Africa Energy Futures: Egypt

Over the last five years, how has the energy mix in your jurisdiction changed, and what have been the key drivers for that?

Egypt’s electricity production has increased by over 30,000 MW, achieving self-sufficiency in electricity since June 2015, and now enjoys a surplus of more than 25%. The Ministry of Electricity and Renewable Energy has also worked on upgrading Egypt’s transmission grids and went from 2,364 KM of total length of 500 KV grid in 2014 to 6,006 km of total length of 500 KV grid by the end of 2020. The ministry also invested approx. USD1.5 billion on the upgrade of Egypt’s distribution grid. Furthermore, according to a report issued by E&Y dated October 2021, Egypt has advanced to the 19th among the world’s top 40 markets in the Renewable Energy Country Attractiveness Index (RECAI). As per the 2020/2021 the Egyptian Electricity Holding Company (EEHC) Annual Report, Egypt's peak demand is 31.9 GW while the total available installed capacity is 59.5 GW with new and renewable energy (solar and wind) contributing 5.1% and Hydro 4.8% of the installed capacity; and the total generated capacity is 204,794 GWh with renewables contribute 5% and Hydro 7.2% of the generated capacity. While new and renewable energies (wind/solar/hydro) share in the total generated energy in 2020/2021 reached 12.2%, through investments in wind, solar and hydro including Ras Ghareb Wind farm, Kom Ombo solar PV plant and the Benban Solar Park in Aswan which is the largest solar energy project in the world, however, the natural gas participation rate reached 98.2% of the total fuel consumption through the operation of three giant power plants, being Burullus Power Plant, the Beni Suef Power Plant and the New Capital Power Plant.

What is the outlook for the energy and natural resources sector in your jurisdiction in the next five years? In particular:

Key policy decisions

According to the Integrated Sustainable Energy Strategy (ISES) to 2035, the government has pursued an energy diversification focusing on the development of renewable energy and energy efficiency. Under Egypt’s 2030 Vision, Egypt intends to increase the supply of electricity generated from renewable sources to 20% by 2022 and 42% by 2035, with wind providing 14%, hydro power 2%, photovoltaic (PV) 22%, and concentrating solar power (CSP) 3% by 2035.

Furthermore, the National Climate Change Strategy 2050 issued by the National Council for Climate Change, which can be viewed as a roadmap for overcoming the challenges of climate change in a way that supports the achievement of the country’s desired economic and developmental goals, identifies five objectives:

• Achieving sustainable and low-emission economic growth in different sectors, through increasing the share of all renewable and alternative energy sources in the energy mix, reducing emissions associated with the use of fossil fuels, maximizing energy efficiency and adopting sustainable consumption and production trends for reduction of greenhouse gas emissions from other non-energy activities.
• Enhancing resilience and adaptive capacity to climate change and alleviating the associated negative impacts.
• Enhancing climate change action governance and management.
• Enhancing climate financing infrastructure.
• Enhancing scientific research, technology transfer, knowledge management and awareness to combat climate change.

The Egyptian Minister of Electricity and Renewable Energy recently adopted steps to introduce Green Hydrogen in the Energy Strategy of 2035. The green hydrogen and green ammonia projects have been explicitly included among the areas falling within the state’s economic development strategy and are entitled to benefit from the investment incentives under the Egyptian investment Law including tax incentives. A comprehensive national hydrogen strategy is currently in the making, with the support of the European Bank for Reconstruction and Development, covering green hydrogen chain, including supply, demand and infrastructure. The strategy is expected to be announced during COP27.

Key policy challenges

Despite the government’s efforts to encourage investments in green energy, certain actions were taken that are believed to discourage investments in renewable energy. This includes the imposition of integration fees on renewable power generation plants with a capacity of more than 500 kW under the net metering scheme and the self-consumption scheme (Circular no. 3 of 2022), despite an exemption made to net metering plants and self-consumption projects with capacity of 1,000 MW. Furthermore, the wheeling scheme for renewable energy has been put on hold, which limits the capacity of the Independent Power Producer to access the renewable energy market. With regard to Waste to Energy (WtE) projects, investors think such projects are not profitable because of the low feed in tariff. Furthermore, the operational cost of WtE plants is high and it requires a high capital investment compared to solar or wind projects.

In the updated NDCs, it is estimated that financial resources estimated at a minimum USD246 billion are required for the adaptation and mitigation targets. The mobilization of the required financial resources and investments to meet the ambition to transition into a green economy is necessary.

Renewables and/or new technologies will play an important role in Egypt including, amongst others:

• decreasing energy and production cost;
• expediting the phasing out of the government electricity subsidy bill;
• reducing unemployment rates with the increase of investment in renewable energy projects; and
• exportation of energy will increase inflow of foreign currency which will have an effect on other sectors.

Looking further ahead

What are the key investment opportunities you foresee in the energy and natural resources sectors in your jurisdiction over the next five to ten years?

The Egyptian Minister of Electricity and Renewable Energy stated in October 2021 that green hydrogen would be introduced in the 2035 Energy Strategy. Focus has shifted to the development and encouragement of the investment in green hydrogen and green ammonia. Since the end of 2021 to date, almost 16 memoranda of understanding have been signed by the New and Renewable Energy Authority, the General Authority for the Economic Zone of the Suez Canal, the Egyptian Electricity Transmission and Distribution Company, Egypt's Sovereign Fund, and international companies and consortiums working in the production of new and renewable energy. Subject to issuance of the needed regulatory framework, Egypt has the potential to be a regional leader in the production and exportation of green hydrogen.

With particular focus on sustainability, and on reducing carbon emissions, how do you anticipate the energy and natural resources landscape in your jurisdiction changing over the next five to ten years? In that context please comment on what you think could be achieved (and how it would be achieved) even if you consider that unrealistic (for reasons that you can explain).

Egypt has shifted from having energy shortage, to having electricity and energy surplus in the last decade. Egypt has an abundance of land, it lies within the sun belt, and has high wind speeds, making it a prime location for renewable energy projects. With the appropriate regulatory framework, investment incentives and green financing, the targeted share of renewable energy in the energy mix as determined in Egypt Vision 2030 may be achievable.