”Energy Efficiency Master Plan for Egypt”, a roundtable organized by Egypt Oil & Gas, took place at the Four Seasons Nile Plaza in Cairo on March 26th. The event, organized by Egypt Oil &Gas, brought together a diverse group of stakeholders including policy-makers, industry experts and academics to discuss how to tackle Egypt’s current energy issues, particularly how the country can benefit from the implementation of policy and technologies that promote energy efficiency.
”The time of cheap energy is over,” said Executive Chairman of TAQA Arabia, Khaled Abu Bakr. In his opening remarks, he emphasized the necessity for collective action in order to move the country past the current crisis. In organizing the event Egypt Oil & Gas sought to facilitate a space for dialogue by providing a forum in which a range of stakeholders could come together to discuss and debate how best to solve the country’s pressing energy challenges.
The Main Challenges for Egypt’s Energy Sector
Dr. Anhar Hegazy, Head of the Energy Efficiency Department at the Egyptian government’s think tank, the Information and Decision Support Center, highlighted in her presentation that Egypt’s energy deficit is already at a level where it was earlier forecast to be in 2022. ”We are all here because development in our country is in danger,” she said. Hegazy went on to portray the ”distorted institutional structure” as one of the main impediments to better management; stating that subsidy reform, energy efficiency and increased use of renewables were the core issues at hand, but without structural reform these issues were unlikely to be resolved.
Other participants echoed Hegazy’s concerns. Several panelists said that low energy prices provided by the current subsidy system are the main barrier to achieving higher energy efficiency in Egypt. Eng. Emad Ghaly, Power Generation and Renewable Energy Country Division Leader for Egypt, at Siemens, explained that the company’s customers in Egypt are discouraged from investing in energy efficiency improvements because due to low energy prices, it will take several years for the investment to pay off in terms of lower energy bills.
”The institutional structure of the energy sector requires some re-thinking,” said Mr. Emad Hassan, Principal at Nexant Inc. He pointed out that there is a ”schizophrenic approach to implementation between the Electricity and Petroleum [Ministries]”, insisting that, ”The problem is we are still dealing with ‘I did the right thing, but he didn’t’ mentality. If we take this approach, we are going to continue to pull in two different directions and the ball is never going to move. If we want the ball to move, we have to own the problem, all of us collectively.”
Energy Efficiency Potential Exists in All Sectors
Ghaly introduced several technologies that Siemens offers for increasing energy efficiency in a wide variety of industries, including oil, gas and the electricity sector. For example, Siemens combined cycle technologies can increase power plant efficiency to 60%, whereas the average efficiency of Egypt’s power plants is just 40%. ”There is major energy saving and energy efficiency potential in all sectors,” Ghaly stressed, adding that low energy prices are the main obstacle to realizing this potential.
When pricing is not motivating companies to invest in energy efficiency, the government could make moves to impose obligatory energy efficiency targets for industries. This idea was proposed by Dr. Mohamed el-Sobky, Director of the Energy Research Center at Cairo University. He said this could be a potential option alongside mandatory energy audits, to be conducted on a regular basis.
Dr. Samir Mowafy, Advisor to the Minister of Environment, on the other hand suggested that Egypt should re-think the development of its industrial sector, considering that oil, gas and some other energy resources are limited. ”Should we go for energy intensive industries that require a lot of limited resources or go for labor intensive [industries]?” he asked the panel.
Mitigating Peak Load
Mr. Olivier Guichard, Near and Middle East Managing Director at Alstom, said that the so-called demand response management system has proved an effective tool for energy conservation, by companies, as well as residential customers, especially for mitigating peak load. In the case of this system, customers can sign up to be called to reduce their energy consumption at certain times. They may receive financial rewards for reducing energy consumption in response to a call or be penalized for not doing so, depending on what is stated in their agreements with the utility company. Such a system has proven successful in South Australia, where it has yielded energy savings ranging from 19% to 35% since 2006 when Siemens conducted the initial trial.
Guichard also introduced an experiment taking place in Abu Dhabi. Last summer, half of the air conditioning capacity in five buildings was switched off and the resulting impact on temperature and humidity measured. In fact, there was no impact for several hours, for example 3.5 hours in case of a hotel, proving air conditioning capacity can be reduced temporarily with little perceptible effect. Alstom is involved in the next stage of this experiment, which foresees expanding the experiment to a much larger building area in order to mitigate peak load in the UAE on a larger scale.
As another means of mitigating peak load, Dr. Galal Osman, Professor of Renewable Energies at Mansoura University, pointed out the potential of storing energy as water in elevation as well as ice storage air conditioning technology whereby ice is being used for thermal energy storage. He called for the government to develop an energy storage industry in Egypt.
Since air conditioning systems account for a major share of electricity usage in Egypt, several ideas proposed at the roundtable focused specifically on them. Osman said that blackouts could be avoided by sending radio signals to temporarily switch off less essential appliances such as air conditioners and water heaters at times of critical load. ”This has been done 30 years ago in the USA and elsewhere,” he added.
The Culture of Wasteful Energy Use
Rafik Nasrallah, Deputy Chairman of Prima Elios for Electrical Industries, noted that most African countries do not accept the energy class of air conditioning units that are legal for use in Egypt, saying the government could raise air conditioning standards easily. ”As a citizen… I cannot accept that lobbyists for certain producers are stronger than the government,” he said. Nasrallah added that he does not understand why the government has not moved to phase out GLS lamps as has already been done in 65% of the world. ”These are quick fixes” he insisted, ”With two or three ministerial decrees we could see results in just a few months.”
Setting higher standards for buildings could also yield significant energy savings. It was pointed out that Egypt’s energy efficiency codes for residential, commercial and governmental buildings that were finalized several years ago have never been implemented. ”I am taking it as a clear example of things we do and they are there on shelves,” Hegazy said. ”It is produced in a very nice technical position, but is not enforced because it is not simple to the degree that it can be implemented,” she added.
Dr. Magdi Nasrallah, Founding Chair of the Department of Petroleum Engineering at the American University in Cairo, said that improving insulation of buildings could increase their energy efficiency considerably, and this could be achieved by switching to alternative construction materials. Dr.Arch. Hend Farouh, Head of the Central Unit of Environmental Affairs at the New Urban Communities Authority, informed the roundtable that the government is developing a Green Permit Rating System, where energy efficiency plays a key role, and is trying to find ways for incentivizing investors to use it.
It became evident from the discussions that there is a multitude of technical solutions for increasing energy efficiency in Egypt. The fact that most of these solutions are not implemented can be attributed to what can be called a culture of wasteful energy use, which is encouraged by generous subsidies. The need to change such a culture was emphasized by several participants. ”We have to start promoting understanding about what is the real situation and that anyone of us who is wasting energy is in fact stealing from his fellow citizens,” stressed Hegazy. Sobky proposed that topics related to energy efficiency should be included in the school curriculum, especially in primary years.
Lessons for the Public Sector from South Africa
Several participants called for clearer government guidance and rules for increasing energy efficiency. Hence, a big part of the roundtable was dedicated to ways that Egypt’s government could manage the energy sector more effectively. Renewable Energy, Energy Efficiency and Planning Expert Dr. Adel Beshara presented South Africa as a case study.
South Africa managed to successfully avoid an energy crisis, as a result of prudent government planning. The cornerstone of this planning was the formulation of a white paper, a document responsible for outlining a vision, in this case for the whole energy sector in the country. The draft of this document was also uploaded on the internet and amended in several stages, based on comments from the public, before the final version was completed. This consultation process ”developed synergy and has given a lot of momentum to policy makers to make informed decisions,” explained Beshara.
Based on the white paper, the government then compiled an integrated energy plan for South Africa.The plan covered not only the energy sector, but also other relevant fields, including transport and urban planning. As part of the integrated energy plan, an energy efficiency master plan was also put together with public consultation. All government departments were involved in implementing the plan. The impact of the new policies was measured and the master plan was modified accordingly, based on developments on the ground. The government also embarked on an active information dissemination campaign, involving a wide range of guidelines on energy efficiency, which was made available online.
Using the South African example, Beshara stressed the need for the Egyptian government to initiate a working document. ”We need a white paper to work from,” he said. He stressed that the paper is the necessary foundation for an ”integrated energy vision and strategy in Egypt”, explaining there was a lot to be learnt from South Africa’s experience. He also stressed the importance of public consultancy and transparency when compiling strategies and plans. As Beshara pointed out, ”Egypt has actually done a lot for improving energy efficiency since late 70s … but the yield could be better.” The government is currently working on incentives for mitigating the energy crisis, several of which were also touched upon at the roundtable.
Several Energy Institutions Being Established
Eng. Sherein Abdalla, Senior Energy Efficiency Engineer at the Egyptian Electric Utility and Consumer Protection Regulatory Agency (Egypt ERA) outlined the activities her organization is undertaking for promoting energy efficiency. These include a wide range of awareness raising measures: informing the public about the present load and sending critical load notifications via Facebook, a mobile application and some media channels; disseminating information materials in governmental buildings and schools as well as to some consumers alongside with electricity bills; engaging with customers via Twitter and YouTube; organizing competitions for increasing awareness among children; and holding Arab Energy Efficiency Day on March 21st. The Egypt ERA also holds monthly meetings with distribution companies to supervise their activities for increasing energy efficiency, and has launched a training program whereby distribution companies certify energy mangers all over the country.
Abdalla also informed the panel that with funding from the World Bank, an energy efficiency unit is being established at the Ministry of Electricity. The unit will be responsible for monitoring and promoting energy efficiency policies and measures, and managing corresponding funds in the electricity sector. A technical assistance team, which will establish the unit, and provide ongoing in-house support to its staff during the first year of existence, is currently being selected.
Hegazy informed the panel that two weeks ago, the Supreme Energy Council was re-established with a mandate to develop a sustainable energy path for Egypt.
Furthermore, the re-establishment of the Energy Planning Organization, which was dismantled several years ago, is also underway. On the sidelines of the roundtable, Hegazy explained that this organization would be charged with supporting the Supreme Energy Council and determining the responsibilities of the different energy efficiency units in the public sector so that they do not overlap. The initiatives of the organization will require the approval of the Supreme Energy Council, which is headed by the prime minister and contains representatives of all relevant ministries. In Hegazy’s opinion, the Organization of Energy Planning should be under the prime minister’s office, although some ministries want to have it under their umbrella. Additionally, Hegazy said that a gas regulator is being established, which will open the way to liberalizing the market.
No Consensus on Government’s Priorities
Hegazy noted that an energy efficiency mindset has started to penetrate Egypt’s public sector. However, several roundtable participants questioned the effectiveness of the government’s management of energy issues.
Referring to the Egypt ERA, Sobky noted that, ”A regulatory body should be careful not to slip into the mistake made by the Energy Planning Organization when it went from planning to implementation.” Hassan agreed that the Egypt ERA should try not to get involved in implementation because ”it is not preferable to be a judge and a player”.
”We should keep in mind that a regulatory body should be an independent entity formed via elections not through appointment,” said Eng. Osama Kamal, former Minister of Petroleum. ”The regulatory body should include a Treasury representative who would prioritize where we should direct our money,” he added. Several other participants agreed that the role of the Finance Ministry should be larger.
Overall, there was no consensus among participants on what should be the government’s priority in fixing the energy sector’s woes. While some emphasized the need for a general energy strategy and institutional overhaul, others believe that in the current situation, concrete decisions and actions need to be taken on the executive level rather than creating new policies and institutions.
Renewables for Increasing Energy Production
Next to enhancing energy efficiency, another way to mitigate Egypt’s energy crisis is to increase energy production, especially from renewables since these resources are not depleting. Accordingly, renewable energy was a recurring topic at the roundtable discussion. Hegazy said that by 2025, all renewables would be competitive for electricity production. ”Different studies say that by 2020, [solar] PV will be even cheaper than coal,” she added. Osman said that in Brazil, renewable energy is already cheaper than fossil fuel. However, in Egypt renewables are currently more expensive than fossil fuels. Hence, Magdi Nasrallah suggested that the government could provide subsidies to support renewables. It was also proposed that the government could impose obligatory shares of renewables, at least in some sectors, and promote local production and ownership of new power capabilities.
Farouh informed the panel that the Ministry of Housing is preparing a decree to mandate the installation of solar water heaters in all new governmental buildings, and from 2016 in all other new buildings as well. Speaking of Egypt’s solar power potential, Kamal noted that, ”The East Owainat area can produce 280,000 megawatts of electricity, and it’s a huge quantity, equivalent to double European consumption, and 100 times more than Egypt’s current consumption of electricity.”
Hassan el-Wakil, Managing Director of Sama Solar Energy, informed the panel of a private sector project currently being planned, and expected to be approved by the government in the near future, which will involve construction of a 5-gigawatt solar PV plant, later to be expanded to 25 gigawatts. The project will be located close to the border of Sudan where solar DNI is the highest in the world. The project will also see the establishment of a city with a projected one million inhabitants within ten years, which would receive all its electricity from the solar plant. The components of the solar plant are to be manufactured from raw materials existing in the mountains of the Eastern Desert. This 17-billion-dollar project is being developed by a group of 25 companies.
While Osman stressed that Egypt could make use of hybrid renewable production, Dr. Mona Kamal, Head of the Environmental Quality Sector at the Ministry of Environment, said that the country could produce 20% of its energy from solid waste.
Oil and Gas to Continue Playing Major Role
Ghaly noted that in the energy sectors of several countries ‘prosumers’, the consumers who produce their own electricity and send any excess to the grid, have started to play a significant role. ”We do believe in Egypt we need to promote, create and support those prosumers to play a role in the market,” he said. ”I think that with the promotion of specifically PV, we will see those prosumers playing more of a role in the Egyptian market too.” Some other participants also pointed out the potential of self-generating entities, which do not need to be connected to the grid at all.
Although solar power dominated the roundtable discussions about renewables, Ghaly said that from Siemens’ perspective, the most competitive renewable energy source currently is wind. Egypt has abundant wind resources that could with current technologies produce electricity at a price ranging from 6.5 to 8 dollar cents per kilowatt-hour in some locations across the Red Sea, he said.
Despite Egypt’s renewables potential, Ghaly noted that, ”We do still believe that fossil fuel power generation will play a key role … at least in Egypt and many other countries.”This is not necessarily bad news for Egypt, as Dr. Mark Fenton, General Manager of Dana Gas-Egypt, said, ”Egypt has tremendous gas and oil potential.” He added that, ”I sat at a presentation by the minister a couple of days ago where he talked about reserves in this country. In my view, the reserves are probably 2-3 times what he is saying and all you need to do is unlock them.”
Fenton believes that Egypt should incentivize investments to hydrocarbon exploration and production, since this would improve the country’s trade balance, and provide money to the population for investing in energy efficiency, and to the government for offering targeted tax incentives to drive energy efficiency. A major hindrance to hydrocarbon investments is the government’s inability to pay its debts to oil and gas companies. ”We accept that there is a shortage of money,” said Fenton. ”But what they [the government] can do is to look at their contracts and negotiate a change of contacts, whereby the companies are more incentivized to invest.”
More Roundtables to Come
In his closing remarks, Hassan said that there should be further ongoing public discussions on energy issues, focusing on one to two questions and being hosted by respective ministries. Mohamed Fouad, President of Egypt Oil & Gas, agreed with the need for further discussions. He also pointed out that, ”This is our first roundtable that is focusing on other energy resources besides oil and gas. But we see that there is a transition happening and the future is not only oil and gas focused, and we believe that as a media source we need to be part of this transition.” Obviously, Egypt Oil & Gas will also continue organizing major events that relate directly to the oil and gas industry, such as the next roundtable on brownfields that will take place in May.
By Sherif Elhelwa, Laura Raus, and Maddison E. Sawle