International Journal of Management (IJM)

Volume 11, Issue 11, November 2020, pp. 1679-1692. Article ID: IJM_11_11_160
Available online at http://www.iaeme.com/ijm/issues.asp?JType=IJM&VType=11&IType=11
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ISSN Print: 0976-6502 and ISSN Online: 0976-6510
DOI: 10.34218/IJM.11.11.2020.160

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ESTIMATION OF THE DEMAND FUNCTION

FOR ELECTRICITY THE CASE OF UAE
Akram Masoud Haddad
Professor of Economics, Economic Program Leader,
Amity University, Dubai

ABSTRACT
The electricity sector is of strategic and vital importance sector represents the
backbone of economic, social and cultural growth, prosper and development of any
country. Consequently, electricity production and consumption become one of the
criteria for measuring the progress and development of nations and economic growth.
estimating the demand function for electricity in UAE is an important task because
demand of electricity is the main pillar of planning production and consumption of
electric energy to build successful policy in general and in UAE particular and it is
the core of this study were data during 1971-2018 are analyzed
Results shows that that prices of the electricity, population, population growth
rate, GDP, share of the sector in GDP of the household sector and the share of other
sector (sectors excluded the residential and commercial and industrial sectors) are
significantly affect the electricity demand in UAE while other factors have
insignificant affects. This is due to climate of the UAE and the coming labor to the
country.
Key words: factors affecting electricity, demand of electricity, electricity sector in
UAE.
Cite this Article: Akram Masoud Haddad, Estimation of the Demand Function for
Electricity the Case of UAE, International Journal of Management, 11(11), 2020,
pp 1679-1692.
http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=11&IType=11

1. INTRODUCTION
The United Arab Emirates (UAE) is Federation consists of seven emirates with an area of
(86716 square kilometer), and total population of (9.6) millions at 2019. All authorities except
foreign affairs, defense, security and social services and adopt a common immigration policy,
are handled separately by each emirate and each contributes to building and protecting the
constitution as well as benefiting from its services. UAE is the eighth largest oil producer; the
oil wealth is directed to develop of the country. In addition to that, the location of the UAE in
the Middle East region of Asia, at the tip of the Arabian Peninsula, political and economic

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 Estimation of the Demand Function for Electricity the Case of UAE

stability, free and open economy well developed economies ensure robust competitive edge as
the region's premier commercial hub and second largest economy in the region. UAE
economic policies such as adoption of economic diversification program, free trade zones
which increase the contribution of non-oil sectors to GDP significantly. As a result, it became
one of most open and successful economies in the world and an important player in regional
and international affairs, and the third richest country in the world in terms of per capita
income. (Haddad, 2018)
The electricity sector is of strategic and vital importance sector represents the backbone of
economic, social and cultural growth, prosper and development of any country. Consequently,
electricity production and consumption become one of the criteria for measuring the progress
and development of nations and economic growth. Therefore, countries pay more attention,
and interest to this sector and invest more and more both in production and R&D in this
sector. (Bohna, 2015)
Electricity as commodity is characterized by the inability to be resold after purchased,
difficult to store and daily and seasonal fluctuated demand. The electricity market consists of
three interconnected and interdependent chains; those are generation, transmission, and
distribution to the end consumer chains. (Bouhna, 2015)
The supply side of electricity is characterized by huge capital intensity, huge fixed capital
investment, public owned firms, natural monopoly, the necessity to satisfy consumer needs
and raising the standard of living of the population, trade-off between utility and
environmental impact, price policy and welling of reduction of total costs by producers as
well as the international prices of the fuel.
Economic modeling of energy is very important tools for forecasting potential
developments or assessments of policy and market design options of the electricity that help
the policy maker.
Electricity is a very important in the gulf region in general and in UAE in particular due to
the prevailing hot climate, increase of population, the degree of civilization and as crucial
input for the growing and expending the industrial and commercial sectors. Therefore,
estimating the demand function for electricity in UAE is an important task because demand of
electricity is the main pillar of planning production and consumption of electric energy to
build successful policy in general and in UAE particular and it is the core of this study.
To achieve this objective the study tries to elaborate the following:

 What is the situation and main features of the electricity sector in UAE?
 What are the main factors that affecting the demand sector of the UAE?
 What is the demand function for electricity in UAE for the main sectors?
This paper is organized as follows: the 1st section introduction, the 2nd section is revision
of literature and theoretical background. The 3rd section presents the methodology, data
collections, and the models of the study, while the 4th section present the situation of the
electricity sector in UAE and the 5th sector present the results of the data analysis. Finally, the
paper ends up with concluding remark and recommendations.

2. REVIEW OF LITERATURE
Electricity is most important energy sources and the key to humanity that contribute
substantially to other sectors and it drives the development process to progress. Electric one
essential goods for various activities, cannot be dispensed with because of their great
importance in the life of the various communities. (Omeran and Al-thalibi, 2015)

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 Akram Masoud Haddad

Electricity sector attracts the attention of scientist, economist, engineers as well as the
policy makers in general and the demand side of electricity is one of the main interest issues
for researchers to develop and provide plans for policy makers.
Several studies are done in most countries to estimate the demand functions of the
electricity, among those:
Amran and Abdulsalam, (2012) use some statistical methods to predict the demand for
electric power consumption in Saudi Arabia to reach the best model of electric power. The
study found that GDP, population and electricity consumption in the previous period are
positively affect the consumption of electric power in Saudi Arabia, and the consumption of
electric power grows by (32%) annually. In addition, the increase in economic development
and per capita income result in increase in demand for electric power.
Schulte, and Heindl (2016) study the price and income elasticities of residential electricity
and heating demand in Germany by applying a quadratic expenditure system, during the
period 1993-2008, the results show that the estimated expenditure for electricity is (0.3988)
and (0.4055) and the own price elasticity for electricity is (-0.4310) and (-0.5008) in the case
of space heating. In addition, expenditure and demographic composition disaggregation of
households reveals that the behavioral response to energy price changes is weaker (stronger)
for low-income (top-income) households. The study found that there are considerable
economies of scale in residential energy use, but scale effects are not well approximated by
the new Organization for Economic Co-operation and Development (OEDC) equivalence
scale. The real increases in energy prices show a regressive pattern of incidence, implying that
the welfare consequences of direct energy taxation are larger for low income households. The
application of zero-elasticities in assessments of welfare consequences of energy taxation
strongly underestimates potential welfare effects. The increase in inequality is 22% smaller
when compared to the application of rich and disaggregated behavioral response patterns.
Tawel, (2013) estimate the households demand function on electricity consumption in
Gaza Strip during 2000-2011, using the least squares method. The results showed that
variables greatly influenced and interpreted form by (2 = 99.3) due to privacy of Gaza, a lack
of commitment pay bills electricity service and expressed index total arrears annual
subscribers, and the average per capita income and rely on subscriptions collective and
expressed an average share of single contribution of electricity to the households where the
flexibility large as influenced positively in electricity consumption, which increased the
demand for electricity dramatically.
In Ukraine residential electricity tariffs are lower than production costs which lead to
higher industrial tariffs and need of government subsidies, that is why reduction of residential
electricity consumption became a great concern of the government. Thus, one of the main
policies aimed at reducing electricity consumption is increase the price of electricity. For that
Kozlova (2012) estimated the impact of electricity price on electricity consumption of urban
and rural population. In addition, as the problem of non-payments is still urgent in the
Commonwealth of Independent States (CSI), so that the impacts of debt accumulation is
considered. Results show that the urban population is much less responsive to the price
changes than rural population and the possibility of debt accumulation affects positively
electricity consumption and reduces the effect of price increase.
Khraief, Shahbaz, Mallick, and Loganathan (2016) estimated demand function of
electricity for Algeria, using economic growth, urbanization and trade openness in function
during 1971-2012.The results expose that income growth leads to higher electricity demand
along with urbanization which is another major contributing factor of rising electricity
demand and urbanization causes electricity use and electricity use causes urbanization. In

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 Estimation of the Demand Function for Electricity the Case of UAE

contrast, trade openness leads to reduce electricity demand. The empirical evidence indicates
the presence of the neutral effect between income growth and electricity use.
Shirani-Fakhr, Khoshakhlagh, and Alimorad (2015) estimating demand function for
electricity in industrial sector in Iran applying Structural Time Series Model (STSM) to
quarterly data during 2000-2011. Moreover, identifying the size and significance of the price
and output elasticities. The results indicate that the long-run and short-run industrial output
elasticities amounted to (0.85) and (0.36) respectively and the long-run and short-run
industrial energy price elasticities estimated at (-0.47) and (-0.27) respectively.
Kim, Kim and Yoo (2019) give evidence from South Korean manufacturing sector for
electricity demand function using cross-sectional data for analyzing the influence of
manufacturing firms’ characteristics. As sample of (946) observations collected from a
nationwide survey of manufacturing firms in 2018. As a robust approach, the least absolute
deviations estimation method is applied to obtaining the demand function. The results
illustrate that estimated price and the sales amount elasticities of the industrial electricity
demand are (0.9206) and (0.2568), respectively. Additionally, the economic benefits of
industrial electricity consumption are (1.46) times greater than as the price of electricity. This
can a tool for policy planning, making, and evaluation.
In Jordan, Al-Majali and Alrfua (2018) estimate demand for electricity consumption of the
household sector in Jordan Using VECM Model for the Period (1980 – 2015) This study
aims to estimate household demand function for electricity consumption in Jordan, using
quarterly data during the period (1980 -2015), the model of the study includes (Gross
Domestic Product (GDP), Per Capita, per capita electricity consume in the household sector,
the price of kilowatt/ hour weighted with consumer prices index (CPI), and the average degree
of temperature). The results indicate that there is a negative effect of prices of electric on
electricity consumed in the household sector, as well as there is a positive effect of per capita
income and temperatures on the electricity consumed. Those results afford some relevant
recommendations to policy makers such as keep on price discrimination policy as an incentive
to save energy.
In the same context, Al-Rawashdeh (2014) Estimate the Demand Function and identifying
the factors that affect electricity for family sector in Jordan during (1980-2012), the results
indicating that the family sector has the largest portion in electricity consumption and there
are large number of subscribers and shown that electricity demand is positively affected by
per capital income, while price and capital portion of electricity have negative effects.
Omer (2015) applying three-stage least squares (3SLS), Co-integration Method and Error
Correction model to estimate and determine the most important factors affecting the demand
and supply of electricity in Sudan during 1980-2014. Price, gross domestic product (GDP),
population and temperature and the volume of the Nile water, the amount and price of fuel
used for hydro generation, and the relative humidity are used in the model of the study. The
study concluded that there is a stable and balanced relationship in the long run, but from the
functions and determinants of demand and supply, GDP has great effect on the function of
demand of electricity in the short and long term and that it is possible to modify equilibrium error
in the short run with correction coefficient of -25.48 out of the its equilibrium value in the long
run. Electricity price has its effect on the function of supply in the short and long run with
correction coefficient of -.89 out of the equilibrium value in the long run.
In the same context, adopted the descriptive analytical approach, as well as the
econometrics method for model building. Omer and Alrasheed (2015) indicated that all the
coefficients of determination comply with the economic theory except the price, this may to
subsidized electricity prices by the government. In addition, the price elasticity of demand for
electricity amounts to (0.106) and (0.114) in the short and long run respectively, i.e., the

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 Akram Masoud Haddad

elasticity in the long run is higher than the elasticity in the short run, which is compatible with
Fisher model.
In the mean time Nakd, (2014) estimate long-term and short-term demand functions for
electricity of (residential, Industrial and Agricultural) sectors in Sudan during the period
(1984 2014) found that the function of demand for electricity in the residential sector function
depends on (the price of electricity for the residential sector, alternative electricity prices and
disposable income). The demand for electricity for the rindusterial sector depends on: price of
electricity to the industrial sector, alternative electricity prices, policy of economic
liberalization and contribution of industrial sector in GDP and function of demand for
electricity in agricultural sector depends on (price of electricity for the agricultural sector,
alternative electricity prices, policy of economic liberalization and contribution of industrial
sector in GDP).

3. METHODOLOGY
The demand for electricity depends on many variables differ according to sector under study.
Studies and pervious researches show that household sector depends on many variables, those
are price of electricity, disposable income, population, population growth rate, household size,
urban population percentage, and prices of electricity substitutes, climate factors (average
annual temperature, humidity, heating days, hot days) and the rate of economic growth. In
addition to contribution of sector to GDP, electricity prices for the sector, alternative
electricity prices, and the policy of economic liberalization are factors affecting the demand of
electricity in commercial, industrial agricultural sectors.
Availability of data on each of the mentioned variables is the main limitation to be
included into the demand function for any countries.
In this study the following econometric model is used.
DE = α +β1iINC +β2POP + β3POPGR +β4SGDPi+ β5GDP + β6PSi +β7GDPG+£i
Where:
DE Demand of electricity
INC income per captia
POP Absolute population
POPGR Population growth rate,
GDP Gross Domestic Product
GDPG economic growth rate
SGDP contribution of sector to GDP
PS electricity prices for the sector
The data are collected from different resources such as UNCTAD data base, The Federal
Competitiveness and Statistics Authority (FCSA), Arab Union of Electricity (AUE), The
world Bank database, the electricity companies in UAE websites and other sources during the
period 1970-2018.

4. OVERVIEW ELECTRICITY SECTOR IN UAE

Generation, transmission and distribution of electricity in the UAE are dominated by four
water and power authorities by government, three of them owned by the governments of Abu
Dhabi, Dubai, and Sharjah, and the federal government owns and operates one in the smaller
northern emirates.

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 Estimation of the Demand Function for Electricity the Case of UAE

4.1. Electricity Production Authorities in UAE

Ministry of Energy and Industry is responsible for regulate electricity sector at the federal
level and in conjunction with Federal Electricity and Water Authority (FEWA) implement the
federal government's electricity policy in the northern emirates. However, Dubai and Abu
Dhabi have endorsed laws and specialized regulatory institutions, (the Dubai Supreme
Council of Energy (DSCE), the Dubai Regulation and Supervision Bureau (RSB Dubai and
the Regulation and Supervision Bureau of Abu Dhabi (RSB Abu Dhabi).
There are four major state-owned authorities serve as the exclusive purchasers and
distributors of electricity in the respective emirates, those are:
 Abu Dhabi Department of Energy (DoE) established in accordance with Law No. 11
of 2018 to implement various programs, initiatives, and projects to achieve sustainable
society in the Emirate of Abu Dhabi. It is the largest producer of water and power for
Abu Dhabi succeeding the Abu Dhabi Water and Electricity Authority (ADWEA). It
produces about (61.7%) of the total electricity in UAE according to 2018 statistics. It
is worth to mentioned that the DoE acquires the natural gas which the primary fuel
used in the power generation in the UAE
 Emirates Water and Electricity Company (EWEC) established in the end of 2018, as
succeeding the Abu Dhabi Water and Electricity Company (ADWEC). It is the sole
procurer of power and water within Abu Dhabi, with the mandate to ensure the supply
of power and water to consumers in the emirate of Abu Dhabi and beyond. It is the
second largest water and power generation, transmission and distribution authority
covering the Emirate of Dubai and managing (11) electricity plants over UAE with
total installed Capacity of Electricity Generation Plants of (33.6%) of the UAE total
installed capacity and produce (33.3%) of the electricity in UAE in 2018.
 Sharjah Electricity and Water Authority (SEWA) which generate, transmit and
distribute electricity in the Emirate of Sharjah it own (7) electricity plants with
installed Capacity of Electricity Generation Plants of (9.4%) of the total and produce
about 4.4% of total the electricity in UAE in 2016.
 Federal Electricity and Water Authority (FEWA) which generate transmit and
distribute electricity in northern emirates of Ajman, Umm Al Quwain, Fujairah and
Ras Al Khaimah with Installed Capacity of Electricity Generation Plants (2.3%) of the
total UAE produce about (0.2%) of total the electricity in UAE in 2016.
However, the northern emirates of the UAE shows insufficient power generation capacity,
and construction of additional capacity and the supply of power from the larger emirates
through the Emirates National Grid (ENG) which is aimed to interconnect the four authorities
that are responsible for supplying power throughout the UAE, will address this issue. The
Ministry of Energy and Industry launched the ENG project in 2001 to enhance integration
between the various electricity and water authorities in the country, each of which contributed
proportionately to the capital investment required to build the ENG. It also enables the
commercial transfer of electricity between the power authorities.
The electricity is distributed in UAE through many companies such as Abu Dhabi
Distribution Company (ADDC), which operates in the city of Abu Dhabi and the western
region of the emirate; and Al-Ain Distribution Company (AADC), which operates in Al-Ain
city and the surrounding areas.

4.2. Installation Capacity of Electricity in UAE

As it is mentioned the electricity production in UAE is autonomous by each emirate of the
federation of UAE, Table (1) illustrates the installed capacity of electricity generation plants

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 Akram Masoud Haddad

(MW) in UAE by four companies during the period 2007-2018 and the percentage of the total
for each company.
The total installed capacity of electricity generation plants in UAE is increased annual
growth rate estimated at (5%), that is increased by (71.6%) during the period 2007-2018. This
increase is coming from the increase the installation of plants of the two big companies the
Abu Dhabi Water & Electricity Authority (ADWEA) (now Abu Dhabi DoE) and Dubai
Electricity & Water Authority (DEWA) (now EWEC) which both owned about (88.1%) of
the total installations capacity in UAE in 2017. Each of them owns about (54.7%) and
(33.6%) of the total installed capacity of electricity generation in UAE respectively, while the
other two companies the Sharjah Electricity & Water Authority (SEWA) and Federal
Electricity & Water Authority (FEWA) owned (9.9%) and (2.4%) of the total installation
capacity in UAE.

Table 1 Installed Capacity of Electricity Generation Plants (MW)

(ADWEA)* (DEWA)*
(SEWA) (FEWA) Total
Year DoE EWEC
MW % MW % MW % MW % MW %
2007 8698 49.1 5448 30.8 2302 13.0 1252 7.1 17700 100
2008 9637 48.6 6676 33.7 2382 12.0 1119 5.6 19814 111.9
2009 10111 49.2 6997 34.0 2382 11.6 1075 5.2 20565 116.2
2010 12223 52.7 7361 31.7 2575.66 11.1 1039 4.5 23199 131.1
2011 13850 53.1 8721 33.4 2575.66 9.9 939 3.6 26086 147.4
2012 13842 50.9 9646 35.5 2768.16 10.2 924 3.4 27180 153.6
2013 13899 50.8 9656 35.3 2894.56 10.6 924 3.4 27374 154.7
2014 15546 53.9 9656 33.5 2893.56 10.0 733 2.5 28829 162.9
2015 15546 54.1 9656 33.6 2840 9.9 703 2.4 28745 162.4
2016 15220 52.9 10000 34.8 2838.16 9.9 703 2.4 28761 162.5
2017 16622 54.7 10200 33.6 2846 9.4 703 2.3 30371 171.6
Change 7924 5.6 4752 1.8 544 -3.6 -549 -4.8 12671 71.6
Growth 6.1 1.0 5.9 0.8 1.9 -2.9 -5.1 -9.7 5.0 5
Source: Ministry of Energy and Industry. (*) means the old name of the company.

The table (1) shows that the installation capacity of the two big companies increased by
about (6.1%) and (5.9%) while Sharjah Electricity & Water Authority (SEWA) increased the
installation capacity by (1.9%) and Federal Electricity & Water Authority (FEWA) decreased
the capacity by (5.1%) annually during the period 2007-2018 and so that the share of the
company decreased from 7.1% to 2.3% of installed capacity of electricity generation plants in
UAE.

4.3. Production of the Electricity in UAE

Electricity production capacity depends on installation capacity and the efficiency of the
generating plants as well as the working hours of the plants. However, the total production of
electricity in UAE increased during the period 2007-2018 by (70%) that is from (7876) to
(134553) GWh. (see table).
According to the table (2) the electricity production Dubai by Abu Dhabi Department of
Energy and Dubai Electricity & Water Authority (DEWA) (now DoE) which is the biggest
electricity producer in UAE, show increase in electricity production, while the electricity
production of the other two companies show decease during the period 2007-2017. The
production of the Abu Dhabi Department of Energy which cover about (61.7%) of the total
electricity production of the UAE, and its production increased twice since 2007.

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 Estimation of the Demand Function for Electricity the Case of UAE

Table 2 The Share of Gross Generated Electricity by Authority, 2007-2017

(ADWEA)* (DEWA)*
(SEWA) (FEWA) Total Increase
Year DoE EWEC
GWh % GWh % GWh % GWh % GWh %
2007 38592 49.0 26030 33.0 8968 11.4 5171 6.6 78761 100
2008 38546 47.9 29089 36.2 8093 10.1 4735 5.9 80463 102.2
2009 43644 50.9 31013 36.2 7311 8.5 3730 4.4 85698 108.8
2010 49942 53.2 33742 35.9 6864 7.3 3401 3.6 93949 119.3
2011 56576 57.1 34606 34.9 5415 5.5 2540 2.6 99137 125.9
2012 62165 58.5 36297 34.2 5362 5.0 2398 2.3 106222 134.9
2013 65492 59.5 37478 34.1 5428 4.9 1581 1.4 109979 139.6
2014 70847 60.8 39599 34.0 5683 4.9 399 0.3 116528 148.0
2015 79768 62.6 42006 33.0 5433 4.3 158 0.1 127366 161.7
2016 80527 62.1 43092 33.3 5685 4.4 292.5 0.2 129596 164.5
2017 83006 61.7 45162 33.6 5899 4.4 485. 8 0.4 134553 170.8
Source: Ministry of Energy and Industry. (*) means the old name of the company

The production of Dubai Electricity and Water Authority (DEWA) is increase by about
73.8% during the period 2007-2017.
The electricity produced by both Sharjah Electricity & Water Authority (SEWA) and
Federal Electricity & Water Authority (FEWA) dramatically decreased during the period
2007-2017, to reach about 4.4% and less than 0.4% of the total electricity production in UAE
in 2017 respectively. However, both the two companies cover only 5% of the total electricity
produced in UAE.

4.4. Types of Power Stations in UAE

There are many types of generation of electricity in the world, in UAE there are five main
types of generation stations as shown in table (3), those are the stem, gas, composed cycle,
diesel and solar. The table shows that before 2010 the main stations are the gas stations which
share about 63.2% of the total generated electricity and increased to be about (68.9%) the
reset is generated by stem power stations. However, after 2010 there are a big change in the
types of stations, and UAE depends mainly on composed cycle stations types. With about
more than 73.1% of the total electricity generated by this type beside the gas stations which
contribute about 6.6% and stem stations which contribute about 20% in the recent years. Solar
electricity stations appear after 2013 but with less than (0.2%) of the total. The variation in the
share is reflected by the increased amount of the total electricity generated which increased
from 58.5 thousand GWh in 2004 to reach about (129.9 GWh) that is more than 221% of
2004.

Table 3 Generated Energy by types of Power Stations

Companied Total
Stem Gas Diesel Solar
Year Cycle
(GWh) % (GWh) % (GWh) % (GWh) % (GWh) % (GWh) %
2004 21,500 36.8 36950 63.2 - 0.0 31 0.1 - - 58,481 100.0
2005 21500 35.4 39167 64.5 - 0.0 31 0.1 - - 60698 103.8
2006 21600 34.4 41167 65.6 - 0.0 31 0.0 - - 62798 107.4
2007 23750 31.0 52770 69.0 - 0.0 12 0.0 - - 76532 130.9
2008 26750 31.0 59450 68.9 - 0.0 60 0.1 - - 86260 147.5
2009 26750 31.0 59450 68.9 - 0.0 60 0.1 - - 86260 147.5
2010 0.0 0.0 - 0.0 0.0 - - 88,184 150.8

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 Akram Masoud Haddad

2011 5370 5.4 7729 7.8 86035 86.8 4 0.0 - - 99137 169.5
2012 5370 5.4 7729 7.8 86035 86.8 4 0.0 - - 99137 169.5
2013 5370 5.1 7729 7.3 86035 81.0 4 0.0 7084 6.7 106222 181.6
2014 6870 6.2 9365 8.5 88566 80.5 11 0.0 5167 4.7 109979 188.1
2015 7749 6.6 23266 20.0 85133 73.1 137 0.1 243 0.2 116528 199.3
2016 8468 6.6 25425 20.0 93022 73.0 163 0.1 288 0.2 127366 217.8
2017 8616 6.6 25870 20.0 94651 73.0 167 0.1 293 0.2 129597 221.6
2018 8646 6.4 26859 20.0 98271 73.0 173 0.1 304 0.2 134553 230.1
Growth -5.9 -11 -2.1 -7.4 1.7 -2.1 12.1 80.1 -40.8 5.7
Source: Calculated from Arab Union of Electricity, Statistical Bulletins.

4.5. Sources of Fuel Used to Generate Electricity

The UAE is owns the tenth and world-class gas reserves which provides the country with a
comparative advantage in both energy costs and funding sources of the government budget,
thus it favor the development of gas-fired power plants so that (99.9%) the electricity
generation by thermal-fired is depending in natural gas and the rest depends on light and
heavy fuel which is decreased the recent four years to reach less than (0.1%)in 2017.

Table 4 Fuel Consumption in Electrical Sector (000 T.O.E)

Year Gas Light Fuel Heavy Fuel Total
2004 79.0 16.4 4.6 25140
2005 80.1 15.5 4.4 26530
2006 80.3 15.6 4.1 28305
2007 80.3 15.6 4.1 28305
2009 80.3 15.6 4.1 29555
2013 97.6 1.4 1.0 28000
2015 99.6 0.2 0.2 30110
2016 99.9 0.0 0.1 35674
2017 99.9 0.0 0.1 36237
Source: Arab Union of Electricity, Statistical Bulletin. (2008, 2010-2012 and 2014 no data)

5. ELECTRICITY CONSUMPTION IN UAE

The population of the UAE is increased dramatically during the after the independency, that is
it increase from about (0.2) millions in 1970 to reach about (9.6) millions in 2018, which
means an increase of about 41 times as it is in 1970. The big increased was between 1970-
1980 with growth rate of (17.7%) in the eighties and nineties the growth rate is about 5.5%.
the period 2001-2010 show another increase of about (8.6%) annually while the population
growth rate in 2010-2018 shows very slightly increase with only (1.1%). This may result of
the opening and building the new country and non-citizen population that come to UAE for
working which account of about (88%) in 2018.
Table (5) shows that there is rapid increase in the per capita use of electricity during the
since dependent till now, that is from about (681.2) kWh per capita in 1970 to about
(11088.4) kWh per capita in 2014 which means it increased more than (17) times and
increased to be about (14449) kWh per capita in 2018 more than (21) fold that in 1970. This
due to improvement of the life and more dependency on electricity in the daily uses mainly
increase of the electric machine.
It worth to mention, that all the population in UAE have access to electricity since the
eighties of the last century. According to the Arab electricity Union reports the total
consumers are amounted to (2.033) millions consumers, distributed to (1.403) millions in

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 Estimation of the Demand Function for Electricity the Case of UAE

household sector, (0.427) in the commercial sector, (0.018) millions consumers in industrial
sector and (0.085) millions consumers on other sectors in 2018.

Table 5 Trends of Electricity Power Production in UAE

Indicator Name 1971 1980 1990 2000 2010 2018
Electric transmission
and distribution losses 9.1 9.9 9.6 11.4 13.0 16.0
(% of output)
Electric consumption
681.2 5752.8 8500.7 12314.1 10610.0 14449
(kWh per capita)
Access to electricity
NA NA 100.0 100.0 100.0 100.0
(% of population)
current prices per
5270 43324 28092 33726 33893 43005
capita US$
Population millions 0.8 1.0 1.8 3.1 8.6 9.6
% Urban population 79.8 80.7 79.1 80.2 84.1 86.5
population Annual
16.8 9.0 5.8 5.5 7.7 1.5
average growth rate
Source: World Bank and UNCTAD database at the website.

Table (6) shows the distributions of the electricity consumption by sector in UAE during
the period 2004-2018. According to the table the electricity consumption increased from
about (50) thousand GWH in 2004 to (129.5) thousand GWh in 2018 that is two and half
folds of that in 2004.

Table 6 Energy Consumption by Sectors (GWh

House Commercial Industry Other Total Index
Year
GWh % GWh % GWh % GWh % GWh %
2004 17461 34.3 18476 36.3 6449 12.7 8473 16.7 50859 100
2005 18858 35.0 19584 36.4 6451 12.0 8981 16.7 53874 105.9
2006 21397 36.4 21006 35.7 7451 12.7 8967 15.2 58821 115.7
2007 24678 33.0 21137 28.3 6712 9.0 22190 29.7 74717 146.9
2008 29920 34.7 25728 29.8 8386 9.7 22226 25.8 86260 169.6
2009 29920 34.7 25728 29.8 8386 9.7 22226 25.8 86260 169.6
2010 30908 36.6 28246 33.5 7591 9.0 17659 20.9 84404 166.0
2011 25068 31.4 27968 35.0 9228 11.6 17628 22.1 79892 157.1
2012 33502 35.1 33159 34.7 8140 8.5 20707 21.7 95508 187.8
2013 35207 34.7 32923 32.5 10237 10.1 23087 22.8 101454 199.5
2014 33292 31.6 34859 33.1 12564 11.9 24648 23.4 105363 207.2
2015 35121 31.4 37160 33.3 13355 12.0 26049 23.3 111685 219.6
2016 38008 30.0 55621 43.9 12973 10.2 19980 15.8 126582 248.9
2017 36,797 29.4 57,081 45.6 12,740 10.2 18,650 14.9 125268 246.3
2018 38965 30.1 56302 43.5 13661 10.5 20611 15.9 129539
Growth rate 5% 7.7% 5.1% 6.1% 6.4%
Source: Arab Union of Electricity, Statistical Bulletin

The main consumer is the commercial sector which consumed about (56.3) thousands
GWh which is represent 43.5% of the total consumed electricity in 2018. The consumption of
the commercial sector shows an increase over the period 2004-2018 both in quantities and
percentage and increased from (18476) GWh and 36.3% of the total consumed electricity in
UAE in 2004 to (56302) GWh represents (43.5%) of the total electricity consumption in UAE
in 2018.
The second sector is residential or household sector which consume about 38.97
thousands GWh which represent (30.1%) of the total electricity in UAE in 2018, although

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 Akram Masoud Haddad

there are increase in the quantities consumed the share of this sector decrease from 34.3% in
2004 to 30.1% in 3018, this as result of the increase on consumptions of the other sectors.
Industrial sector electricity consumes (13.7) thousands GWh which is about 10.5% of the
total electricity consumption in 2018, however the consumption share shows show
fluctuations during the period 2004-2018.
The other sectors consumed (20.6) thousands GWh) which represent about 15.6% of the
total electricity consumption in UAE.
The prices of electricity is discriminated according to the sectors (residential, commercial,
industrial and government) and within the sector according to the amount of consumption
moreover prices of electricity is discriminate prices of residential sector between the type of
building (apartment or villa), however (DOE) also discriminate prices according to national
and non-national citizen. In addition, the prices differ from one Producer Company to another
especially for industrial and commercial sectors.

5.1. Electricity trade of UAE

Table (7) shows that UAE import and export electricity in the sometime during the period
2001-2018, although the exported and imported quantities is very small compared to the
production, the balance of electricity trade is in favor of UAE.
Before 2011 there are no trade in electricity in UAE, trade in electricity usually between
the borders areas which is far from the production centers so that transport the electricity to
those area is very costly and implies high percentage of losses during transportation of
electricity so that countries try to import and export electricity in the sometime.
Table (7) shows that there are increasing amount of electricity during the period 2011-
2018 by more than ten folds and reach about (509) GWh imported and (632) GWh exported
with (123) GWh balance in favor of UAE.

Table 7 UAE Exchange Energy (GWh)

‫ ا‬Year Import Export Balance
2011 49 62 13
2012 49 62 13
2013 115 137 22
2014 67 23 -44
2015 147 170 23
2016 784 146 -638
2017 410 513 103
2018 509 632 123
Source: Arab Union of Electricity, Statistical Bulletin

6. DEMAND ESTIMATION
To estimate the demand the data available during the period 1971-2018 is used for the main
variable used in the model of the study.
Table (8) shows the results of the demand function and the analysis of the factors that
affecting the electricity demand in UAE. The table indicates that prices of the electricity,
population, population growth rate, GDP, share of the sector in GDP of the household sector
and the share of other sector (sectors excluded the residential and commercial and industrial
sectors) are significantly affect the electricity demand in UAE while other factors have
insignificant affects.

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 Estimation of the Demand Function for Electricity the Case of UAE

As it usual the prices of electricity for all the three sectors negatively affect electricity
demand in UAE. However the value of the impact is very small (see the table), this may be
due to many reason such as the climate of the UAE considering that the temperature range
between (32-50 c), which means the necessity of electricity for air conditioning during all
over the year, and people can’t tolerate the high temperature as UAE is the second Arab
country in per capita consumption of electricity in addition to that low prices of electricity as
it is mentioned above and the value of total consumption is very low related to the high
income of the people.

Table 8 Result of Regression of the Dependent Variables

Variable Coefficients t Stat P-value
Intercept 387586.6 1.19 0.2416
Residential (Expatriate) -0.00001 -2.73 0.0089
prices of residential -0.00003 -2.73 0.0089
price of commercial -0.00001 -2.73 0.0089
prices for industrial -0.00001 -2.73 0.0089
prices for other -0.00001 -2.73 0.0089
GDP US dollars at current prices in millions 0.145962 2.87 0.007
US dollars at current prices per capita 0.352045 1.72 0.0945
Absolute value in thousands 5.679699 2.65 0.0118
Population Annual average growth rate -4038.7 -3.98 0.0002
Household share in GDP -458.308 -2.87 0.0067
other sectors share in GDP 3046.148 3.40 0.0016
Industry sector share in GDP -4797.73 -1.49 0.1452
Commercial share in GDP -3732.7 -1.11 0.2749
Annual average temperature 1633.296 1.35 0.1848
Annual average growth rate per capita 199.895 0.19 0.8467
GDP Annual average growth rate 85.74785 0.09 0.9272
Source: calculated from the data 1970-2018.

The GDP positively affect the demand of the electricity and everyone million US$ of
GDP will cause about (0.145962) TWh increase in electricity demand. This also due to wide
use of the electricity about 70% in the production sectors such as commercial, industrial and
other sectors which generate the GDP in UAE considering that the UAE is great trade center
in the middle east and Gulf region. In the same context the share of both the Household share
in GDP and the share of other sectors in GDP significantly affect the demand of electricity In
UAE, but in different way so that the share of other sectors (government, agriculture,,, etc. )
in GDP positively affect the demand of electricity while the Household share in GDP
negatively affect the demand. In the contrary the share of commercial and industrial sectors
has insignificant affect.
The impact of the increase in the population number affect the demand of electricity in
UAE and everyone thousand population increase the demand by (5.679699) GWh, this as
those new people need to electricity for air conditioning and other house electronic
instruments. In the contrary the population Annual average growth rate negatively affect the
demand of electricity by (4038.7) GWh this may due to the fact that the population growth
rate decrease during the past decades after it reach about (14%) due to the foreign labor
coming to work in UAE and it decrease to reach about (1.5%) which is the normal growth
rate.

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 Akram Masoud Haddad

7. CONCLUSION AND RECOMMENDATIONS

Revision of the data available by the public institutions on the electricity power in UAE
shows that the there are four companies responsible to generate electricity in the UAE, Abu
Dhabi Water and Electricity Authority (ADWEA) (now DoE) which produce about (61.7%)
of the total electricity in UAE and the Abu Dhabi Water and Electricity Company (ADWEC)
produce about (33.3%) of the total electricity in UAE. the total production increased by (70%)
with annual growth rate about (5%) and reach (134553) GWh during the period 2007-2018,
commercial and residential sectors consume about (74%) of electricity produced in UAE.
that prices of the electricity, population, population growth rate, GDP, share of the sector
in GDP of the household sector and the share of other sector (sectors excluded the residential
and commercial and industrial sectors) are significantly affect the electricity demand in UAE
while other factors have insignificant affects. This is due to climate of the UAE and the
coming labor to the country.
It is recommended that the electricity companies increased their installation capacity to
meet the increased demand in electricity resulted from the increase in population either the
national or non-national population, and development in the economy main sectors. In the
main time take measures to reduce the losses during production and transportation of the
electricity since the losses is large. In addition to make use and expand the use cheap energy
sources such as the solar and wind in producing electricity.

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