power is considered to be
Installed solar capacity and future targets.
one of the most attractive renewable technologies in the UAE because of
its abundance and decreasing costs [34]. Commissioned as 2020 2030
of 2018 Accumulated Accumulated
Table 4 shows the commissioned and under construction RE power
Targets Targets
plants in UAE. Since 2016, the cost of LCOE went down dramatically to
2.42 USA cents/kwh as in the case in Nour 1, PV plant, in Abu Dhabi. In Solar Power 223 MW 2500 MW 6500 MW
plants and
addition, utility scale PV projects are shifting more toward more public- rooftops
private partnership using IPP-PPA model. Solar CSP Plants 100 MW 800 MW 800 MW
By 2020, Abu Dhabi is planning to add 500 MW of Solar PV rooftops Total 323 MW 3300 MW 7300 MW
and planning to auction additional solar PV plants to reach a total ca­
pacity of 1500 MW by 2020. Dubai, on the other hand, is planning a
solar targets of 1800 MW (1000 PV and 700 CSP) by 2020 and 5700 MW Table 6
(5000 PV and 700 CSP) by 2030. These plans will change in time due to Waste to energy projects in UAE.
future new technologies and their feasibilities [33]. Table 5 bellow 2020 Total electricity generated
shows the installed solar capacity as of 2018 and for the 2020 and 2030 (kWh)
targets.
Abu Dhabi, the Abu Dhabi National 100 MW 700,800,000
Energy Company
Dubai, Al Warsan 60 MW 420,480,000
5.3. Waste-to-energy
Sharjah, bee’ah 35 MW 245,280,000
Total 195 MW 1,366,560,000
From waste to energy perspectives, Abu Dhabi, Dubai, and Sharjah
are planning waste-to-energy plants utilizing gasification technology.
The total capacity of waste-to energy is 195 MW generating around 6. Business Model Transition of Utility Companies in UAE
1,366,560,000 Kwh starting 2020 [33]. Table 6 shows the different
projects in UAE. The researchers found that existing companies are often struggling to
innovate and create a business model (BM) that is still profitable, this
will undermine their future potential growth, profitability and
5.4. Clean coal
competitiveness. The BM can be defined as a structural template that
describes the organizational and financial structure of a company. The
Dubai, because of lack and oil and gas resources, has decided to rely
BM is a shift that determines how the organization provides value to
on clean coal as part of its energy mix for the future. Four plants are
customers, and frees customers from paying for value, and turns those
being planned, each of 600 MW capacity for a total of 2.4 GW. The first
payments into profit. Problems are most often encountered when an
plant will be commissioned in 2020 and the other three will follow on
immediate application of new technologies can’t be found in the market
year at a time. All the plants will be equipped with CO2 capture capa­
and may not fit the BM of the existing company [35–37]. BM consists of
bilities as required by the Government of Dubai [33].
several elements that are needed to understand the market needs from
companies’ and stakeholders’ perspectives. The left column in Table 7
Table 4 shows these elements. The challenges of climate change have forced all
Existing and future RE solar projects in UAE.
the stakeholders, especially utility companies (EUCos) and Energy Ser­
Dubai 13 MW PV built and operated by DEWA (EPC). Commissioned in 2013. vice Companies (ESCos), in the energy sector to co-evolved to meet the
200 MW PV. Auctioned. Public-Private partnership, IPP-PPA Model.
realities of technological changes, organizational structure, and gover­
LCOE 5.85 Cents/Kwh. Commissioned in 2017.
800 MW PV. Auctioned in 2017 and awarded. Public-Private nance in order to have successful transitions and stay competitive [38].
partnership, IPP-PPA Model. LCOE 2.99 Cents/Kwh. Under From UAE perspective, before the new transition, all utility com­
construction. panies are publicly owned and all power plants were done using EPC
700 MW CSP. Auctioned in 2017 and awarded. Public-Private model (Engineering, Procurement, and Construction). After the gov­
partnership, IPP-PPA Model. LCOE 7.3 Cents/Kwh. Under construction.
ernment introduced new RE policies and targets, there was a transition
Abu Masdar 10 MW. Build by Masdar Company. Net metering with ADWEA.
Dhabi Commissioned in 2010. toward more public-private partnership (PPP) by using independent
SHAMS 1 100 MW CSP. Auctioned. Public-Private partnership, IPP-PPA power producers (IPP) and power purchase agreement (PPA) model.
Model. Commissioned in 2013. This has forces the two main utility companies in UAE, ADWEA and
Nour 1 350 MW PV. Auctioned in 2017 and not awarded yet. Public-
DEWA, to shift to new BM as shown in Table 7 below.
Private partnership, IPP-PPA Model. LCOE 2.42 Cents/Kwh.

5
S. Al Naqbi et al. Renewable and Sustainable Energy Reviews 116 (2019) 109429

Table 7 Table 7 (continued )

Below shows the Business models of DEWA and ADWEA. BM Elements Dubai DEWA Utility BM Abu Dhabi ADWEA Utility
BM Elements Dubai DEWA Utility BM Abu Dhabi ADWEA Utility BM
BM
billing. Generation billing. Generation
Customer Segments Residential, commercial Residential, commercial, technology and/or technology and/or
(Different groups of and remaining economic Industrial, and wholesale purchase of wholesale purchase of
people/organizations sectors agricultural sectors. energy. Fuel. Premises & energy. Fuel. Premises &
that the organization land acquisition for land acquisition for
aims to access & serve) generation. Cost of RE generation. Cost of RE
Value Propositions (A Fulfil energy and water Fulfil energy and water power generation as power generation as
range of products and needs. Supply of reliable needs. Supply of reliable stipulated in PPA. stipulated in PPA.
services that create electricity and water to electricity and water to
value for a customer customers including from customers including from
segments) Renewable energy Renewable energy 7. Designing UAE energy market
technologies and technologies and
desalination. desalination.
As mentioned before, utility firms in each emirate are considered to
Channels (How the On-line, TVs, payment On-line, TVs, payment
company channels, etc. Support via channels, etc. Support via be a monopoly. In a study on electricity demand in the GCC countries, it
communicates with & customer service and call customer service and call was found that the price elasticities, which measure the relationship
reaches the customer centers, metering & centers, metering & between change of in demand and change in price, for both renewables
segments) billing etc. billing etc. and non-renewables are considered to be low ranging between 0.16
Customer Formal & standardized. Formal & standardized.
Relationships Short-term supply Short-term supply
and 0. Therefore, increasing the electricity prices will not impact the
(Relations between contracts. contracts. demand. The best policies to decrease energy consumptions are through
the company & behavior changes and improve energy efficiency of buildings and home
customer segments) appliances [39]. This section includes more details of such policies.
Revenue Streams (The Sale of metered units of Sale of metered units of
The main driver for shaping RE policies and institutional framework
money generated by delivered electricity and delivered electricity and
the company from water. Trading of surplus water. Trading of surplus in UAE is the government. The main challenges that the government is
each segment of electricity to other electricity to other facing are economic and population growths, and environmental
customer segments) emirates in UAE. emirates in UAE. pollution. These challenges will result in increase in the energy and
Government subsidies. Government subsidies. water demands. Water and energy are interlinked because desalination
Profits for public-private Profits for public-private
projects. Low-carbon projects. Low-carbon
is the main source of water in the country [41]. All these factors made
financial incentives (e.g. financial incentives (e.g. the government realize that new innovative solutions are needed to
Renewables Obligation Renewables Obligation make the economy less dependent on fossil fuel. Therefore, RETs are
Certificates) Certificates) considered an important part of the energy mix based on the energy
Key Resources (The Financial, technical and Financial, technical and
strategies discussed previously.
most important assets legal resources to develop legal resources to develop
required to make the large-scale, centralized large-scale, decentralized
business model work) decentralized (RE) generation, and 7.1. Barriers/challenges facing RE market design and lessons learned
generation, transmission centralized transmission
and distribution and distribution
infrastructure for infrastructure for Since the announcement of Abu Dhabi Government in 2009 of its 7%
electricity and water. electricity and water. RE target for 2020, only few projects were implemented and there are
Customer services Customer services risks that many of the targets may not be met. Economics and financial
activities. Fossil fuels. activities. Fossil fuels.
challenges were evident since the economic crisis of 2008 and later the
Centralized generation Decentralized generation
(decentralized RE), and centralized drop of oil prices that restrained the fiscal budgets. High upfront costs
transmission & transmission & and long payback period for RE projects may discourage investors and
distribution technologies distribution technologies. additional cleaning costs for PV modules and CSP mirrors due to dust
Key Activities (One of Owing the electricity and Partnering with IWPP for and humidity. Finally, fossil fuel subsidies remain a barrier to RE
the most important water generation the electricity and water
things the company (conventional fuel), generation (conventional
adoption [33].
does to make its supply, distribution, and and RE), Owning Market challenges include lack of wholesale competitive market in
business model transmission. Partnering distribution, and UAE and all the energy and water infrastructure is publicly owned.
workable) with IPPs to generate transmission channels. Existing commercial and bankruptcy laws can hinder new investors in
energy from renewable
the energy sector.
and integration with the
grid. Political, institutional, governance, regulatory and administrative
Key Partners (A Financial Institutions & Financial Institutions & challenges are many. UAE nationals pay lower tariffs than expats and
network of suppliers Investors. Fuel supply Investors. Fuel supply own bigger homes. and this may cause abuse in energy and water use.
and partners that networks. Dubai Supreme networks. Abu Dhabi There are no CO2 emission reduction targets set. No income taxes exist
make the business Energy Council. Dubai Supreme Energy Council.
model work) Regulatory and Abu Dhabi Regulatory
in UAE and this will limit the incentives and mechanisms that can be
Supervisory Bureau. IPP and Supervisory Bureau. used for RE adoption especially for off grid uses. The Federal govern­
companies. IWPP companies. ment is only reacting to RE initiatives made by Abu Dhabi and Dubai.
Cost Structure (All costs Staff and contractors to Staff and contractors to The Federal government intervention is limited by the decentralized
to run a business implement projects. implement projects.
decision making process in the country. Decision making is made at the
model) Marketing and Marketing and
communication. communication. government level without the coordination and the collaboration of the
Operation & maintenance Operation & maintenance private sector, research and development institutions, and NGOs. There
of infrastructure. Finance of infrastructure. Finance are no economic, social, and environmental studies that highlight the
or investment or investment direct and indirect negative impacts of fossil fuel in the power sector.
repayments. Technical, repayments. Technical,
financial and legal financial and legal
This will put additional burden on the national budget.
consultancy. Metering & consultancy. Metering & Cultural, behavioral and educational challenges include: lack of
awareness of the benefits of RE and overestimation of the associated
risks especially for off grid applications, lack of awareness and programs

6
S. Al Naqbi et al.
at all levels of the educational system throughout the UAE on the climate
change challenges facing the country, and finally subsidies in electricity
and water do encourage consumers to waste precious resources.
Technical and technological challenges are many. Baseload power
concerns in intermittencies of solar power and high cost of storage
especially for thermal solar. During cloudy and rainy days, and during
the nights, fossil fuel power generation capacity will be needed to
maintain stable power supply. Operating and maintaining the additional
capacity will put addition technical and financial burdens on utilities.
7.2. Ways forward in designing an energy market
It is evident that UAE has rebuilt its momentum in renewable energy
especially in the power sector. The 2020 RE 7% target in Abu Dhabi may
not be attainable but the changes that were made such as adopting new
business model by the utilities, which include IPP-PPA model for new RE
projects which will reduce the financial burden on the government. In
addition, the LCOE for solar PV is as low as 2.99 US Cents/KWh which
makes it a viable technology to be used in UAE [33]. This is evident in
the case of Dubai were many large utility scale solar PV plants were built
in few years’ time. The nuclear power target of 19% by 2020 will be
delayed by 4 years and the first unit of 4 nuclear power plant (1.4 GW)
will be commissioned by 2020. Unit 1 is 100 complete, Unit 4 is more
than 82% complete, Unit 3 is more than 91% and Unit 2 is more than
95% completed. The delay was attributed to its operational readiness
review [40]. The government of UAE is still able to meet the electricity
demand by using gas generated power plants.
The current power infrastructure in UAE is well build and up to date
but it is based on fossil fuel technologies. More attention should be given
to building smart grid systems to be able to integrate RE power sources
and manage power dispatch. The new systems should be well operated
and maintained and equipped with high technical skills that are needed.
At the institutional levels, the governance structure of UAE gives
each emirate its own autonomy in running their economic activities.
Future energy related strategic decisions in each emirate should be made
in collaboration and coordination between all governmental in­
stitutions, the private sector (RE sector, financial institutions, etc.),
research and development institutions, and NGOs. Dubai net metering
model which allows consumers to feed-in power to the grid is a good
mechanism benchmark for other emirates to follow. Need to gradually
eliminating electricity and water subsidies, and unifying the tariffs for
both expats and nationals. Moving from EPC to IPP-PPA model was an
important decision to get the private sector more involved in the power
sector including the financial institutions. More assurances are needed
from utilities to guarantee buying the power offtake over the economic
life of the installed RE power systems. RE and clean energy targets
should be complemented with CO2 emission reduction targets. The true
cost of solar PV to utilities, even with low LCOE, should be reflected in
consumers’ bill. This should be complemented with awareness
campaign. Allowing active wholesale market in UAE and between
different GCC countries will encourage RE adoption. Commercial and
bankruptcy laws should be revised to encourage foreign investors. More
research and development funding are needed into the energy sector.
UAE has wind power potentials and this should be explored more. UAE
energy strategy should include incentives to create local RE industry.
Sharing the performance data of existing solar power plants with gov­
ernment and R&D institutions, and RE industry can improve the RE
policy decisions and in finding technical solutions to some of the chal­
lenges of RETs especially in UAE.
8. Conclusions
Successful implementation of RE projects requires successful market
design which depends on having an up-to-date infrastructure, the right
institutions and skilled human capacity. The paper explored the gaps
and proposed strategies to successfully implement clean energy
7
Renewable and Sustainable Energy Reviews 116 (2019) 109429
strategies in UAE. In addition, it showed the business model transitions
in two major utilities in the country mainly ADWEA and Dubai.
Designing the right RE market will require the cooperation and collab­
oration between all the stakeholders in the energy and water sectors.
This should include government institutions, private sector, research
institutions, non-governmental organizations, and consumers.
Acknowledgement
The author would like to acknowledge the support of Khalifa
University.
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