Green light for Egypt’s renewables
After several quiet years, the sector is expanding to help meet power needs
A key lesson that Abdel Fattah el-Sisi has learnt during his transition from military officer to political leader is that electricity and social stability are closely connected. To put it another way, cuts to power supply during the months of stifling summer heat make people angry and restive, providing another catalyst for social unrest.
For this reason, the Sisi administration has offered international oil companies generous terms to exploit onshore and offshore reserves of natural gas. The prospect of receiving a gas delivery price higher than other countries are prepared to pay has encouraged international firms to fast-track exploration and development projects, enabling power stations to gradually increase the daily hours of electricity generation.
Egypt has a population of at least 92m and the figure rises each year. To meet the growing demand for electricity, an extra 2.5 gigawatts needs to be added annually to the grid. Against this backdrop, the Egyptian authorities have no option but to explore all ways of expanding electricity generation—which explains the new emphasis on renewables to supplement fossil fuels as a power source.
In one of the latest developments, Norway's Scatec Solar and partners have signed 25-year power purchase agreements with the Egyptian government for the delivery of electricity from six solar plants totalling 400 megawatts. The $450m project will be located in the Ben Ban area near Aswan in Upper Egypt and generate revenues of around $60m over the 25-year period. The ventures are part of a 2GW feed-in-tariff (Fit) programme launched by the Egyptian government's New & Renewable Energy Authority (NREA) in 2015.
Scatec announced that the European Bank for Reconstruction and Development (EBRD) was leading a consortium of finance houses to support the six projects with loans totalling $350m. In May 2016, the EBRD said it was allocating a total of $0.5bn to lend to 10-15 private developers to finance the construction and operation of renewable energy projects in Egypt under the Fit scheme.
Throwing power to the wind
The NREA is also encouraging the expansion of wind energy. A US government report says that Egypt "enjoys excellent wind along the Suez Gulf with an average wind speed of 10.5 metres a second". Current installed wind capacity is around 0.95GW, and the government's target is for wind to account for 12% of the energy required to generate electricity by 2022.
So far, firms from Denmark, Germany, Japan and Spain have been active in developing wind energy, and the NREA has allocated almost 800 square km of territory in the Gulf of Suez and along the northern banks of the Nile for further expansion. The European Investment Bank, France's Agence Française de Développement and Germany's KfW are discussing financing arrangements for a planned new 200-250MW capacity wind farm in the Suez area, with start-up scheduled for 2021.
The state firm Egyptian Electricity Transmission Company (EETC) is also pressing ahead with its own renewables projects. Lekela Power, a joint venture between the UK's Actis and Ireland's Mainstream Renewable Power, last November signed a memorandum of understanding (MOU) for a 250MW wind power station in the Gulf of Suez on a build, own and operate (BOO) basis. The company has also signed deals for a 50MW wind-power station and a 50MW solar plant.
In March this year, the EETC signed an MOU with Egypt's Elsewedy Electric and Japan's Marubeni to develop wind-power plants with up to 0.5GW capacity in the Gulf of el-Zayt on the Red Sea coast. The BOO venture would be developed in two 250MW phases, with commissioning starting in 2020.
Egypt's wind energy capacity has more than doubled over the past decade, while solar energy has come from almost a standing start to become a significant contributor to the national grid. Both these branches of Egypt's renewables sector were negatively affected by the popular uprising in 2011 which toppled the Hosni Mubarak regime. During the chaos of the subsequent few years, output capacity was static. But since 2015 the sector has begun to expand again. Given the number of existing projects and potential ones in the pipeline, Egypt's goal of adding 4.3GW of renewable energy to its production capacity by 2022 now seems achievable.
For the Egyptian government, the task will be to muddle through the coming two summers-oil minister Tarek el-Molla said in early May that the country would be self-sufficient in natural gas once more by the end of 2018, meaning that power stations will have regular supply. With the knowledge that renewables are set to become a significant element in Egypt's energy mix, President Sisi will feel that at least one threat to social stability will soon be eliminated.