By Waleed Mansour
Gulf nations are expected to replace aging liquid-fuel power plants with new thermal power stations, particularly in Saudi Arabia. These new plants will enhance energy security by meeting peak demand and supporting intermittent renewable energy sources, aligning with strategies for energy diversification and carbon reduction.
According to MEED, all Gulf countries have ongoing projects and plans to acquire new thermal power stations. However, temporary measures and rising costs are putting both customers and developers at a crossroads.
Carbon Capture Challenges
A major hurdle is the absence of clear policies for carbon capture, utilization, and storage (CCUS). This uncertainty has deterred many international utility developers from participating in new projects and tenders, as they aim for net-zero carbon emissions by 2045 or 2050.
Most independent power projects (IPPs) in the Gulf are backed by power purchase agreements (PPAs) lasting 20 to 25 years. Given that building such facilities typically takes three years, these agreements—activated upon commercial operation—will remain in effect until approximately 2048-2053.
Despite extensive discussions, none of the recently issued contracts in the region have provided a clear and mutually accepted pathway for capturing, storing, or reusing carbon emissions.
Pathways to Net-Zero
MEED reported that current decarbonization strategies for these power plants include using more efficient gas turbines, turbines capable of running on a natural gas-hydrogen mix, or integrating carbon capture at a later stage when regulatory frameworks become clearer. Another approach is shortening the concession period to avoid long-term emissions commitments beyond 2050.
The high costs and complexity of thermal power projects, coupled with CCUS requirements, contrast with the region’s push for a more cost-effective energy transition.
For instance, the UK’s Teesside Net Zero Power (NZT Power) project, a 742-megawatt net-zero emissions plant with carbon storage and transport infrastructure, requires a $4 billion investment—four times the cost of conventional thermal plants in the Gulf.
Despite these costs, NZT Power has reached financial closure, with construction set to begin mid-year and operations expected by 2028. The project aims to capture up to 2 million tons of COâ‚‚ annually, which will be safely stored beneath the North Sea.
