Power policy

The government has set its sights on clean power providing 42% of electricity generation by 2035, with different targets for various renewable technologies. Yet, the target-setting strategy document is not in the public domain, while intermediate targets for 2022 are unlikely to be met. But after some trial and error, Egypt has successfully held a number of competitive renewables tenders. These include the landmark 1.4-gigawatt (GW) Benban solar project, commissioned in late 2019. However, a healthy auction pipeline has shrunk due to an oversupply of generation capacity and supply chain issues. There is little visibility on tenders due in the coming years.

Efforts are being made to encourage rooftop solar through net metering, rules for which were reissued in April 2020. Progress in this area has been lacking as would-be installers have their hands bound by red tape. Those applying to erect panels and connect them to the grid must, for instance, entirely own their properties and have no outstanding planning issues. Such rules rule out a large share of the country’s housing.

Power prices and costs

Retail power prices are being raised as part of the government’s economic reform program. An announced phaseout of electricity subsidies by 2022 has been delayed until 2025 – ostensibly due to the coronavirus pandemic. Similar efforts are being made to remove subsidies for cooking gas, diesel and gasoline. Average residential electricity bills have been raised from 240 Egyptian pounds ($12) per megawatt-hour (MWh) to 1,180 Egyptian pounds/MWh over 2012-20. At $0.084/kilowatt-hour (kWh), the feed-in tariff awarded to the Benban solar projects is high by international standards, although recent auctions tendering individual projects have attained lower prices. Egyptian PV was cheaper than any other source of new bulk generation in 2021.

Power market

Egypt’s power mix is dominated by the addition of 14.4GW of Siemens combined-cycle gas turbines, invested in after a power crisis in late 2014. Together, these additions have provided a substantial reserve margin. Despite recent additions, renewables made up only 1% of the power fleet in 2020. The oversupply could crimp growth in the short term. Renewables that have been commissioned are contracted on a take-or-pay basis, guaranteeing tariff payments regardless of demand. Despite the growing role of independent power producers, state utility and its subsidiaries own and operate some 80% of installed capacity. Moreover, private-to-private power deals can be signed, but a robust framework governing such contracts has yet to be finalized.

Egypt has ambitions to become a regional electricity hub and is actively expanding power interconnector capacity with neighboring countries such as Saudi Arabia. There is also talk of leveraging renewable power to become a hydrogen producer; several production projects have been announced involving offtakers such as fertilizer trader Fertiglobe. Combining clean electricity exports and hydrogen production would require the massive build-out of clean generation capacity.

Doing business and barriers

Peak electricity demand has increased by some 29% over 2010-20 to reach 31.9GW. The pandemic has slashed power consumption, but demand is expected to resume with strong growth. Favorable wind and especially solar resources align with the government’s renewables ambitions. Egypt has set its sights on boosting gas extraction, but plummeting renewables costs and sustained high gas prices make combined-cycle gas plant additions unlikely. While the country currently enjoys an abundance of generation capacity, much of Egypt’s power fleet is made up of old, highly inefficient diesel plants, which will be replaced in the coming years. As for coal, a 6.6GW plant postponed in April 2020 is unlikely ever to be built.

EV market

Egypt’s parliament has discussed putting an end to all fossil fuel-burning car sales in 2040.

EV policy

However, the government has yet to implement any substantive policy support in this sector and the EV market remains at an early stage. The government had ended fuel subsidies on road fuel. This may facilitate uptake when support for electrifying transport is more forthcoming.

Buildings market

A National Energy Efficiency Action Plan kicked off in 2012 was supposed to address the energy performance of Egypt’s buildings fleet.

Buildings policy

However, the initiative has made little headway in enhancing energy efficiency across the economy. A second plan was adopted in 2018 and, like the first, has yet to bear fruit.