While Egypt has an average solar radiation of between 2,000 and 3,000 kilowatt hours per square meter, in addition to excellent wind conditions and hydropower potential, the countrys installed renewable energy capacity accounted for just 1% as of 2013.
That’s about to change.
Egypt has set an ambitious goal to install 4.3 GW of wind and solar power by 2017, including 2.3 GW of solar (2 GW of large-scale and 300 MW of small scale under 500 kW) and 2 GW of wind. The feed-in tariff for installations between 500 kW and 20 MW is $0.136 per kilowatt hour; for plants between 20 MW and 50 MW, it is $0.143 per kilowatt hour.
In a new report, Egypt’s Solar Energy Market: FiT Program and Beyond 2015, the Egypt Solar Industry Association (Egypt-SIA) offers a current overview of government policy, the countrys feed-in tariff program and perspectives from a number of stakeholders, including government regulators, developers, EPC contractors and legal experts.
The government has and continues to put solid policies to help make solar energy a true alternate large-scale source of Egypts energy mix, with 2.3 GW of power to be generated by solar photovoltaic energy in the next couple of years, says Egypt-SIA Executive Director Alan Elyousfi.
The countrys New and Renewable Energy Authority (NREA) selected 69 large-scale projects of more than 20 MW last year as part of an initial renewable energy tender for 2 GW of large-scale solar capacity.
In the report, NREA Chairman Mohamed El Sobky says final agreements covering PPAs, usufruct, land and cost sharing will likely be completed by April.
Discussions have taken place between the electricity entities, developers and financiers and El Sobky says the NREA is receiving feedback. There is an open communication channel with all the developers and its helping us in understanding the various points of view and developing the related documents.
Project financing in Egypt will initially be very much led by international financial institutions and multilateral development banks, such as the International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD), according to Marc Norman, a Dubai-based associate at international legal firm Chadbourne & Parke. IFC and EBRD are assisting the government with the drawing up the draft power purchase agreement.
Wael El Ezabi, CEO of Sun Infinite, a Cairo-based EPC contractor and developer, says access to finance is a hurdle, but points out that development banks products are more ready and designed for this type of project finance, and thats why we are more inclined to work with development banks.
Egypt’s human capacity demand
Sun Infinite is currently developing its own 50 MW FiT project project that will use imported components from Europe and China.
El Ezabi says one of Egypts biggest challenges is a lack of qualified personnel. Being a new industry, there is a lack of trained technicians, especially engineers and system installers.
To incentivize developers and investors, the NREA is offering 36 ready plots of land to qualified bidders for large-scale solar projects. The land plots will be allocated to private companies on a first come, first served basis for 20 to 25 years.
The NREA has selected some sites with specific capacities and subdivided those into smaller plots for each project, according to Mohamed Nabil, senior associate of Cairo-based law firm Sharkawy & Sarhan. The plots will be fully permitted so that investors will not have to worry about land permits and approvals for solar projects. "Offering fully permitted land through allocations should save investors a lot of hassle," says Nabil.
The countrys largest plot is near the southern city of Aswan and will cover capacities totaling 1.8 GW.
Beyond the FiT scheme
While the governments FiT scheme is capped at 50 MW, developers can still participate in the wider solar market with larger projects.
If you do a project outside the FiT program, then you have the possibility of working on a much larger scale project because you wont be constrained by the capacity cap, says Norman.
The Chadbourne & Parke associate says there may be scope to negotiate directly with the Ministry of Electricity to develop larger scale projects and perhaps propose a tariff that is more competitive than the FiT but in exchange for larger capacity levels.