Energy shortage in Egypt 

      With the increasing need to secure new sources of energy pressing on the country, the Ministry of Electricity last week announced the prices at which it will buy the renewable energy produced by households or private investors.

The step aims at encouraging both household and private investors to rely more on clean energy in a practice known as feed-in tariffs that makes it worth their while to do so. The tariffs will be fixed for the next five years, a step seen by many as an important prerequisite for attracting investments in the sector.

Investment Minister Ashraf Salman was quoted recently as saying that fixing feed-in tariffs was projected to encourage the production of up to eight gigawatts of solar and wind energy in Egypt.

“Foreign investors have thus far refused to enter the energy market in Egypt due to the fluctuation in energy prices, but this move will help them calculate their costs and return on investment,” said Emad Ghali, vice-president of Wind Energy Development, a company working in power generation.

The tariffs at which the government will buy solar energy are LE0.848 for each kilowatt (kw) produced by householdsالشركات القابضة , LE0.901 for industrial producers under 200 kw, and LE0.973 for producers of 200 to 500 kw.

The Finance Ministry said it would offer loans at low rates of interest to finance such projects. Producers of less than 200 kw of electricity will pay four per cent on the loans, compared to the eight per cent paid by those generating between 200 and 500 kw.

The prices of the feed-in tariffs were reasonable, said Ahmed Zahran, CEO and co-founder of KarmSolar, a company that builds off-grid solar solutions primarily for farmers.

But there were still obstacles, he said, such as the long process required to find land for the projects. Budget constraints could also limit the effect of the feed-in tariffs. “I wouldn’t bet that feed-in tariffs were going to dramatically change the market, but introducing them makes sense economically,” he said.

Minister of Electricity Mohamed Shaker said that those interested in this kind of investment could acquire land through usufruct agreements that lasted for 25 years for solar energy projects and 20 years for wind energy production.

Egypt is currently facing its worst energy crisis in recent years due to a limited supply of gas on the back of foreign companies’ reluctance to invest more in local gas and oil fields before getting the money that is owed them.

The political turmoil of the last three years has deprived the state budget of billions of dollars of foreign direct investment and tourism receipts and limited the government’s ability to pay its dues. The gap between supply and demand in the electricity sector has been reflected in the long hours of blackouts that were exacerbated during the hot summer months.

A day-long nationwide power cut paralysed the country two weeks ago and spurred President Abdel-Fattah Al-Sisi to make a speech stressing the fact that electricity production and distribution needed to be upgraded to meet consumption levels.

He said that in order to cover increasing demand Egypt had to generate an extra 2,500 megawatts annually for the next five years.

This crisis underscores the importance of looking for new sources of energy, especially since Egypt’s reliance on renewable energy is currently minimal. According to the Ministry of Electricity’s website, out of the 25,000 megawatts annually consumed only 0.8 per cent comes from solar energy.

The 24th Cairo Climate Talks, held recently under the title Lifting Energy Subsidies: a Pathway to Renewables, also shed light on opportunities for renewable energy providers and innovators.

 German Ambassador Hansjörg Haber said at the Cairo Climate Talks that Germany had recently launched an initiative called “Energiewende” which aimed at a radical transformation of the German energy sector to cover 80 per cent of local electricity demand in 2050 by renewable energies.

“We introduced feed-in tariffs for renewable energy, with this scheme having become one of our most successful export hits,” he said.

A plan to use solar energy in 100,000 hotel rooms in the Red Sea areas has also been signed by the Solar Energy Development Agency (SEDA) with the Ministry of Tourism.

And a framework agreement was signed in October 2013 between Egypt and the United Arab Emirates to finance a number of energy generation projects in off-grid areas. The project began in March and it intends to provide solar energy to nine governorates: North and South Sinai, Sohag, Al-Wadi Al-Gedid, Luxor, Aswan, Marsa Matrouh, the Red Sea, and Qena.

While the introduction of solar energy in homes comes at a price due to the equipment needed to set up solar energy panels, it can be used as a back-up when power cuts occur or for generating electricity to maintain energy demands throughout the day and/or night.

For this reason, net meters have been introduced to reduce the financial pressures on power generation in homes. Net-metering is used to deduct the cost of producing alternative energy from the monthly bill of consumers in order to encourage them to set up production in their homes and businesses.

In addition to solar and wind energy, Amr Mohsen, an engineer in power generation, argues that the use of steam energy on an industrial scale could be a valuable addition to the country’s depleted energy resources.

The Al-Nasr Pharmaceutical Company at which a solar steam plant was developed in 1989 by the National Renewable Energy Authority and funded by the African Development Fund, was a good example of the possibilities, he said.

“The company needed thermal energy for the boilers, so if sufficient energy was produced to meet that basic need there was also no need for other energy sources,” he explained, saying that the company’s plant was designed to meet this requirement.

Another untapped source of energy could be recyclable waste. “Cement plants are designed to use waste from rice and wheat harvests as a source of energy. However, we use heavily subsidised natural gas instead,” said Osama Fathi, Chairman of the Egyptian Biomass Energy Company.

  Alahram weekly newspaper