Egypt’s energy sector recuperates as solar projects progress

CAIRO - 25 August 2017: Long-awaited solar power plants are becoming a reality as companies started construction works in Aswan, where majority of new plants will lie, benefiting from the high intensity of solar heat.

Fueled by a severe energy shortage, the Egyptian government announced in September 2014 a mega project where it will involve private sector companies to build solar plants in Aswan, Minya and Hurghada, under the name of ‘feed-in-tariff’ (FiT) scheme.

The plan set by Minister of Electricity Mohamed Shaker eyes generating 20 percent of Egypt’s energy supply from renewable energy resources by 2022.

Divided over two rounds, the first round of the scheme witnessed three developers pursuing their projects at Benban city in Aswan. Saudi Arabian group Fawaz Alhokair’s FAS Energy, ELF and Infinity Solar have already started construction works at the site.

More developers were interested in the project, but stalled their proposals upon disagreeing with the Ministry, which put a condition in the contract that forces parties to resort to local arbitration courts in case of disputes, a clause reportedly refused by international lenders.

Small-scale projects under the scheme were luckier. Local solar energy firm, Karmsolar, was able to clinch an SME loan from EG Bank, prompting it to sign a 25-year Power Purchase Agreement (PPA) with the Canal Electricity Distribution Company (CEDC).

Karmsolar said in May that its 2MW solar plant in Hurghada, under the scheme, has begun operations.

With the government becoming more flexible by allowing international arbitration, projects under the second round of the FiT were able to persuade international lenders.

In July, the International Finance Corporation (IFC) approved $660 million in funding to 11 FiT projects in Benban, near Aswan, according to an International Cooperation Ministry statement. These projects are worth a total of $730 million and have a total capacity of 500MW.

This has allowed Saudi Arabia’s ACWA Power to sign Power Purchase Agreements for three 120MW solar power plants under the scheme.

Located in Benban area in northern Aswan, the agreement allows ACWA Power to develop, build, finance, own and operate three solar plants with a total capacity of 120MW.

The three plants will reduce carbon dioxide emissions by 156,000 tons per year, and secure power supplies to 80,000 households, Shaker said in the statement.

Construction works of the plants will be completed by the fourth quarter (Q4) of 2018.

The European Bank for Reconstruction and Development (EBRD) is also expected to finance a total of 16 solar projects in Egypt at a total capacity of 750MW. They pledged $500 million in funding framework for the FiT project.

Earlier this week, the EBRD signed an agreement with France-based Proparco worth $116 million. The plan is to finance the construction of two 50MW solar plant in the Benban solar complex in Aswan.

Coming under the framework of the Paris Climate Agreement, development of Egypt’s solar energy sector will help reduce dependency on traditional gas-fired plants, which will eventually lead to saving more gas supplies that could benefit the budget if exported.