Egypt has for many years relied on a mix of fuel sources to meet its electricity needs. Unlike many countries in the region, it has a long history of developing renewable energy including the construction of the world’s first thermal solar power demonstration facility nearly 100 years ago.

The country’s power generation profile has diversified over time. According to Egypt’s Electricity & Energy Ministry, the country has some 22,580MW of installed power capacity. Of this, steam-powered generation accounts for 11,571MW, hydropower represents 2,842MW, gas-fired facilities total 7,865MW and wind power totals 305MW.

The installed capacity increased in the five years to 2008 for each of the fuel sources, except steam power. This trend is set to continue as the state’s energy strategy emphasises the importance of creating a balanced overall energy profile.

In April 2007, Egypt’s Supreme Energy Council approved an ambitious plan to increase the contribution of renewable energy to 20 per cent of the country’s total installed power capacity by 2020. Of this, 8 per cent is to be met through hydropower capacity and 12 per cent is to be wind powered.

Meeting demand

Between 2007 and 2008, electricity demand increased by 6.7 per cent, largely as a result of rising demand from the residential and commercial sectors. Egypt will need to develop its renewable energy projects on a much larger scale and at a faster pace than it currently does to achieve its goals.

In 2007-2008, Egypt generated 15,510GWh of hydropower with two projects located on the Aswan Dam generating 3,500GWh.

The country’s largest project, known as the High Dam, has an installed capacity of 2,100MW and generated 11,371GWh of power in 2007-2008. The project was commissioned in the late 1960s and initially it provided more than half the total energy capacity of the grid. As overall electricity demand has increased significantly since then, the proportion of total power capacity sourced from the High Dam has decreased. In 2008, the High Dam accounted for only 9 per cent of the total available capacity.

Wind power plays a central role in Egypt’s renewable energy sector. The country has an ideal wind portfolio

The most recent hydropower facility to be brought online in Egypt is the New Naga Hammadi hydropower facility which began commercial operation in 2008. Although a relatively small project compared with the rest of Egypt’s hydro portfolio, it is part of a larger drive by the government to continue to harness its hydropower resources through investing in new projects.

Wind power

The government intends to start up two more small hydropower projects over the coming years. The New Assiut Barrage plant will have a capacity of 32MW and is scheduled to come online in 2015. Another project, the Zefta Barrage will have a capacity of 5.5MW and will come online after the first project is completed.

Wind power plays a central role in Egypt’s renewable energy sector. The country has an ideal wind portfolio – particularly in the Gulf of Suez.

The West of Suez Gulf Zone has been identified by the government as the most promising area to site large-scale wind farms, due to high wind speeds, ranging from 8-10 metres a second on average. The vast proportion of the land in the area is also uninhabited desert.

Elsewhere, there are also promising sites with wind speeds of 7-8 metres a second on either side of the Nile, near Beni Sweif and
Al-Minya governorates and El-Kharga Oasis in the New Valley governorate.

The country’s New and Renewable Energy Authority (NREA) is currently developing a host of wind projects in the Zafarana region. The authority is putting together request for proposal documents for companies to bid for a 200MW wind farm, which it intends to issue within the next 4-6 months. Demark’s Calpro has been awarded a contract for the consultancy work associated with the project and the wind farm has already secured financing. The project costs are expected to total about E300-350m ($402.5-469.6m).

Further proposals

The government will cover about 25 per cent of the capital cost, while the remainder will be provided by Germany’s Kreditanstalt fur Wiederaufbau (KfW), the European Investment Bank (EIB) and the European Commission.

The NREA is developing a second wind farm in the Zafarana region, with a capacity of 220MW. It will be part-financed with debt from Japan International Co-operation Agency (JICA).

Egypt has done much to promote the development of alternative power generation capacity

The NREA is also working with an Italian cement company, Italcementi, on an off-grid wind farm. The company owns a large cement factory in Egypt and intends to use electricity generated by the wind project to power the facility.

While the proposal remains at an early stage, Italcementi intends to develop a facility with a capacity of 100-200MW.

Besides the NREA, Egypt’s renewable energy plan is also being advanced by the Egyptian Electricity Transmission Company (EETC), which was established in May 2009.

The EETC has already launched a wind project on the Gulf of Suez that will have a capacity of 200MW and will be constructed on a build-own-operate basis. It is scheduled to come online in 2013.

In November 2009, the EETC shortlisted 10 developers that submitted expressions of interest comprising Spain’s Iberdrola, Italy’s Enel, France’s EdF, the UK’s Renewable Energy Systems, the US’ AES Corporation, Korea Electric Power Corporation, Japan’s Toyota, the local Orascom Construction Industries, the local El-Sewedy Cables and Egypt Wind Power with Malaysia’s Powertek Berhad.

But whereas most wind projects are tendered once wind-speed data is collected, the EETC decided to allow bidders to conduct their own research after submitting expressions of interest.

Concerned that this process would result in an unnecessary duplication of work as well as being costly, the bidders have opted to
complete wind measurement tests together with a single consultant.

AES Corporation volunteered to perform the administrative functions of the research and the cost of the12-month investigation is to be covered equally by the bidders. The shortlisted companies are expected to mandate a management consultant to execute the study by May.

Hybrid potential

The bidders are allowed to conduct their own analysis on top of the joint effort should they wish to do so. Once the data is ready by mid-2011, the EETC hopes to revive the tender process and invite commercial and technical bids.

Egypt has also pioneered solar power, but to a lesser extent than wind and hydro in recent years. The country has an integrated natural gas concentrated solar power hybrid facility, which is currently in operation at Kuraymat, south of Cairo. The plant has a total capacity of 140MW, of which 20MW is solar powered.

The Global Environmental Facility (GEF), an international partnership of development organisations, and the Japan Bank for International Co-operation (JBIC) provided finance for the project, which is expected to come online by mid-2010.

The facility is an important test project for Egypt to assess the potential for hybrid plants. While solar power will most likely continue to take a back seat in its renewable sector, the government is nevertheless keen to move ahead with a pipeline of solar power projects.

Egypt has done much to promote the development of alternative power generation capacity in the country.

Unlike many other countries in the region, it prioritised renewable energy from an early stage. It established a renewable energy strategy in the early 1980s and founded the NREA in 1986.

However, developers continue to face significant hurdles when developing renewable energy projects in the country. As the shortlisted bidders for the Gulf of Suez wind farm have witnessed first-hand, the process for developing a renewable energy project in Egypt is still evolving.

In addition to overcoming the protracted tendering process, developers must overcome other hurdles, including securing access to the electricity network, and securing financing both from the government and commercial lenders. 

The Clean Development Mechanism (CDM) assists projects to a certain extent. Two renewable projects have benefitted from CDM finance to date. However, if the sector is to expand at a reasonable pace, a comprehensive and structured renewables support mechanism will need to be introduced.

As Rafik Youssef Georgy, consultant for the NREA, says: “While the government has the courage to call for investments [for its renewable projects], it has not yet created an environment for investment.”

The passing of the electricity law, which is currently being considered by Egypt’s parliament, would help change this. The law was put forward by the NREA and, if approved, will provide subsidies to developers to make renewable projects more economically viable.

The form this support will take is still unclear, but the government has indicated that a feed-in tariff similar to that used in Europe is the most likely option.

Egypt will need to move swiftly and introduce a financial support mechanism if it is to convert the political will for renewable energy into reality in time to meet its 2020 target.