Egypt needs pipeline of projects to deal with blackouts

25 August 2010

Power shortages continue throughout the country

The Government of Egypt has unveiled plans to implement an emergency power plan that will see an extra 550MW capacity brought online within weeks and a further 700MW by the end of the year.

In doing so, the government hopes to alleviate the ongoing power outages that have severely hindered the country’s industry and been the cause of social unrest.

More power capacity is desperately needed. This year, the power shortage has impacted most severely on the capital and its satellite cities.

While it is true that existing power plants in Egypt face constraints on the amount of gas feedstock they receive, the long-term problem is delivering a continuing pipeline of generation projects.

A new 375MW power station in Nubaria province is set to come online in September and a 140MW gas/solar powered project at Koraymat, south of Cairo is scheduled for completion by the end of the year.

While these developments will help Egypt keep the lights on, it will need much bigger projects to avoid blackouts in the future.

In terms of projects that will come online next year, according an engineer at local company El Sewedy, its projects at Benha and Al Sokhna will add an extra 2,050MW to the grid.

The country has 25,000MW of power generation capacity in operation and peak demand is currently exceeding the 23,500MW mark.

As the economy expands at a rate of 5-6 per cent and the population continues to swell at an even higher rate, the government will need to move quickly if it is to keep pace with demand.

In June, the ministry prequalified ten companies to bid to build a 1,500MW IPP at Dairut in the Asyut governorate. The landmark project, which is scheduled to come online by the end of 2011, will do much to alleviate Egypt’s power shortage.

However, the project has already faced many delays at the tender stage which could derail the project and the electricity sector. According to an industry source, “If it doesn’t go ahead, they will be looking at serious blackouts in the future.”

The project has faced issues from the outset. Egypt’s first foray into the private power sector in the 1970s drew less than desirable results following the devaluation of the local currency.

Deterred from using private developers to build out its generation plans, Egypt has since relied on soft loans as a source of finance. The successful completion of the Dairut project would bode well for future IPP schemes.

Beyond IPPs, Egypt is pursuing a strategy that includes engineering procurement and construction (EPC) projects and negotiated power deals.

To avoid blackouts remaining a long term problem for the Egyptian economy, Cairo needs to start building a pipeline of new power projects now.

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