Energy-short Egypt aims to reduce use of fuel oil and natural gas from 90 percent to 62 percent by 2020
CAIRO, April 8 (Thomson Reuters Foundation) - Egypt lies in the world's "sun belt" and receives abundant sunshine. But until now the nation has neglected one of its most plentiful resources, relying on renewable energy for less than one percent of its energy needs.
That could be about to change. With new political impetus for energy diversification, Egypt's leadership is throwing its weight behind a combination of efforts to boost renewable energy generation.
The government has announced a string of plans, including the construction of solar-and wind-power plants to add a combined capacity of 4.3 gigawatt hours to the country's grid and the introduction of a new feed-in tariff system aimed at encouraging private investment.
As the summer heat approaches and Egypt worries it faces more power outages like those that last year hit the country as often as twice a day, the government has announced it wants to cut reliance on natural gas and fuel oil from 90 percent to 62 percent by 2020.
Even though this diversification push may include adding coal to the country's energy mix, a flurry of renewable-energy startups say this could be their window of opportunity.
"This is the time for investing in energy," said Rana Alaa, co-founder and technical director of SolarizEgypt, a two-year-old company that designs and installs photovoltaic solar power systems.
"It's not simply a question of responding to an energy crisis. The government is extending its arms to the private sector and is actively seeking its involvement," Alaa said.
Renewable energy developers had long complained that one of the obstacles to investment in Egypt was the country's subsidies for fossil fuel purchases. But in July 2014 the cabinet announced the most dramatic cut in fuel subsidies in decades, saying the move could save 51 billion Egyptian pounds ($7 billion) which would be reallocated to health and education.
"Removing fuel subsidies was an important step. We have departed from the point that the government is stifling us," said Yaseen Abdel-Ghaffar, the managing director of SolarizEgypt. "Now we are at a stage where we have to innovate and deliver."
CLEAN ENERGY APPETITE
Egypt's appetite for new energy is evident. An Egypt Economic Development Conference (EEDC) held in March saw major players in both conventional and renewable power markets announce contracts worth billions of dollars.
Saudi Arabia's ACWA Power and Masdar, a clean energy developer based in Abu Dhabi, together agreed to set up large-scale solar-power capacity in Egypt, while Canadian solar energy giant SkyPower and Bahrain-based solar consortium Terra Sola both signed initial deals with the Egyptian government.
"The availability of energy and managing the demand for it is one of the main priorities on the Egyptian development agenda," Egypt's President Abdel Fattah Al-Sisi told the conference.
The country has also launched a feed-in tariff scheme to reward the generation of solar power. Large-scale projects with a capacity between 500 kW and 20 MW will be eligible for a tariff of $0.13 for each kWh, while those with a capacity between 20MW and 50MW will get $0.14 per kWh.
The initial call attracted bids for more than double the capacity sought, suggesting wide interest from the private sector.
The government now is working to complete final agreements on how public-private renewable energy partnerships may operate, and what land and cost sharing could look like.
Egypt's Solar Industry Association has applauded the new favorable policies and early signs of a regulatory framework that would "help make solar energy a true alternate large-scale source of Egypt's energy mix."
The initiatives are also gaining approval from international observers.
"Securing an adequate power supply (in Egypt) is a top priority as frequent black-outs impede industrial development and stir discontent. Solar and wind power are expected to play a key role in this process," stated a March report by German clean-tech consultancy Apricum.
It described Egypt as the latest nation to join the "hot list" of global renewable energy markets.
"With well-managed implementation, Egypt could evolve as one of the most progressive renewable energy markets in the MENA (Middle East and North Africa) region within a short timeframe," the report said.
RETHINKING SCALE
The push for solar is welcome and overdue, said Ahmed Zahran, co-founder and chief executive officer of KarmSolar. Established in 2011, the firm provides off-grid solar energy solutions for agricultural and industrial businesses.
"Egypt's current energy mix is completely distorted," Zahran told the Thomson Reuters Foundation. "The whole point is spreading the risk so that you are not exposed to one single fuel for your energy needs. When you look at the resources we have an abundance of, it is solar and wind."
KarmSolar became the first company in the Middle East and North Africa to install high-capacity off-grid solar water pumping stations. Now it is working to expand its expertise to sustainable building by developing a village entirely reliant on solar energy.
But Zahran and other younger players in the renewables field worry that the state-led focus on mega-scale projects may come at the disadvantage of smaller developers.
"The obsession with mega-projects with enormous budgets is not the way forward," he said. "This is a region where you have to focus on a small project, apply the right economics more creatively and then scale up."
Both large and small-scale developers agree, however, that Egypt's new enthusiasm for renewable energy finally gives them the chance to demonstrate solar's potential as an alternative.
"At the end of the day, the ultimate proof of anything's economic value is if people are buying it," Zahran said. "We see repeated demand and that means our product makes sense." (Reporting by Dina Zayed; editing by Laurie Goering)
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