The Egyptian solar market has received a timely boost this week following the news that two leading global development banks are to pour more than $500 million into the construction of 1.4 GW of PV capacity in the country.
The European Bank of Reconstruction and Development (EBRD) has confirmed that $380 million from a pot of $500 million is to be used to part-finance 16 large-scale solar projects in Egypt with a combined capacity of 750 MW. Additional funding will be mobilized from the private sector to help these projects get over the line.
Not to be outdone, the World Bank’s International Finance Corp (IFC) has pledged to mobilize $203 million of its own financing to develop a further 13 solar farms, with a cumulative capacity of 650 MW.
All in, the EBRD and IFC – together with private backers – will oversee some $1.8 billion in investment into Egyptian solar over the next few years.
The solar projects set to receive EBRD’s backing are all located in a site near to the village of Benban in Upper Egypt, and will become the country’s first private utility-scale renewable energy projects. Egypt is still heavily reliant on fossil fuels to meet its power needs, with Bloomberg New Energy Finance (BNEF) estimating that oil and gas provides 90% of the country’s power.
The Egyptian government, however, is aiming to generate 20% of the nation’s electricity from clean sources by 2022. Thus far in 2017, the country’s solar industry has attracted investment of more than $2 billion and the involvement of firms ranging from Saudi Arabia’s ACWA Power, France’s EDF and Norway’s Scatec Solar.
The EBRD’s loans are part of a $500 million program to support Egyptian solar first launched in 2015. The bank’s financing partners in Egypt include the Islamic Development Bank and the Green Climate Fund.
“This investment has made an important contribution to a major shift in Egypt’s energy market, engaging the private sector in support of renewables development and creating a template for many similar projects in the sector in the future,” said EBRD’s director for power and energy utilities, Harry Boyd-Carpenter.
The IFC, meanwhile. Works with China’s Asian Infrastructure Investment Bank and Finnfund.
Egypt’s solar industry has suffered from the sharp devaluation of the Egyptian dollar in recent years, with local banks struggling to finance projects where the FIT is based on the local currency, particularly where debt was raised in USD. Egypt is likely to adopt a competitive auction system in 2018 in a move designed to help grease the wheels of further PV development.