By Nataša Kubíková

Egypt has eloquently embarked upon the aspiration to become a leader in electricity transmissions scheme in the Middle East, Africa, and potentially Europe.

While Egypt’s proximity to the targeted areas suggests potential, the goal is necessarily bound to the country’s limited resources and capabilities that are further restraint amid growing domestic electricity demand greatly outbalancing supply. Cairo will need to find channels to boost its lacking domestic capacities in the upcoming decades. The vision to become an interregional electricity hub will thus likely remain contingent upon external intervention and aid provided by other established and technologically advanced actors in the sector in the region, namely the GCC Interconnectivity Grid (GCCIG).

Egypt’s limited independent capacities on the financial, technical, and natural resources levels have recently marked a significant shift as Cairo has attracted large foreign direct investments and loans in the energy sector. This is a positive start for attempts to improve country’s electricity infrastructure and secure its self-sufficiency. The financial support flew in mainly from the Gulf region, which appears to be expanding its outreach rather than creating a new regional hub. Egyptian government’s projection thus seems unlikely to materialize in the foreseeable future amid the current regional competition. Instead, it seems that Egypt will, for the time being, serve as a service hub for the expansion of GCC’s dominance in the interconnectivity market.

Understanding the Benefits

The electricity interconnectivity scheme is based on a smart grid system that bears multiple advantages. It unlocks cost savings in energy industry, offers flexibility to tackle demand-supply imbalance, guarantees security and reliability due to high quality technology, creates common electricity market that allows countries to use low-cost generated electricity in peak times and sell electricity surpluses, and provides opportunities for cross-sectoral utilization.

The Arab Fund for Economic and Social Development (AFESD) accounts for the interconnectivity benefits: “There are multiple advantages to be gained from interconnecting the electric power grids of several countries. The main benefit comes from deferring, or avoiding altogether, the construction of new power plants. This can be achieved by sharing power across interconnected grids without impacting their security and reliability. The interconnection also reduces the need for standby capacity to meet fluctuations in demand, which in turn reduces operating cost. It enables new generating plants to be erected in the most economically attractive sites, typically close to the sources of inexpensive fuel. A further benefit is the lowering of the overall level of environmental pollution in the region.”

The designed smart grid system provides a structure that saves capital investments for the construction of national energy infrastructure. The existing GCCIG system is calculated to “save countries up to $3b in capital investment by avoiding the need to build more than 5GW of generation capacity over 20 years. Operational and fuel efficiency savings across the system will amount to at least $300m, based on feasibility estimates to 2028,” GCC Interconnectivity Authority’s (GCCIA) CEO, Ahmed Ali Al-Ebrahim explained for press.

The smart grid system’s technological structures also allow for a large degree of adaptability and flexibility. A key advantage of the system’s technological capabilities is to counteract major load shedding and thus enable rationalization of resource spending. The technological advancement has achieved greater electricity transmission stability and security. It has been designed to provide fast-pace diagnosis of faults at the interconnected stations even in distant locations, and thus allow for almost real time decision-making to counteract errors and protect the network. High Voltage Direct Current (HVDC) interconnecting stations secure transmission in diverse environment with different load frequencies and fluctuating demand, without generating excesses. Simultaneously, the smart technology allows independence of interconnected networks in different regulatory, technical, and economic environments. Lastly, it enables to incorporate renewables into the system without disruptions in line with energy diversification policies of the GCCIA’s member states and in the wake of concluded global accords on climate change protection.

The long-term benefits of smart grid schemes seem to outweigh fast-paced short-term investment solutions through national structures that rely on momentarily available resource capacities such as coal-fueled power plants.

Geography Moulds Prospects

Making smart grids operational across larger geographical territories poses a major challenge. A solution can be found through improvements required for such a mega-scale endeavor. The improvements relate to network’s security and reliability, control and management, geographical positioning, and expanding capacities.

In line with the goal to ensure security of interconnected grids, a series of studies was conducted comparing the AC, DC and AC-DC hybrid power grids system operations. In a recommendation issued by the International Electrotechnical Commission, the use of hybrid power grids based on UHV AC interconnection and DC transmission was graded as an efficient tool to improve the grids’ reliability.

The Electrical Energy Storage (EES) system may also help to further tackle the inevitable dynamics of the smart grid operations when addressing the issue of time mismatches defined by geographical positions of connected countries. The EES is able to store electricity obtained at lower price generated during off-peak hours to be used at peak times, decreasing the total electricity costs. It is also designed to supply electricity during network failures caused by external factors such as natural disasters. The EES helps to maintain and improve power quality, frequency and voltage through a technologically advanced system balancing differences among in national grids generation. A possible improvement to the supra-regional grids’ operation is to interconnect the EES installations that were created as so called microgrids or small-scale storages on national and local levels. This integration of storage systems with different technologies into a single virtual store may then be more beneficial.

The management and control of the super-smart grids in larger geographical schemes is crucial. The transmission networks are equipped to obtain extensive data set for measurement purposes. Technically, they are capable of processing the measurement values in real time and suggest load flow solutions through algorithmic estimations. The network thus optimizes load flow to find a balance, where the capacity of all operational stations is evenly utilized to satisfy individual demands.

Another challenge to introduce smart grid solution to a bulk power transmission networks across multiple countries is to shift from a quasi-static state of transmission between currently functioning two state connections into a complex and dynamic system that requires upgrade in management functions above all. The smart grids to be operational in larger geographical areas are thus recommended to extend their control mechanisms using the Phasor Measurement Units (PMU) that will help to reduce blackouts, power outages. Once management gaps are resolved efficiently, the grid would be able to accommodate the transient behavior of the net, on top of providing the power, voltage and current measurements.

Necessary requirements for future interconnectivity structures to function efficiently relate to a set of parameters such as power quality, voltage tolerance, frequency, synchronization, and metering. In line with efforts to set up a supra-regional structure, the International Electrotechnical Commission (IEC) recommends that it is necessary to rebuild the Transmission & Distribution grid, install new generation control systems such as Flexible AC Transmission Systems (FACTSs) and High-Voltage DC (HVDC) Systems to make the grid fully functional. The IEC also promotes the Wide-Area Monitoring, Protection and Control (WAMPAC) scheme that will guarantee cost-effective solutions and improve functionality, reliability and security of the grid.

It is further required for such a scheme to be able to balance diverse socio-economic conditions and regulatory-bureaucratic environments of member states. While GCCIG has proposed a doable plan within the Gulf region, it will face a series of difficulties in its attempt to accommodate diverse environments that the compartmentalized African and European markets entail in order to set up a fully functional supra-regional electricity smart grid.

Relying on GCC Lead

A number of regional actors have expressed aspirations to establish such a supra-regional smart grid. Most notably, GCC countries have been promoting a closer integration of diverse electricity generation environments. The six GCC members have successfully completed the construction of a transmission networks system in 2011. The GCCIG worth $1.2b is connecting national power infrastructures to a unified super power grid with a total capacity of 1,200MW.

Since its completion, eleven MENA countries requested to be connected to the network to exchange electricity in peak hours. The goal is to create a ring of interconnected power grids in the Mediterranean region stretching to Morocco in the west, reaching to Europe via Turkey, and creating a gate to the African market through Egypt. According to GCCIA Chairman, Dr. Matar Hamed Al-Neyadi, quoted in Middle East Monitor: “The [GCCIA] authority is planning to expand the network to reach the European market by creating a market for energy trade with EU countries via Turkey.”

The project has become a crucial integral part of the strategic regional solution, and it employs the most innovative technologies. GCC Interconnectivity Authority’s CEO, Ahmed Ali Al-Ebrahim, told press: “Building an entire grid system from scratch means there are no legacy systems to negotiate. It is the first-ever project in the GCC and the Middle East to use HVDC technology.”

The project became the first of its kind in the region projecting massive economic benefits as the GCCIA introduced an in-kind energy-for-energy trading scheme in early 2015. The GCCIG sub-regional energy interconnectivity system has thus opened up a path to the formation of regional electricity market that will be protected from fluctuating global dynamics. The in-kind approach aims at overcoming economic disparities given by different levels of energy subsidies, pricing, and regulations of member states circumventing the bureaucratic obstacles. It enables the involved countries to secure sufficient electricity supply to their domestic markets binding them under mutual responsibility formula.

The move represents an upgrade in the process of setting up an interconnected supra-regional grid under the GCCIA’s auspices in the future.

Egyptian Matrix

Given the existing capacities of Egypt and GCCIA’s agenda for electricity politics, Egypt is likely to merely follow the lead of the established actors before picturing a future as an electricity hub in the region. Nonetheless, its position on the regional electricity market seems to be improving.

The Economic Development Conference in Sharm Al-Sheikh in March 2015 concluded a series of investment deals for Egypt in light of its need to build up to 5.2 GW worth of generating capacity annually until 2022 to meet the massive domestic demand. According to publicized estimates, domestic electricity sufficiency is achievable by promoting energy efficiency, diversification of power generation, adoption of renewable mix into the energy production, and direct foreign investments of $5b per year for the enhancement of the national electricity structures. These steps would have to come ahead of any other expansionist plans.

Egypt has so far turned to the GCC seeking improvements in domestic infrastructure and linking them to prospective plans for the construction of interconnection networks. In line with the national energy strategy, a $1.6b project deal to build electricity connection with Saudi Arabia with a capacity of 3,000 MW was signed. The project envisaged to build up an infrastructure scheme consisting of two HVDC converter stations with 500 KV in the Egyptian Badr city, the antenna lines, marine cables leading through Al-Aqba Gulf, and two generator power stations in Al-Madina and Tabouk.

The Islamic Development Bank (IDB) has leased $220m in support of the project. “This connection or project will contribute in the future to integration with the electric grid of the Cooperation Council for the Arab States of the Gulf (GCC), as well as the Arab Maghreb area network, including increasing the potential of electricity exchange between Arab countries,” an IDB statement read, cited by the Daily News Egypt.

The Arab Fund for Economic and Social Development will finance the antenna lines through a soft loan of up to $160m, and the Kuwaiti Fund for Economic Development has pledged $100m in an additional loan. The World Bank will co-finance the project, for which Egypt has earmarked $600m.

The Saudi Ministry of Water and Electricity was reported by Daily News Egypt as stating that “it is a core project as through Egypt we can connect electrically with Jordan and North Africa and we will achieve this project within three years according to the agreements.”

The investment flow targeting regional networks provide a solid foundation for the development of interconnectivity scheme. However, the funds for enhancing Egypt’s domestic energy infrastructure before being able to contribute and benefit from regional networks seem to be limited. Attempts to meet the growing electricity demand are therefore supported through further bilateral investment deals as the EUR8b one for a joint venture between Egyptian El Sewedy Electric and German Siemens for gas-fired and wind-powered plants. While these contracts sound promising, fear remain over a lack of natural resources that had previously shut down energy production facilities in the country. The government is facing a conundrum that will likely delay the accomplishment of Egypt’s vision for energy role in the region even more.

The disadvantageous factors for Egypt were partially resolved by the adoption of a new privatization law of the energy sector allowing private companies to link their operations to other energy providers on bilateral basis to counterbalance electricity shortages.

In an interview with Daily News Egypt, Egyptian Minister of Electricity, Mohammed Shaker revealed ministry’s plans: “Goals include maximizing the use of all resources, encouraging the use of renewable energy, and promoting electricity interconnection. We also aim to improve the efficiency of energy production and its usage by adopting environmental protection policies and appropriate measures in the field of electricity generation and future planning to meet the rising demands.”

Apart from Egypt’s challenge to achieve electricity self-sufficiency, there are further major questions regarding its standing in the regional interconnectivity scheme. Despite its geographical position in a cross-road of energy corridors, largest obstacles relate to how the inflowing funds to Egypt are managed and distributed, what areas of development the international investment targets, and which alternative corridors may be more easily accessible to energy giants.

As the ongoing talks between Riyadh and Ankara suggest, Egypt may not eventually play any role in the European market, as GCC seems to currently prefer the northern way. The developed interconnection infrastructure in the Maghreb, that provides electricity shipments between Morocco and Spain, puts Egypt in disadvantageous position as well. Egypt is nevertheless likely to serve as a transmission point for GCC’s future expansion reaching out to western and southern African countries. However, Egypt’s current status prescribes its effort to be directed first to secure its domestic electricity generation capacity in order to qualify for a decisive role in the interconnection networks, before pondering any expansionist plans.

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