Egypt’s renewables strategy dates back to the 1980s, but its capacity mix remains decidedly fossil-fuel-focused, with these technologies taking a 90% share in 2015. The government is working to avoid the regular blackouts seen in 2014, caused by ageing infrastructure and gas shortages. The country’s renewables incentives are attracting considerable interest, despite the sometimes less-than-transparent decision-making and delays.
Egypt is the largest oil producer in Africa outside OPEC and the continent’s largest oil and gas consumer. That said, generating capacity is struggling to keep pace with the rising power demand, which will be the highest in Africa by the mid-2020s, according to BNEF forecasts. As such, the country aims to double its capacity mix of some 34GW by 2020. It plans to introduce coal and nuclear power, though gas is expected to remain the principal source.
The government is also looking at renewables as a way to diversify energy sources and exploit its substantial natural resources. Egypt has committed to secure a fifth of electricity consumption from renewables by 2020, with 12% from wind. The country has only seen modest renewables build to date, but it has a blossoming pipeline of projects. Indeed, 2GW of wind is set to come from the EUR 8.5bn investment deal signed by Siemens in 2015.
Egypt has four main mechanisms to achieve its clean energy goals: one is the feed-in tariff system for solar PV and wind projects of less than 50MW. The aim is to increase renewable energy production by building 2.3GW of PV capacity and 2GW of wind over 2015-17. The PV track in the first round was 50% oversubscribed. However, only 1.7GW of wind capacity was secured in the 2015 tender, indicating a further request for qualification is on the cards.
The government plans to source another 1.2GW of renewables through a competitive bidding scheme for build-own-operate contracts. In 2015, it announced three new requests for qualification for the development of 500MW of wind and solar capacity. This round has seen continued high interest from developers, with the PV track attracting 41 offers.
In addition, 3.2GW of state-owned power plants are being developed by the New & Renewable Energy Authority, while 920MW are to come from the merchant scheme whereby private investors may sell power from their projects directly to large consumers. Egypt has had a net metering scheme since 2013, but uptake has been limited – not least because it has some of the lowest electricity prices in the world. They are set to rise, however, as the government kicked off a tariff-reform programme in 2014. The aim is to reach cost-reflective pricing and cut subsidies, which stood at EGP 22bn ($2.8bn).
Another change on the horizon for the power market was initiated by the 2015 electricity law, which began a gradual market liberalisation. At present, the state dominates the power market, with the EEHC owning more than 90% of each segment. Instead a new competitive market will be created based on bilateral contracts; and the offtaker (EETC) will have more autonomy by becoming an independent transmission system operator.
Score summary
Egypt scored 0.97 in Climatescope 2016 and it took 42nd place on the list of countries overall. Its best performance was on Greenhouse Gas Management Activities Parameter IV.
On Enabling Framework Parameter I, the country scored 1.03 and ranked 42nd. The presence of a clean energy rural electrification programme helped to support its score, as did its well-developed set of clean energy policies, including feed-in tariffs and net metering.
On Clean Energy Investment and Climate Financing Parameter II, Egypt ranked 42nd. No new investment was recorded in 2015, yet some $330m has been committed since 2011. The average cost of debt is relatively low at 11.6%.
The country placed 30th on Low-Carbon Business & Clean Energy Value Chains Parameter III. Its score of 1.46 reflected the relative diversity of its clean energy value chains, plus the presence of a number of companies servicing the sector, including financial institutions.
On Parameter IV, Egypt took 30th position. The country is engaged in some carbon off-setting activities and has put in place initiatives to boost corporate awareness.
