Egypt plays catch-up through developing renewable energy

By Mohammed Farag

Egypt is joining the global rush toward sources of renewable energy in an effort to manage the country’s growing industrial and household energy needs. The energy crisis has escalated in recent years, negatively impacting industrial production rates and at the same time contributing to increased feelings of resentment among Egyptians–which reach apeak during summer months.

The Ministry of Electricity recently added 3,400 megawatts to the national grid to cope with the country’s energy needs in 2014. The extra supply will be achieved through running boththe Banha station at its full capacity of 750 megawatts in addition to the North Giza station at its full capacity of 1000 megawatts. There are also plans to convert a number of stations to a combined cycle system. The first stage of the project will include running various gas units before the summer of 2014, followed by a second stage in whichsome units will be converted into a steam combined cycle.

New and renewable energy is distinguished by its long-term availability. The hope is to become decreasingly less dependent on non-renewable fossil fuels, including oil and gas, as renewable energy sources have a positive yield and keep the environment clean.

Mohammed al-Mahdi, managing director and chairman of the board at Siemens-Egypt, says that right now the priority is toconstruct power plants that harvest wind energy, along with setting up gas stations that run on a combined cycle system.

According to al-Mahdi, Egypt stopped exploiting approximately 98 percent of its hydropower resources, and the resulting amount of energy produced was 12 percent that of previous years.

“Renewable energy is not simply a fad,” he said. “These resources are used widely across the world. It forces factories to manage some of their energy usage through wind energy after instituting tariffs as we saw in Jordan, Morocco, and Lebanon.

The Supreme Council of Energy, led by Prime Minister Dr Hazem el-Beblawi, decided last September to require energy-intensive factories to meet some of Egypt’s energy needs through renewable sources.Minister of Electricity and Energy Ahmed Imam said the decision requires energy-intensive factories to use renewable resources to cover 50 percent of total energy usage. This energy is expected to be generated by wind farms which will be built through the private sector in coming months. The capacity of the farms is estimated to be 970 megawatts.

The Ministry of Electricity aims to make renewable energy sources comprise 20 percent of energy production by 2020, in addition to adding 1350 megawatts of solar energy.The Ministry plans to link the granting of license renewals for energy-intensive factories to a commitment to utilise renewable energy resources. The price per kilowatt per hour will be determined by the Board of Directors of the Power Utility and Consumer Protection Authority, and implemented in early 2015.

The Ministry of Electricity plans to build six wind farms through private sector investments as well as through IPP (Independent Power Producer) at a total capacity of 600 megawatts.

According to al-Mahdi, Egypt should be diversifying its energy sources and building up morerenewable energy facilities to attract investors and stimulate growth. Legislative frameworks should be put in place both to clarify the law surrounding and allocated to renewable energy sources and to facilitate procedures for obtaining this type of land, he said. Legislation can also play a role in determining appropriate tariff rates, according to al-Mahdi.

Wael Nashar, president of the Middle East Engineering and Telecommunications Company–Oonera, suggested that the Ministry of Electricity put tariffs on electricity network feeds as an incentive for consumers to switch to solar power. He proposed a tariff of LE0.70 per kilowatt per hour. In light of expectations of a decrease in solar energy costs, the tariff should be reduced by six percent annually, he said, reaching a rate as low as LE0.40 per kilowatt per hour by 2027. This is still higher than the cost of generating power through gas, which is expected to reach LE0.69 by 2027.

According to Nashar, the proposed tariff will be equal to the cost of power generated by gas, i.e., LE0.50 per kilowatt per hour. This means that the Egyptian Electricity Holding Company will pay less for solar power than gas.

Nasharhopes the cost of solar energy will be decreased at the beginning of 2027to rates lower than the proposed tariff to attract more consumers to invest in solar energy.

The cost of not switching to solar energy at this stage is greatin light of economic constraints on Egypt, said Nashar, as the country will pay a projected LE2.17 trillion in order to maintain the power supply through 2027. This amounts to more than double the total gross domestic product of Egypt in 2011 at current prices, he said.

Nasharfurther warned against too quick a transition to solar energy, as maintaining the current rate of change threatens to drain reserves of foreign currency. He also pointed out that removing fuel subsidies would translate into a wave of popular anger, especially among the 60 percent of the Egyptian population considered to be low-income. Egypt is currently seeking to control accumulating energy subsidy costs, which have reached approximately LE120 billion.

Mohammed Salah Sobkey, head of the Energy Research Centre, said the private sector may prove a gateway to solving the problem of power in Egypt. The development of industries linked to new and renewable energy sources provide thousands of jobs annually, he said.

A recent study titled“Prospects for Renewable Energy in Egypt” claims that renewable energy sources represent 16.7 percent of the total power supply in the world, according to estimates made in 2011. Total capacity in 2011 increased to 1360 Gigawatt hours (GWh) from 1260 GWhin 2010, representing an eight percent increase. Total global investments in renewable energy increased to US$275 billion in 2011.

Egypt currently depends on a mix of energy resources, 98 percent of which are fossil fuels. Renewable sources account for just 1.2 percent of Egypt’s energy needs, according to the aforementioned study. The same study indicated that approximately 30 percent of energy driving electricity in Egypt comes from fossil fuels, while industrial activities consume approximately 40 percent of total energy sources in-country.

Although Egypt is a country that produces quantities of comparatively “better” fossil fuels like petroleum and natural gas, these resources are consumed heavily, according to estimates from the US Energy Administration (EIA). Production rates and consumption levels represent the greatest challenges that Egypt faces regarding the energy sector. Oil resources in petroleum reserves have held at a constant 3.7 billion barrels without expectations for any increases, according to the study.

Expanding wind power usage is proving challenging due to varying wind speeds and ideal directions from locale to locale thanks to terrain differences in Egypt, says the study. The high price of electricity production is also a factor: costs are estimated to be four times as high as electricity generated by conventional energy sources. Energy storage issues are also a problem.

The study further mentions that the total capacity of wind power worldwide amounted to 240,000 megawatts in 2011 compared to 198,000 megawatts in 2010, representing an increase of 17 percent. China boasts 26.1 percent and 62,000 megawatts of total world wind power capacity, followed by the US at 47,000 megawatts, and Germany at 29,000 megawatts.

Solar power boasted a capacity of approximately 69,000 megawatts in 2011 compared to 40,000 in 2010, an increase of 42 percent, according to the study. Germany is home to 35 percent of solar capacity globally with 24,000 megawatts, followed by Italy at 12,000 megawatts, and then the US at 4,000 megawatts.