THE signing of a Memorandum of Understanding between the Ministry of Electricity, Water, and Renewable Energy and a leading company to establish the first power generation station under the “independent supplier” model marks a major step in Kuwait’s energy sector, which represents a pioneering leap as it contributes to achieving the sustainable development goals sought by the new era.
For years, we have been calling to release electricity production and distribution from the grip of bureaucracy, which has strained public finances and contributed to the growing annual deficit due to the inefficient distribution of electricity subsidies.
In contrast, many countries solved this problem decades ago by adopting the so-called “independent supplier” model for production, distribution, and fee collection. This approach involves both local and foreign companies in building power plants, which in Kuwait could include more than ten such facilities. The role of the relevant ministry is then limited to supervision and laying out development strategies.
There is no doubt that building a project of this scale requires a stable working environment. Therefore, the Build-Operate-Transfer (BOT) system needs to be upgraded. How can an investor be expected to build large-scale power or water stations, only to be asked to vacate and abandon the project after five or ten years? Incentives and protections must be provided to independent suppliers, as is the case in most countries worldwide.
In Spain, France, Germany, Japan, and other countries, such companies are granted project management concessions of up to 99 years.
Since its independence, Kuwait has provided subsidies for all services, including electricity, despite the high costs involved, and the consumption of vast amounts of oil for electricity production.
The subsidy system does not differentiate between an average consumer with a limited income living in an apartment or small house, and a wealthy consumer who resides in a palace. This indiscriminate distribution of subsidies drives up costs. As a result, we often face critical electricity load conditions during the summer due to high consumption. The concept of rationalization has remained a mere slogan without any real impact.
Most countries categorize consumers into different groups based on their needs. Saudi Arabia, the United Arab Emirates, and Bahrain adopted this system years ago, taking into account the interests of citizens with limited income.
In some countries, subsidies are limited to those most in need, rather than being extended to all citizens. Also, service fees must be paid by consumers, even if no electricity consumption is recorded during a specific period. These fees are required regardless of whether the consumer used any electricity.
In Kuwait, the current subsidy system, particularly in electricity, is problematic. The indiscriminate subsidy allows owners of residential and commercial complexes, buildings, and private facilities to profit substantially, while they pay minimal amounts to the state.
The concept of the independent supplier should not be limited to electricity but could also extend to water. Also, other sectors could be privatized if there is a genuine intention to initiate a real recovery process that aligns with the ambitious goals of the new era leadership, which seeks to accelerate development and stimulate the economy.
On this basis, it is necessary for all to support this shift, ensuring that we do not squander the opportunities that are available now, as we have done in the past.
