Funding Renewable Energy – Egypt Today

As Egypt aims at boosting the renewables’ share from one percent to 20 percent of energy produced by 2022, the state has been eager to secure funding for projects in that sector targeting mainly utility scale renewable energy and small scale solar energy. Wind and solar are supposed to constitute 12 and two percent of Egypt’s energy, while the rest would be generated from hydropower. A milestone was achieved by promulgating the feed-in tariff law in 2014 before it was amended in 2017.

In the same year, the European Bank for Reconstruction and Development (EBRD) and the Green Climate Fund (GCF) approved the Egypt Renewable Energy Financing Framework and it is expected to be accomplished in 2022.

The programme has two stages. The first is providing technical assistance for planning, setting necessary policies, and enhancing renewable energy integration mechanisms. The latter is pumping investments to support the development and construction of renewable energy projects worth $1 billion with the aim of generating around 1,400 GWh electricity annually and avoiding GHG emissions of about 800,000 tCO2e.

The mechanism in the first phase is debt financing by both organizations of up to $500 million, including up to $150 million in loans from GCF. In the second phase, debt financing would be leveraged from commercial banks and private sector investments.

Last year, the Asian Infrastructure Investment Bank (AIIB) announced $210 million in debt financing for building 11 solar power plants with an aggregate capacity of 490 megawatts.

In parallel, a report by Bloomberg Climatescope indicated that Egypt ranked second among countries making progress throughout the year in the transition to renewable energy. According to the report, Egypt climbed 23 places to rank 19 out of the 71 evaluated countries in emerging clean energy markets while Jordan topped the list.

Egypt’s plan states that Egyptian Electricity Transmission Company invites tenders for constructing projects with a capacity of 250 megawatts for wind energy and 200 megawatts for solar energy in the BOO (Build-Own-operate) system. In addition, the New and Renewable Energy Authority (NREA) launches bids to design, supply, and execute projects with a capacity of 750 megawatt for producing 1980 megawatt of wind energy and 80 megawatt for solar energy.

Investments in Benban

Benban – established on an area of 37-square-kilometer and housing 40 power plants – will generate 1,650 megawatts of electricity when fully operated by mid-2019. That is sufficient to power hundreds of thousands of homes and businesses. Plants in the solar park are executed by 32 companies.

IFC and a consortium of other lenders decided last year to finance the project by $653 million by directing funds to 13 private companies. The loan is part of a series of annual loans called the Fiscal Consolidation, Sustainable Energy, and Competitiveness Development Policy Financing loans – worth a total of US$3.15 billion and provided over 2015 to 2017.

The consortium includes Asian Infrastructure Investment Bank, African Development Bank, CDC, Finnfund, Oesterreichische Entwicklungsbank, Industrial and Commercial Bank of China, Europe Arab Bank, Arab Bank and Finance in Motion/Green for Growth Fund.

The EBRD also gave financing for 16 projects in Benban – the world’s largest solar PV park – as part of the Egypt Renewable Energy Financing Framework. The Multilateral Investment Guarantee Agency – a subsidiary of the World Bank Group – provided $210 million in political risk insurance to 12 projects within Benban whose total cost is between $3.5 and $4 billion.

Wind Energy Farms

There are six wind farms that are under construction in Egypt. Those include three farms in Gabal Al Zeit, and three farms in Suez Gulf. They will start operation between 2018 and 2023.

The second farm in Gabal Al Zeit whose cost is €188.7 million and LE308.6 million is financed by the Japan International Cooperation Agency (JAICA) which also funds a 200 megawatts wind farm western the Nile Valley. The Spanish government funds the last farm in the same location which will be accomplished in the value of €85,6 million and LE325.5 million. Their capacities are respectively 220 megawatts, and 120 megawatts.

The second farm in Suez Canal is executed in partnership with the German Bank for Reconstruction (KFW), the European Investment Bank (EIB), and the French Development Agency (AFD), which also funds the third farm. The capacity of the former is 200 – 250 megawatts, while that of the latter is 200 megawatts.

The first farm in that location – with a capacity of 200 megawatts – is funded and executed by the Emirati Masdar Company which is one of two private investors both funding and executing a mega project in that sector as Siemens builds a number of wind farms in the country. The total capacity of these is 2,000 megawatts while that of the first phase is 180 megawatts.

Furthermore, two wind farms located in Suez Gulf, and western the Nile Valley will be executed in the BOO system which will also be used to build a solar park western the Nile Valley, and 10 stations with a capacity of 10 megawatts in Kom Ombo.

JAICA and AFD will fund two solar parks with a capacity of 20 megawatts each in Hurghada and AFD.

Small and Medium Scale

CEO of Onera Systems Wael El Nashar says that two months ago a funding program was activated by the Ministry of Electricity and Renewable Energy covering 25 percent of the cost of on-grid solar stations for residential, commercial, industrial, and touristics entities.

The body in charge of implementing the program is the Industrial Modernization Centre (IMC). It grants $250 for each kilowatt with a maximum of 150 kilowatts summing up to $37,500. The program is a joint project with the UNDP and the Global Environment Facility (GEF) worth $3.5 million, El Nashar clarifies.

The project titled “Grid-Connected Small Scale Photovoltaic Systems” and signed in 2016 aims at installing four megawatt of small scale photovoltaic systems on rooftops of the above mentioned entities.

In 2017, the EBRD and European Investment Bank (EIB) signed an agreement with Alexbank to provide a financing package of $30 million under the Green Economy Financing Facility (GEFF) for Egypt. The first stage consists of $15 million on-lending to private companies for energy-efficiency and renewable energy projects targeting mainly small businesses. GEFF secures financing of €140 million by EBRD, EIB, and AFD for small-scale generation.

El Nashar explains that renewable energy is divided into small, medium, and utility (large) scales. In Egypt, developers – predominantly foreign – invest in utility scale whereas banks only fund the local component.

The problem is that there are no funding programs designed for medium scale stations whose capacity is below 20 megawatt. Owners can get regular loans from banks and pay back over 5 – 7 years whilst the duration for such projects should be 10 – 15 years, El Nashar says.

El Nashar explains that small and medium scales in Egypt consist of two parties, consumers, and Engineering Procurement and Construction (EPC). For the utility scale such as Benban, the sector involves off-takers (the Ministry of Electricity and Renewable Energy), developers, EPC, and manufacturers.

There are Egyptian manufacturers who assemble photovoltaic cells. However, El Nashar reveals that those do not supply for utility scale as they are not certified by international organizations which makes acquiring funding by developers from international bodies hard.

Among those producing photovoltaic (PV) cells in Egypt is the Arab Organization for Industrialization, solar energy expert Hani Beshara states. He added that Egyptian companies mostly do EPC and assembling of certain components of renewable energy plants such as turbines and PV panels.

The Enara CEO says that banks would not fund projects like Benban because they need collateral as they only provide nonrecourse loans. On the other hand, EBRD has provided technical assistance to more than 600 small and medium-sized local enterprises.