Ras al Khaimah, which is developing a coal mine in Indonesia, will build a coal-fired power plant in the emirate in the next two years to meet its fast-growing demand for electricity.
It is the second coal plant to be proposed for the Emirates, where electricity demand has been growing so fast that utilities cannot meet demand and many industries burn costly diesel to keep the lights on. The country is expected to launch an atomic power programme later this year, but the first nuclear power plant will take about eight years to build.
The coal plant will be built in stages, starting with one unit of between 400 megawatts (MW) and 500MW that would be expanded within five years to 1,000MW, said Madhu Koneru, a spokesman for the government-owned RAK Investment Authority (RAKIA). "We are already using coal-based power in cement factories and now we have a new plant in development," Mr Koneru said. "It will be a very environmentally clean project."
The proposed electricity station would be by far the biggest built in the northern emirate, and would produce power more efficiently and with less emissions than the on-site generators the cement plants use to supplement supplies from RAK's grid.
The emirate's decision to burn coal follows a similar development in Dubai, where the Dubai Electricity and Water Authority plans to put out a tender to the private sector next month.
Mr Koneru, also the managing director of RAKIA's RAK Minerals and Metals Investments (RMMI) unit, estimated its share of coal production from the Indonesian mining venture would amount to 15 million tonnes a year by 2014, of which the emirate would import between 8 million and 9 million tonnes.
That would be enough to fuel the new coal-fired plant and any other power stations in the region requiring coal, he said.
RMMI and its Indonesian partner, a company owned by the government of Indonesia's East Kalimantan province on the island of Borneo, plan to export coal to other countries, possibly including India and China.
RAKIA on Monday agreed to invest US$1.5 billion (Dh5.51bn) to develop 200km of railway for coal transport, and a seaport and industrial area in East Kalimantan.
Mr Madhu said RMMI would pay about 92 per cent of the between $500m and $600m cost of the railway, which he said would halve the cost of transporting coal by road.
The company is seeking to develop a rail link with the capacity to transport 60 million tonnes of coal a year produced by several mines in the region. It also plans to build a coal jetty at the seaport.
"We will work with various mine owners for the transportation of coal and welcome partnerships," Mr Koneru said. Indonesia is among the world's top exporters of thermal coal, with 57 per cent of its supplies produced in East Kalimantan.
Mr Madhu said RAKIA's investment decision was influenced by the lower projected cost of mining and transporting Indonesian coal, compared with buying it from suppliers such as South Africa or Australia. He said the sulphur content of East Kalimantan coal was low, which meant it was relatively clean-burning.
By Tamsin Carlisle