Egypt’s electricity consumption has about doubled in each of the last three decades. (1) Until recently production managed to keep up with this pace, but it is not the case anymore. Currently, Egypt can produce up to 27,000 MW of electricity per day, whereas daily consumption reaches 29,000 MW in summer.

Current Capacity and Consumption
As per the latest annual report (2011/12) of the Egyptian Electricity Holding Company (EEHC), 88% of installed capacity is thermal and 10% hydro. There is also 550 MW of wind energy capacity and one solar thermal power plant that produces 20 MW of solar energy. More than three-fourths of thermal power is fueled by natural gas while fuel oil is used to a lesser extent. Out of thermal capacity, 50% comes from steam plants, 39% from combined cycle plants and 11% from gas turbine plants. Since the government established the first combined cycle plant in 1989, their share has increased considerably. This is due to the fact that they can reach thermal efficiencies of up to 60% in contrast to the maximum of 40% efficiency attained by steam plants.

Households consume 42% of electricity and 31% is consumed by industries. According to the EECH, 99% of Egypt’s households are linked to the power grid. Egypt’s grid is also linked to Libya and Jordan. Jordan has also connected its grid to Syria and Lebanon, therefore Egypt can trade with them as well. However, the amount of power sold and purchased is insubstantial. 

Plan for Raising Capacity
The government plans to add 12,400 MW of thermal capacity in the period 2012-17, which requires investments of about USD 11 billion, according to the EECH’s annual report. Forty-four percent of the investments are expected to come from the private sector, which will be invited to build, own and operate three plants with the total capacity of 5,500 MW.

There are also ambitious plans to boost the capacity of renewables. In 2008, the government agreed to increase their share in power production to 20% by 2020. As for wind power, the government plans to add 6,650 GW by 2020, 72% of which is expected to come from private projects. Thirty-two megawatts of hydro and 120 MW of solar capacity is expected to become online by 2017. Already by 2027, solar power capacity should reach 3,500 MW with 67% private sector participation, as agreed by the government in July last year. (2) In order to speed up the development of renewables, the government decided  this September that from 2015, new energy-intensive factories have to meet 50% of their electricity needs with new and renewable energy, writes Daily News Egypt.

The planned increase of power capacity will add jobs for Egypt’s manufacturers. The share of local production has reached 42% of conventional thermal power plant, 30% of wind power plant and 100% of transmission network components for up to 220 kV. However, power capacity will probably increase more slowly than the government plans. Many experts do not consider the 2020 renewables target realistic. The government is also lagging behind with implementing its plans for thermal power. Out of the 7,000 MW capacity planned to be added in 2007-2012, only 4,400 MW had been commissioned by the end of June 2012.

Projects in Pipeline
There are several new power projects in the pipeline. One of the biggest government projects is the 1,950 MW South Helwan gas-fueled steam plant, tendering for which is in progress. It is partly financed by international development agencies. Just USD 921.8 million of the project’s USD 2,404.4 million total cost will come directly from the government, the rest will be provided in the form of loans by the World Bank, the Arab Fund for Economic and Social Development, the Islamic Development Bank, the Kuwait Fund for Arab Economic Development and the OPEC Fund for International Development. According to the World Bank, the plant will create 4,000 jobs, 75% during construction and 25% for operation and maintenance.

The government also has several renewable projects in progress. Its wind projects in the pipeline amount to 1,340 MW. As for solar power, the government in July signed a USD 150,000 agreement with the Arab Organization for Industrialization to install two stations, each with a capacity of 40 KW. The project will start with the installation of solar panels on the buildings related to the Ministry of Electricity and Energy and it is hoped that other government bodies will follow, according to Mada Masr. In September, the UAE announced that it will finance the establishment of a 20 MW solar plant in Siwa, writes Egypt Independent.

There are also private projects in the pipeline. In 2012, the government announced plans to proceed with tenders for two large private projects – a 2,250 MW combined cycle plant in Dairout and a series of wind farms in the Gulf of Suez area. The government has started a tender to build, own and operate Egypt’s first solar PV plant, set to produce 200 MW in Aswan, reports ESI Africa. “However, investor interest may remain poor in light of ongoing political and economic turmoil,” said Wafik Alfred Hanna, Senior Partner at Deloitte, referring to the Deloitte Resources – Intellinet (The Economist intelligence Unit). “In the meantime, the ministry is pressing ahead with an emergency program to install 2,100 MW of gas-turbine capacity over the next 12 months.” At the same time, since November, several gas power plants are being converted to work on diesel since Egypt is facing gas shortages, informs AllAfrica.

Coal and Nuclear Plants
The new government has also announced plans that are set to change Egypt’s electricity mix in the further future. Since Egypt is facing shortages of gas, which is the main fuel for its power plants, the ministers of electricity and industry in September announced plans to depend on coal for electricity generation. The EEHC has approved three potential locations for building Egypt’s first coal-fired power plant, informs PennEnergy. According to the Minister of Electricity Ahmed Imam, coal-fired plants need to have a generation capacity of 3,000-5,000 MW to be cost-effective, reports World Bulletin. 

In October, the government announced plans to go ahead with building Egypt’s first nuclear plant in Dabaa. Egypt’s government has been intending to build a nuclear plant since the reign of Gamal Nasser, but the plans have been halted for various reasons, reports Ahram Online. In June 2010, Egypt signed a USD 160 million contract with the Australian WorleyParsons Corporation for consulting and assistance in building the plant. However, in January 2013, local tribes in Dabaa stormed the site of the plant and destroyed most of its infrastructure. Their occupation of the site ended in September after successful negotiations with the military, which promised the tribes a new tourist and residential city will be built in the area. The Ministry of Electricity and Energy is currently working on reactivating the contract with WorleyParsons and the first tender to build the 1000 MW plant will be launched in January. The contract will be signed June 14th 2015, and the plant is planned to come on stream by the end of 2021. According to Ahmed Imam, the government has already set aside USD 87 million to rebuild the infrastructure for the plant and Russia assured in November that it is prepared to invest in Egypt’s nuclear energy.

Power Linkages to Other Countries
There are also plans for building linkages to the grids of other countries, in order to cope better with unexpected power plant shutdowns as well as to enable regular trade. In June, Egypt and Saudi Arabia signed a memorandum of understanding to link the grids of the two countries. As a result of the USD 1.6 billion project expected to be finalized in 2016, the countries can exchange 3,000 MW. Since peak power usage hours of the countries are different, Egypt plans to transmit electricity to Saudi Arabia in the afternoons and the kingdom would send power to Egypt in the evenings. This project will lead to an interconnection between Maghreb, Mashriq and the Gulf Cooperation Council countries.
There is a plan to link the Eastern Nile Basin countries after a 2008 study confirmed the feasibility of exporting 2,000 MW from Ethiopia to Egypt. Some years ago, there were also discussions about linking the grids of Egypt and Greece in order to export renewable energy to Europe. However, this vision seems distant now that Egypt is having difficulties with meeting its own electricity needs.

Towards More Liberal Market
The need to attract private sector finances for increasing power capacity has motivated Egypt’s recent governments to liberalize the country’s electricity sector, which was nationalized in the early 1960s. The liberalization started in the 1990s. In 1996-97, the government permitted private companies to produce power and introduced incentives for that. As a result, the country’s three private power plants became operational in 2002 under the build-own-operate scheme. (3) They account for about 9% of power capacity. Additionally, there are a few private companies that produce electricity for their own needs and sell the excess.

Most electricity production and all transmission are still controlled by the government – by the enterprises affiliated with the EEHC. Together with the EEHC, they employ about 183,000 people. The government sets power prices depending on the purpose and amount of consumption, subsidizing almost all consumers. The prices are lower for the households that consume less energy. In 2011/12, the government spent USD 730,000 on electricity subsidies, which accounts for about 3% of the total energy subsidy bill. The Mubarak-era plans to liberalize the power market further are still on the table. There is a new electricity law pending approval by the parliament that foresees introducing more competition in the power sector as well as incentives for renewables.

Curbing Consumption
There have been attempts recently to curb electricity subsidies. In 2004, the government started gradually cutting power subsidies with the goal of bringing the prices, which had been unchanged since 1993, close to the cost of producing electricity. The cuts were suspended due to the global recession of 2009. In January-July 2012, the government increased power prices for energy intensive industries up to 50%. Households and commercial enterprises experienced an average price increase of 15% between November 2012 and January 2013. Similarly to the 2004-08 price hikes, subsidies for the households that consume more electricity were reduced more sharply, whereas a few thousand of the lowest-consuming households were exempted from the cuts completely.

Subsidy cuts were partly motivated by the goal of increasing energy efficiency. The government has also made other efforts toward power savings, in particular when it comes to lighting, which accounts for about one-fifth of electricity consumption. A few years ago, the government sold over 8.5 million energy efficient fluorescent bulbs to households for half of their price with a guarantee period of 18 months. In addition, it replaced about one-fourth of Egypt’s street lights with more efficient ones. (4) In June, the government decided that within one year, Egyptian manufacturers and importers of household air-conditioners must make a transition to energy-saving AC units, which temperatures range from 20 to 28 degrees. This contributes to the government’s target to save an equivalent of 20% of electricity consumption between 2010 and 2022. (5)

Expert Opinions Differ
The opinions of experts vary on what would be the optimal electricity mix for Egypt. When asked if it is a good idea to develop nuclear power in Egypt, Professor Christopher Knittel, Director of MIT Center for Energy and Environmental Policy Research, noted that Europe has had great success with it. “The security situation in Egypt is not a good one for nuclear power,” argued Dr. Paul Sullivan, Professor of Economics at the US National Defense University. “Nuclear power also requires an internal culture in the plants and associated organizations that stress maintenance and security, and strong ethics of chain of responsibility. My sense is that Egypt is not ready for this yet.” He added that a nuclear plant of even modest size costs as much as USD 5-8 billion. “Also, in the longer run this plant would have to be built likely by the sea. Rising sea levels could pose problems for that plant and Egypt,” the Professor said. 

In regards to coal-fueled power generation, Knittel thinks that it would reduce a lot of uncertainty for Egypt. “There is a lot of coal in the world market, so there would not be coal shortage issues, especially since US coal consumption has decreased thanks to its shale boom and this is putting downward  pressure on prices,” he explained. However, Sullivan does not think that coal-fueled power plants are a good idea since Egypt would need to import almost all the coal needed, whereas it has a lot of natural gas that could be extracted with the right policies. “Coal plants are also the dirtiest ones for producing electricity,” the Professor noted, adding that coal plants use massive amounts of water for cooling.
“Egypt really should be looking more to garbage-to-energy plants, solar, wind and other sources of power that can use the natural resources and other sources of fuel present in Egypt,” said Sullivan. “Renewables are still now expensive by average cost basis compared to coal and even nuclear,” argued Knittel on the other hand.

Both experts agree that energy efficiency measures can play a big role in avoiding electricity shortages and the best way to raise power savings would be to bring the prices of electricity in line with its actual production cost. “Until Egypt deals with subsidies issues, inefficient use of electricity will remain a serious problem,” said Sullivan. “The best thing to do economically and technically would be to phase out demand subsidies and phase in efficiency subsidies and tax breaks for some time and then phase out both as the benefits of efficiency are seen by consumers and factories,” he noted, adding that by utilizing novel technologies, huge amounts of waste heat from power stations could be used for industrial purposes.

Conclusion
Egypt’s government has made a lot of efforts to guarantee sufficient power supply. However, Professor Sullivan thinks that unless Egypt’s situation and policies change for the better, it will not manage to avoid power shortages in the future. “It may take many years to resolve the supply, technology, efficiency and other gaps that exist in the electricity industry of Egypt,” he noted, adding that the government needs more reasonable goals for raising power capacity, set up based on the human and natural resource bases of Egypt in mind. Avoiding power cuts is indeed not only about boosting capacity, but also about curbing consumption. “There is a massive source of energy in Egypt,” stressed Sullivan. “It is not oil, gas, etc. It is capturing and using inefficiencies.”

By Laura Raus

  1. “Overview data for Egypt.” EIA.
  2. “Annual report 2011/12.“ NREA.
  3. “Paving the Way for MSP. Country report Egypt.” EBRD.
  4. “Electricity Sector in Egypt.” IESC.
  5. “What sustainable solutions to meet Egypt’s rising energy demand?” 23 July2012, AFD.