03 Renewable Energy

In Egypt energy plays a substantial role in the country’s economic development, contributing to macroeconomic variables as gross domestic product (GDP), commodity exports and investments. On the other hand, Egypt as a developing fast growing country suffers from rapid annual population growth currently at a rate of approximately 1.68% yearly. Such fast population growth along with other environmental challenges is overstraining the limited energy resources of the country.

The Egyptian government has therefore recognized the need to reform the energy sector in order to attract private sector investment in power generation, since this will be instrumental to Egypt’s ability to deliver its renewable energy targets. To do this, the government has implemented the competitive bidding approach whereby the Egyptian Electricity Transmission Company will issue tenders requesting the supply of power from large-scale renewable energy resources for pre-determined sites on a build, own, operate (BOO) basis.

Overall, the country is set to supply 20 % of generated electricity from renewable sources by 2022 (20 by 2022 plan), with wind providing 12 %, hydro power 5.8 %, and Solar 2.2 %. The solar energy plan aims to install 3.5 GW by 2027; including 2.8 GW of PV (photovoltaic) and 700 MW of concentrated solar power. The strategy is also aimed at generating 7.2 GW (12 % of generated electricity) from wind by 2022. To do this, private sector involvement must equate to around 67 % of the overall plan. Over the next three to five years, the Ministry of Electricity and Renewable Energy plans to add 51.3 gigawatts (GW) to the current installed capacity. The New & Renewable Energy Authority (NREA) plays a strategic role in the government’s renewable energy plans. It currently has around 500 MW of wind power plants in operation and 1340 MW under implementation and development, and is expected to contribute substantially to the rapid expansion of wind power capacity. There are also three privately owned independent power producers (IPPs) which began operations in 2002-2003 under 20-year long power purchase agreements with EEHC, and currently

have a total generation capacity of about 2.5 GW. The Egyptian government’s renewable energy plans for 2015-2023 include 3.2 GW from government projects; 1.25 GW generated through BOO mechanisms, and 920 MW from IPPs.

Solar

Egypt is located in the “sunbelt” area of the world, meaning geographically, Egypt is endowed with high intensity solar radiation ranging between 2000 and 2600 kwh/m2 per annum, with a daily sunshine duration of 9-11 hours. The potential for solar energy is further increased given the country’s vast deserts, rendering it well suited for the generation of concentrated solar power.
The first solar thermal power plant was constructed 90 km south of Cairo at Kuraymat. This location in the desert makes use of the extended unified power grid, expanded natural gas pipelines, and close proximity to a
substantial source of water namely, the River Nile. The power plant, which is financed from the Global Environmental Facility (GEF) and the Japan Bank for International Development, is able to contribute 140MW to renewable energy generation. Based on the above, the Egyptian government has been working to expand solar energy usage within the country and to stimulate investments in solar energy by offering free land to potential investors in both the Eastern and Western deserts.

Egypt is now recognized as having vast potential for solar energy application in the near future. In addition to the 20 by 2022 plan initiated by the government, a separate proposal was also approved named the ‘Egyptian Solar Plan’.

This plan involves adding 3.5 GW of solar energy to Egyptian electricity generation by 2027. To begin realizing this plan, The Ministry of Electricity and Renewable Energy signed seven memorandums of understanding worth $500 million for solar and wind projects in Egypt. The target for the first regulatory period (2015-2017) was to contract 4,300 MW of both solar and wind energy, and the Ministry has confirmed that this target was reached early 2018.

The government is also considering financing options to conduct feasibility studies for the following projects, which are considered pivotal for the renewable energy sector in the country:
-Solar thermal power plant using CSP technology for both electricity generation and water desalination.
– Designing a technical-financial mechanism to promote the use of solar water heaters in Egypt’s residential sector.

Wind

The Suez Gulf provides an excellent source for wind energy projects, as it boasts an average wind speed of 10.5 m/sec, making it one of the highest consistent wind speeds in the world. The country is also producing almost 57% of the region’s total wind energy, ahead of Morocco, Iran and Tunisia.

Additionally, Egypt is just one of only 38 countries in the world with a published National Wind Atlas, meaning that data on wind patterns are readily available. As well as Suez, other relevant areas include the Western and Eastern deserts, in addition to the Red Sea coast along the Gulf of Aqaba.

In an effort to aid the development of this sub-sector, the Government of Egypt is planning to provide 12 % of generated electricity (6.8 GW) through wind by 2022. Additionally, according to the Egypt Wind Energy Association, 700 square kilometers have been set aside for new wind projects in the
Gebel el-Zayt area which has wind speeds of 11 m/sec.

Egypt’s best-developed wind region so far is the Zafarana district, with average wind speeds of around 9 m/sec. The project (which is owned and operated by NREA) consists of a series of linked wind farms, the first of which started construction in 2001.

The government has also allocated an additional area of approximately 7,845 square kilometers in the Gulf of Suez region and the Nile Banks for NREA to implement more wind energy projects.

Biomass

The current government plan indicates that biomass will generate an expected share of 1,500 MW worth of electricity by 2020 since the country has a logistical advantage in biodiesel production.

Progression within this sector is facilitated by Egypt’s competitive labor force, stable and hot
climate which assists plant growth, and its abundance of affordable land for plant production. There is a high level of public acceptance for future developments in biomass and wind since they are expected to provide an estimated 40 jobs per project. In addition, cultivation of plants for biodiesel production can provide employment for 3,000- 5,000 people, thus creating job opportunities to help boost the country’s economy and the renewable energy sector’s public image.

Advantages

1 | Government Support

There is a strong commitment from the government to encourage investment within Egypt’s renewable energy sector, and they have developed an investor-friendly incentive system based on successful European incentive models to support this commitment. Furthermore, it
has reduced the cost of infrastructure investment for foreign renewable energy companies by identifying logistically suitable areas, whilst at the same time providing the locations with connection access to the national grid:

In addition to governmental tenders, if renewable energy investors want to link projects to the national grid, they will have to submit proposals to the state’s Egyptian Electricity Transmission Co. Land used for the construction of the project will be operated under a usufruct scheme, and the Egyptian Electricity Transmission Company will be tasked with purchasing and transporting electricity produced from the power plants to loading centers for a period of up to 20 years.

Approved Developments:

– The government has provided investors with a feed-in tariff and a seamless licensing process to boost private investment for wind farms.
This means that renewable energy producers will be offered long-term contracts, based on the cost of generation of each technology rather than pay an equal amount for energy however it is generated.
– The licensing process has also been improved by ensuring timely management of authorization requests and creating a single point of interface authorized to deal with land-related issues. The entire
authorization process will be facilitated in full cooperation with all government authorities.
– In order to further aid investors, area zoning has also been upgraded, meaning that the cost of infrastructure investments can be reduced by planning logistically appropriate areas, and preparing the locations with connection access to the national grid.

– The government has also been keen to encourage private sector participation, and they have been doing this by offering competitive tender and bilateral agreements.
– Project risks have also been reduced through signing long term Power Purchase Agreement (PPA) for 20 – 25 years, with the government guaranteeing all financial obligations under the PPA.
– A further incentive is that the selling price for energy generated from
renewable energy projects will be in foreign currency in addition to a portion, covering operation and maintenance costs, in local currency.
– The government has also formed a mutual committee of representatives
from the Ministry of Petroleum, Electricity, Finance and Investment in order to prepare a proposal for a land use agreement to implement wind projects, making it less time consuming for investors to present their projects.

2 | Public Support

Promotion of renewable energy projects will lift a significant weight off the Egyptian job market, creating thousands of potential jobs for its nationals. As well as this however, there has been strong support from NGO’s within the country whose main aim is the promotion of renewable energy projects.

As well as conducting insightful research studies on energy consumption, these organizations have established small grants programs to promote conservation and implement renewable technology in poor communities, in an effort to reduce greenhouse gas emissions by using cleaner energy techniques.

3 | Internationl Cooperation

Egypt has access to over $ 5.2 billion from the World Bank Group, African Development Bank, development agencies, and private sector sources and it has already started making use of these funds to meet its 20% target for attaining energy from renewable sources. The government has also set aside $100 –USD 120 million in clean technology fund money to co-finance

a high capacity transmission system from the wind farms in the Gulf of Suez to serve heavily populated areas such as Cairo. Moreover, the National Renewable Energy Authority is preparing a study in cooperation with the German Government to identify the suitable locations for thermal solar stations. With regards to solar technology, the country has received strong support from Italy, with The National Renewable Energy Authority signing a protocol for cooperation with the Italian Ministry of Environment to electrify two remote settlements in the Matrouh Governorate. The Italian government also gave a grant of more than $500,000 to develop solar power in the Wadi Al-Hitan region of El Fayoum Governorate’s Wadi Al-Rayan wildlife reserve. Furthermore, the World Bank and the Japan International Cooperation Agency have cooperated to finance the construction of the solar-thermal plan at Kuraymat, Egypt’s only major solar power project.

Incentives

The government has introduced a number of incentives to help investors realize the goals set within their 20 by 2022 plan. These include:
– Concluding long-term agreements (20-25 years) with private sector companies in the Renewable Energy Sector to cover their cost of production and return on investments.
– Exempting renewable energy equipment from customs and tariffs.
– Obtaining all the required permits to allocate the lands and clearing from land mines.
– Preparing the required studies for implementing projects, such as environmental impact assessments including bird migration and soil research studies.
– The technology behind PV applications is expensive, yet the high setup cost is compensated by savings in network construction and free land offerings.
– The finance ministry will subsidize the financing of the projects, offering 4% rates for household and commercial productions under 200 kW, and 8% for commercial productions between 200-500 kW.
– For solar energy projects, land will be offered for 25 years whereas wind energy projects will have 20 years of land use.
– Investors will only be charged 2% customs on materials imported for the projects.

Licensing Procedures

The Egyptian Electric Utility and Consumer Protection Regulatory Agency has prepared rules and procedures for obtaining generation, transmission and distribution licenses, namely:

– Approval requires a technical and economic feasibility study.
– The license is valid for a term of 5 years to be renewed thereafter.
– At the end of each year, the license must be verified.
– In cases of non-compliance with the terms of the license, the penalty procedure will be followed.
– The licensee has the right to access the transmission or distribution grids in accordance with a contractual agreement between him and the transmission or distribution company.
– The Agreement has to be approved by the Agency.
– The licensee is further obliged to provide an annual report on the licensed activities.
The requests for licenses with detailed information on the licensing procedures, as well as model framework contracts with distributors and transmission companies can be downloaded from the Agency’s homepage.

The transmission and distribution codes lay down the standard specifications for design, construction, modification, operation and maintenance for all generation and distribution assets associated with the transmission grid.
The transmission companies have to comply with the transmission code, as well as with performance standards acceptable to the agency, in order to verify the quality of electrical supply and the degree of reliability.

Ongoing Projects

1 | 26 MW photovoltaic solar park in Kom Ombo, Aswan

An agreement was signed with Spain’s TSK to establish a photovoltaic solar park with The Egyptian New and Renewable Energy Authority for almost $23 million, financed in part by the Agence Francaise de Developpement (AFD).

2 | 3 wind farms with a total capacity of 380 MW in Gabal el Zeit

Egyptian Renewable Energy Authority opened 3 additional wind farms with a total capacity of 380 MW during the second quarter of 2018. The projects included a 12 MW wind farm, 40 MW and 220 MW In Gabal El Zeit.

3 | 2 250 MW wind farms in Ras Gharib, Gulf of Suez

At the end of 2018, the Egyptian Electricity Minister stated that by 2020 two additional 250 MW wind farms will be operational in the Gulf of Suez, tendered on a BOO basis by an Egyptian Japanese consortium.

4 | 300 MW wind farm in Gulf of Suez

Infinity Solar Company announced plans to build a 300 MW capacity wind power plant in the Gulf of Suez. The project is worth EUR 350 million, and the company is planning to invest an additional $ 400 million in Egyptian renewable energy projects by 2022, and recently received licenses to operate two stations for wind power with a combined capacity of 100 MW.

5 | Financing from The Asian Infrastructure Investment Bank (AIIB) to build Solar Project

AIIB has dedicated a $210 million fund to tap into the renewable energy potential of Egypt.

The investment would consist of 11 solar power plants with an aggregate capacity of 490 megawatts, and would help the country to meet its pledges under the Paris Climate Agreement by reducing half a million tons of CO2 annually.

6 | The African Development Bank Finances 3 PV Projects in Egypt

The African Development Bank (AfDB) Board of Directors approved three senior loans totaling $55 million, to finance three solar photovoltaic (PV) projects in Egypt. The projects fall under the second round of the country’s Feed-in-Tariff (FiT) Program. The three Independent Power Producers benefiting from the loans include; Alcazar Energy Egypt Solar 1 (AlcazarI), Delta for Renewable Energy (Delta) and Shapoorji Pallonji Energy Egypt (SP), with Alcazar I and Delta being granted a loan of $18 million each. All three projects are located at the same site, on unoccupied desert land in
Benban, 40km north of Aswan.