Egypt makes another tilt at nuclear power

30 June 2014

President Abdul-Fattah al-Sisi named the El-Dabaa nuclear power among his priority national projects in his first speech following his inauguration. The challenge is making it a reality

Thirty years have passed since Egypt’s Electricity Ministry invited bids for the construction of a nuclear power station at El-Dabaa, 160 kilometres west of Alexandria. Egypt had already built up a cadre of nuclear scientists with experience of operating a research reactor at Inshas, and nuclear power offered an opportunity to reduce dependence on increasingly expensive oil as the main source of electricity generation.

The tendering process made some progress, but was aborted after the Chernobyl disaster in 1986. The same year, Egypt introduced incentives for the development of its substantial natural gas reserves, and oil prices tumbled.

Regained traction

The nuclear programme regained traction in the mid-2000s, as concerns started to mount over the rising consumption of natural gas, which has turned Egypt into a net importer of gas less than a decade after becoming a liquefied natural gas exporter.

In 2009, the Nuclear Power Plant Authority (NPPA) awarded a 10-year contract to Australia’s WorleyParsons to act as consultant for the nuclear programme, with a target of bringing the first plant on stream in 2015.

By the time of the uprising against the Hosni Mubarak regime at the start of 2011, El-Dabaa had been confirmed as the most suitable site for the first of four planned nuclear power stations. Work had been completed on draft legislation to ensure the nuclear programme conformed to International Atomic Energy Agency (IAEA) safeguards.

Preparations at the El-Dabaa site continued in 2011, but in January 2012 hundreds of local people broke through security barriers and occupied the area, claiming the government had seized the land without giving them proper compensation.

After the removal of Mohamed Mursi as president in July 2013, the government once more took steps to revive the nuclear power programme, presenting it as part of a long-term strategy to address the chronic problems facing the power sector. Abdul Fattah al-Sisi, in his capacity as defence minister and commander of the armed forces, played a central role in these efforts.

He negotiated an agreement with the El-Dabaa protesters, whereby they would return the site to the NPPA while the army would allocate a nearby coastal area for tourism development. (Egypt’s coastline is deemed to be a national security asset, and seaside development projects require army approval.) Residents were also assured that the armed forces would be closely involved in building the nuclear plant, which would supposedly mean proper safety standards would be observed.

In his 9 June presidential inauguration speech, Al-Sisi said the El-Dabaa nuclear power station was to be one of his government’s priority projects, and he was scheduled to chair a meeting of the Supreme Council for the Peaceful Application of Nuclear Energy in early July. Ibrahim el-Osery, a nuclear adviser to the Electricity Ministry, was quoted by Daily News Egypt as saying that terms of reference will be issued soon to interested companies for contracts to build a 1,600MW plant at El-Dabaa, followed by a second unit of 900MW.

According to the Egyptian media, there are seven international companies actively following the scheme:

  • Rosatom Overseas of Russia
  • Westinghouse Electric Company of the US
  • Korean Electric Power Company
  • Areva of France
  • Hitachi Corporation of Japan
  • Toshiba Corporation of Japan
  • China National Nuclear Corporation

Based on recent regional examples of nuclear power station contracts, in Turkey and Abu Dhabi, the first phase of El-Dabaa would cost at least $6bn. Egypt is unlikely to be able to raise this level of finance from its own investment budget, or through borrowing from development agencies.

The financial feasibility of the project will, therefore, depend on either the provision of a substantial portion of grants, or on the developer covering most of the investment costs. The private investment option appears more realistic, given that Gulf Arab donors have already provide more than $10bn in grants to Egypt since mid-2013 and may be reluctant to allocate further funds for a single high-profile project.

Rosatom has been mentioned as one of the more enthusiastic prospective bidders, which could reflect an interest in proposing a similar structure to the Akkuyu project it is carrying out in Turkey on a build-own-operate basis. However, Egypt may baulk at the price it would have to pay for the electricity produced – the weighted average tariff in the power purchase agreement for Akkuyu is 12.35 US cents a kilowatt hour.

The progress of the Akkuyu project has also been painfully slow, and whatever financial model is applied to El-Dabaa, the plant is unlikely to be providing electricity to the grid until at 2020 at the earliest.

Supply and demand

In the meantime, Egypt will face an epic struggle to close the gap between electricity demand and supply. As of mid-2013, generating capacity had reached 30,803MW, according to the Egyptian Electricity Holding Company. However, effective capacity was considerably lower as a result of the inefficiency of many of the plants and, critically, because of growing shortages of fuel.

Although peak load of 27,000MW was below capacity, the actual generating deficit had reached about 3,000MW. There were prolonged power cuts in the summers of 2012 and 2013, and in early 2014 Egyptians also had to contend with the novelty of power cuts during the winter months. Mohammed Shaker, appointed electricity minister in March 2014, indicated it was unrealistic to expect any significant improvement before 2018.

About 80 per cent of Egypt’s power-generating capacity is designed to run on natural gas (although some units can also run on light fuel oil or diesel), and about half of total gas output is consumed in the power sector. Given the decline in gas production, alternative power strategies are vital. The government has ambitious targets for solar and wind generation, and seems to be committed to including nuclear in the mix.

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