Shady Tarfa and Rostom Tajdeen, Ernst and Young
December 25, 2010 | 0 Comments
Cairo, Egypt – Developers, manufacturers, investors and other renewable energy industry stakeholders need to know where the next big market is going to be so that they can adjust their business decisions accordingly.
Since 2003, global consultancy Ernst & Young has released its Country Attractiveness Indices, which gives a numerical ranking to 30 global renewable energy markets by scoring renewable energy investment strategies and resource availability. The indices are updated on a quarterly basis and the most recent report can be found here.
Here is the firm’s assessment of Egypt.
In February 2008, the Government announced its ambitious goal to generate 20% of the country’s energy production from renewable resources by 2020, equivalent to around 7GW of electricity. Wind will represent 12% and hydro/solar PV will contribute 8%.
The Ministry of Electricity and Energy holds a monopoly over the distribution, transmission and generation of electricity in the country. Currently, the Government subsidizes electricity for its population of almost 80m, 40% of which live below the poverty line. However, this introduces a risk that energy generated by renewable sources could be considered much too costly to compete with oil and gas given the significant upfront investment required to develop an RE infrastructure.
The Government, however, appears committed to achieving its target and has proposed a New Electricity Act, which is currently under consideration. It is hoped the law would encourage private sector participation in the energy market via a FIT system similar to Germany’s.
It is likely any boost in energy from renewable sources will be well accommodated by the Egyptian national grid, which is extensive and provides over 99% of the population with modern electricity services. Furthermore, grid-connected RE projects currently enjoy priority in dispatching and Egypt’s central bank guarantees all financial obligations of the Egyptian Electricity Transmission Co. under the PPA.
According to the World Bank, Egypt has some of the world’s best wind power resources, especially in the Gulf of Suez area where an estimated 7.2GW could be developed by 2022, with additional significant potential on the east and west banks of the River Nile. It is estimated that average wind speeds in the Gulf of Suez reach 10m/s.
Egypt had an installed wind capacity of 430MW at the end of 2009. The country’s largest wind project to date is a US$490m (€352m) development in the Gulf of el Zayt, commissioned in 2009 with a generating capacity of 200MW.
Egypt has also received some financial support from the Japanese Government toward the expansion of its wind sector, specifically a JPY38.9b (€344m) loan to help finance a 220MW wind farm, also in the Gulf of el Zayt area. Another 250MW wind farm in the Gulf of Suez is expected to come on line by the end of 2013, with 10 local and foreign companies already shortlisted for the scheme.
The Government has earmarked 7,600km2 of desert land for implementing future wind energy projects, for which all land allocation permits have already been obtained by the New and Renewable Energy Authority (NREA).
Egypt is located in the “Sunbelt” area and is endowed with high intensity solar radiation ranging between 2000-2600 kwh/m2 per annum, with a daily sunshine duration of 9-11 hours. The potential for solar increases is improved further given the country’s vast desert land, making it suitable for CSP development. It is estimated that at least 1GW of solar capacity will be required by 2020, if the country is to meet its RE target while satisfying the growing demand for power.
To date, uptake of solar projects has been slow due to high capital costs, with only 6MW of solar PV currently installed and CSP of 30MW as part of a 150MW hybrid power plant. While the cost of solar technology is expected to decline in the next five to seven years, Egypt has no clear strategy to exploit its abundant solar resources, although the Egyptian Government is attempting to stimulate investment in solar by offering free land to potential investors.
In October 2010, the World Bank announced a US$270m (€194m) loan to the Egyptian Electricity Ministry to build a 100MW solar plant in the south of the country, to be constructed between 2012-17 and costing an estimated US$700m (€503m).
Egypt has substantial hydropower resource, which is exploited by both large- and small-scale developments. The country has a strong portfolio of small-scale hydro facilities and an impressive pipeline of projects planned or already under construction.