Working to increase solar’s contribution to the national energy mix

Solar energy has played a secondary role to wind power within Egypt’s renewables strategy for some time, despite the nation’s obvious advantages in terms of abundant sunlight and large tracts of undeveloped land. In 2014, however, brought a number of clear indicators that suggest that solar power remains very much front and centre in the government’s vision for the energy sector, which has imbued the nascent industry with a fresh sense of optimism. Ahmed Farid Moaaz, country manager at Sea Dragon, told OBG, “Investors must start to look at the domestic energy sector as a whole in order to tap opportunities in alternative energies, such as nuclear, wind and solar.”

Devising A New Strategy

In June 2014 authorities revealed the first details of a major solar energy plant to be built in the Wadi El Gadid region, and to be paid for with $6bn worth of Egyptian and Saudi Arabian financing. The announcement is the most recent in a series of positive signals from the government, including an April 2014 statement from Mohammed Shaker, the minister of electricity and energy, that he has plans to bring solar energy into the mainstream, a proposal from the governor of Beheira Governorate to develop a solar project in Wadi Natrun in cooperation with the armed forces and a number of government ministries, and a push by the army to increase production at a military-owned solar power factory.

These developments suggest that there is fresh momentum behind Egypt’s solar effort and that the government is following through on its strategy for solar power established in 2012, when it committed to the Egyptian Solar Plan. This established a target of 3500 MW of solar energy production by 2027, of which 2800 MW is to be derived from concentrated solar power technology and 700 MW from photovoltaic (PV) means. Albert Fuchet, the country president for Egypt and North Africa at Schneider Electric, told OBG, “Technology for renewable energies is ready and available, but strong collaboration between the private and the public sectors is needed to give visibility to investors.”

The Projects

Until the Wadi El Gadid projects enters the development stage, the growth of Egypt’s solar infrastructure is centred on two PV plants being developed in Hurghada on the Red Sea coast and Kom Ombo on the upper reaches of the Nile. According to the New and Renewable Energy Authority (NREA), the Hurghada project is due for completion in 2016, followed by the Kom Ombo plant a year later, and each will add 20 MW to the grid. These two projects represent a significant leap forward in terms of Egypt’s PV infrastructure. PV technology has primarily been used to service rural areas with scattered demand. Common applications for the PV installations that have been rolled out to date include lighting, water pumping, telecoms and cooling.

These include the electrification of two settlements in the northern Matrouh Governorate, undertaken by the NREA in partnership with the Italian Ministry of Environment Land and Sea, a similar project carried out with the Indian Ministry of New and Renewable Energy also in the area, completed in 2012, as well as the more recent installation of solar-powered boundary lighting at the Kurimat power plant, which was carried out by the NREA with its Chinese counterpart.

The Future

The Hurghada and Kom Ombo plants, in feeding directly into the grid, represent the future of large-scale solar energy in the country. However, the question of pricing remains a major issue. The business case for its future development may be considerably undermined by Egypt’s highly subsidised electricity prices. Solar power producers can realistically provide electricity at between LE0.65 ($0.09) and LE0.85 ($0.12) per KWh, which compares favourably to international rates, but cannot compete with the starting price for residential consumers of LE0.07 ($0.01) per KWh.

In 2014 the government began to tackle the politically sensitive issue of subsidy reform, and its success or failure on this point will have a significant bearing on the future of Egypt’s solar industry. Fuchet told OBG, “It will take time for the residential market to be able to absorb the increase in the new energy prices.”

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The Report: Egypt 2014

Energy & Utilities chapter from The Report: Egypt 2014