Egypt rushes solar energy to catch up as gas prices soar

Egypt, with its few clouds, vast deserts, and well-developed electrical grid, has everything it needs to expand solar energy generation. It is only now that Egypt has begun to take advantage of these resources, as the price of imported natural gas has risen.

Last year, a sharp drop in gas production and a growing demand caught the authorities by surprise. This led to rolling blackouts during the hot summer. Ahmed Mortada is the head of energy for the multilateral lender European Bank for Reconstruction and Development in Egypt.

Analysts estimate that Egypt will have to spend millions more by 2025 on LNG imports.

Solar companies claim they can provide electricity at a lower cost than gas turbines using cheap panels imported from China. However, they complain about market distortions and regulations that have slowed down the rollout of solar power.

Hussain Al Nowais (chairman of United Arab Emirates renewables energy producer AMEA Power) told reporters that God has blessed Egypt with good solar resources and good land resources.

NEW PROJECTS

AMEA opened a $500-million, 500-megawatt solar array at Aswan, 650km south of Cairo last month. It plans to build a 1,000-megawatt plant near it.

It will use $300 million in its own funds to start construction of the new plant, before a final finance deal is worked out around May. Nowais expects that production at the plant will begin during the first quarter 2026.

Nowais added that the electricity produced by AMEA solar power plants would cost between 2 and 3 U.S. Cents per kilowatt-hour. "Definitely, it will be less expensive than a gasoline plant."

According to those in the power sector, it's hard to estimate the cost of electricity produced by gas turbines because of the layers of subsidies. However, one producer estimated that the cost per kilowatt-hour was between seven and nine cents. The state oil company EGPC purchases gas at a lower price from local producers, and then sells the gas to power stations with a further discount. State distributors continue to sell electricity at lower prices to consumers, despite the fact that some households had their charges increased by as much as 50% last year.

AMEA, one of three solar producers in Egypt, is planning to install large solar arrays that will feed electricity directly into the energy grid.

Scatec, a Norwegian company, signed an agreement for a 1,000-megawatt project in September. A consortium of UAE companies Infinity and Masdar and Egypt’s Hassan Allam then signed an agreement to produce 1,200-megawatts in November.

Nowais says that Egypt will need to add thousands of megawatts to its capacity in the coming years to meet the demand.

OBSTACLES

Insiders in the industry say that one of the reasons Egypt has been slow to adopt solar energy is because different government departments have little incentive to consider overall costs.

The problem with Egypt is its island-like structure. "There's no coordinated approach by the ministers," said Yaseen AbdulGhaffar, of SolarizEgypt which supplies solar energy mainly to private companies.

The government will implement a law in early 2024 that allows electricity producers to supply businesses, such as factories. However, initially, it will accept only 500 megawatts worth of projects across the country. In November, Prime Minister Mostafa Mbouly stated that Egypt wanted to increase its share of renewables to 42% in 2030. Currently, 11.5% is generated by solar, hydropower and wind. Mortada stated that the government is seeking international assistance to extend the grid to solar energy sites and strengthen it. The EBRD has also been discussing ways to assist.

Egypt is planning to gradually shut down its older, less efficient power stations as renewable energy becomes more prevalent.

A regulation prohibits the installation of two-way meters by domestic consumers who, in Egypt's major cities, live mostly in apartments. This is true unless they own an entire building. They could also buy and sell electricity from the grid.

According to industry sources, the government hasn't given priority to proposals for changing this rule.

Ayman Raseekh, CEO at SolarSol which installs solar panels for homes and businesses, estimates that solar power will be affordable to home consumers once the cost of electricity on the grid rises over three or four Egyptian pounds (or kilowatt hours) per kilowatt.

Electricity costs for richer households are currently 2.35 Egyptian pounds (0.0462) per Kilowatt-hour.

Egypt's 8 billion dollar financial aid deal with the International Monetary Fund signed in March includes a promise to reduce energy subsides after it repeatedly delayed electricity price increases amid an economic crises.

Rasekh stated that when the government removes the subsidies for electricity, solar panels will be installed on roofs just like satellite dishes.

(source: Reuters)