Has Egypt just announced new investment opportunities in the electricity sector?

new investments in electricity

In a live broadcast organised by the American Chamber of Commerce in Cairo on 03 November 2020, the Egyptian Minister of Electricity and Renewable Energy revealed very positive data on the Ministry’s work over the past 6 years and a number of extremely interesting investment opportunities in the Egyptian electricity sector for the next few years.

We have all lived through or heard about the massive power cuts in Egypt before 2014 due to low availability of power plants and fuel shortages, which have led to large loads’ shedding. The Ministry has since implemented a very ambitious plan by introducing 3,636MW of electricity in 8.5 months with a total cost of USD 2.7 billion through EPC + Finance projects, in addition to 14,400MW in a deal with Siemens to set up 3 combined-cycle mega power plants built in 2.5 years with a cost of EUR 6 billion, as well as converting existing power plants to combined-cycle adding 1,850MW capacity, among other projects. As a result, Egypt added 28,229MW installed capacities between the end of 2014 and October 2020, equivalent to 12 times the installed capacity from the High Dam.

By the end of 2019, the installed capacities in Egypt had reached more than 55GW.

The Ministry has also worked on expanding the total length of the 500kV grid from 2,364km in 2014 to about 6,006km (expected) by end of 2020. The total number of 500kV substations was increased from 18 in June 2014 with a total capacity of 9,800MVA, to 48 substations with a capacity of 54,050MVA, which is 4 times the existing capacity in 2014. Other upgrades and expansions have been applied to the 220kV and 66kV networks and substations, although more work is definitely still needed on the power distribution level. The Ministry is currently studying market needs for improving private distribution conditions to encourage private investment in this sector.

Egypt has allocated about 7,637km2 of land for solar and wind projects, with a potential of 90GW of renewable energy generation.

With renewable energy targets of 20% from peak load by 2022 and 42% from total installed capacity by 2035 (1.98% hydro, 5.52% CSP, 14.04% wind and 21.13% PV, in addition to the 57.33% conventional share), Egypt is largely relying on private investments in the renewables’ field. The latest announced prices received for BOO projects are as low as USDc2.00/kWh for solar and USDc3.00/kWh for wind, and the Ministry might even be calling for an auction in about 3 months’ time to bring generation prices down.

Despite the promising goals, and huge interest from both local and international developers, the Ministry does not consider it feasible to completely open the market for Independent Power Producers before 4 years from now, when it would have totally lifted electricity subsidies.

The Ministry is however planning to use the current excess capacity in its export deals with neighbouring countries. We are currently exchanging 3,000MW with Saudi Arabia, 250MW with Jordan (expandable to about 500MW), up to 200MW with Libya, and 80MW with Sudan (expandable to a total of 1,300MW). We have also signed a framework agreement with Cyprus and Greece in May 2019 to allow the exchange of 2,000MW with them, and a memorandum of understanding in November 2019 to allow the exchange of power between Egypt, Jordan and the GCC countries. Egypt is also part of an initiative to build 3 synchronous grids to achieve cross-regional interconnection through UHV lines, collecting large-scale hydro and solar power from Central and Northern Africa and delivering it to Europe and Asia, positioning Egypt as an electricity hub and corridor.

A 5-year plan through 2025 to produce 2,866,000m3/day of fresh water from the sea, with an aim to power the desalination plants with renewables, among other P2X initiatives.

The Ministry is studying several Power-to-X opportunities to utilise existing electricity capacity. In cooperation with the Ministry of Housing and the Ministry of Water Resources and Irrigation, it has set a strategic plan for renewable-powered water desalination plants whereby the Government will be buying water as a final product, and the Ministry of Finance will be providing a sovereign guarantee to investors, which should be largely appealing for FDI and private investors.

The Ministry is also seeing a big potential for investment in Electric Infrastructure and Electric Vehicles. The Egyptian Electric Utility and Consumer Protection Regulatory Agency (EgyptERA) has recently submitted to the Cabinet for approval a tariff of EGP1.69/kWh (without place occupancy fees) and EGP1.89/kWh (with the use of place occupancy fees) for up to 22kWac, and EGP3.75/kWh for up to 50kWdc. Other incentives have also been put in place by the Government to encourage investment in EVs.

A pilot green hydrogen project?

The Ministry has also recently commissioned a consultant to advise on a pilot green hydrogen project for energy storage and potential transportation across borders. Unfortunately, not much detail has been given on the project, while in our view this topic should be the focus of the Ministry right now, if it does not want to miss out on a great opportunity to be at the forefront of development of this game-changing technology for energy transition.

Other investment opportunities were discussed by the Minister, such as the Take-Over, Operate and Transfer of the 4.8GW Beni Suef combined-cycle power plant in cooperation with the Sovereign Fund of Egypt, and the refurbishment and re-powering of the Zafarana and Gabal Elzeit wind power projects operated by the New and Renewable Energy Authority (NREA).

Also discussed was the Waste-to-Energy potential of conversion of about 4.2 million tons of Municipal Solid Waste into electricity and/or heat. The Ministry has already approved a tariff of EGP1.4/kWh for the purchase of electricity produced from solid waste, and is setting a 300MW cap over the coming 5 years.

To discuss any of these investment opportunities in more detail, do not hesitate to contact us.