Government forecasts it needs an additional 54GW of capacity to tackle power outages
With agreements signed for close to $40bn of new power generation projects in two days at the Egypt Economic Development Conference held in Sharm el-Sheikh, it shows the priority President Abdul Fattah al-Sisi and his government has given to solving the countrys electricity crisis.
The Electricity Ministry signed contracts and memorandum of understandings (MoUs) with some of the worlds largest power companies to deliver more than a staggering 30GW through various technologies. With the government forecasting that an additional 54GW of capacity is required by 2022, the investment conference has provided a great platform for Cairo to begin addressing its power shortages.
One of the most interesting elements of the new schemes unveiled, aside from their sheer size and value, was the volume of coal-fired power projects. With the government having only passed a law in April 2014 to enable power generation using coal, the signing of agreements for close to 17GW of coal-fired plants marks quite a turnaround in policy.
While sizeable renewables and nuclear projects were also discussed for the future, the agreements signed show the government is committed to implementing coal-fired schemes on a large scale.
Egypts decision to diversify its fuel for power generation is a result of increasing gas shortages over the past four years, which has been a primary cause of blackouts during peak periods. The gas issue has resulted in Cairo turning to liquefied natural gas (LNG) imports in addition to ambitious new exploration projects. While this will relieve pressure on gas supplies, the scale of the demand growth for electricity has forced Egypts decisionmakers to expand its feedstock portfolio.
Although the signing of the ambitious MoUs is a good start, the hard part has yet to come, with financing $40bn-worth of projects in one sector set to provide an unprecedented challenge. An MoU and a signed contract are two very different things, with the complex financing structures for such schemes providing the biggest hurdle.
However, while the challenge is undeniable, there is much reason for optimism, with many of the agreements having been signed with some of the worlds largest and most established power giants, ranging from the US GE and Germanys Siemens to Saudi Arabias Acwa Power. These companies have long track records of success with some of the largest and most complex projects in the world, and so are the best partners that Cairo could have chosen.
The Egyptian people and businesses will hope the abundant energy and optimism that emerged from every corner of the event can be directed into turning these amazing plans into action.
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