1 TW Renewable Potential in Egypt: A Game-Changer or a Distant Dream?

Egypt has the potential to produce electricity capacity of 350 gigawatts (GW) from wind energy and 650 GW from solar energy, the Minister of Electricity and Renewable Energy Mohamed Shaker suggested at the fourth edition of the round table on the green hydrogen industry in Egypt, chaired by Egypt’s Prime Minister Mostafa Madbouly.

The claim of renewable potential, totalling 1 Terawatt (TW), is a significant announcement for the renewable sector of the country. However, reaching that potential is altogether a different story, especially considering the laggardness the country has shown so far in the renewable sector.

Egypt’s Renewable So Far

Egypt has aimed for its renewable energy to make up 42 per cent of the country’s total electricity needs by 2030, and to reach a renewable energy capacity share of 60 per cent by 2040.

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The country’s renewable energy production accounted for 29.6 per cent of the total energy mix, reaching a peak of about 10 GW in 2022. Statista reports that the total renewable energy capacity in Egypt amounted to 6,322 Megawatts by the end of 2022. This represented an increase of roughly 1 per cent from the preceding year. The country added about 2500 megawatts (MW) of renewable energy since 2017.

Initiatives to Increase RE Share

In a bid to accelerate renewable adoption, Egypt recently updated its Nationally Determined Contribution document aiming to advance its target of generating 42 per cent of its energy through renewable sources by 2030, instead of the 2035 targeted year earlier. The country aims to obtain grants and soft financing worth €500 million ($548 million) as a contribution to the energy axis of the Nexus for Water, Food and Energy (NWFE) program, in the framework for updating the NDC through a plan to develop the network.

Egypt also pushed for green hydrogen on several occasions now. At COP27, Egypt signed eight framework agreements to develop green hydrogen and ammonia projects with several well-known industry partners. The country is now one of the largest destinations for foreign direct investment (FDI) for mega projects thanks to the large-scale capital investments in 17 green hydrogen projects, which accounted for 97 per cent of Egypt’s total inbound capital investment in 2022.

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In 2023, Egypt has made significant progress in its renewable energy goals, thanks to government measures and the efforts of other stakeholders. This year has seen remarkable advancements compared to previous years, with several significant milestones achieved in the renewable sector, showcasing the country’s steady stride towards a greener future. In the recent round table meeting, Minister of Petroleum expressed trust in green hydrogen in becoming one of the most promising fields for Egypt to achieve its goals towards sustainability

In December last year, European Investment Bank (EIB) agreed to a framework loan to AlexBank, a bank of Intesa Sanpaolo group, under Egypt GEFF (Green Economy Financing Facility) for private sector financing of green economy projects, including energy efficiency, renewable energy and a significant Climate Action component. Earlier, the EIB and AlexBank announced a new tranche of $15 million renewable & efficiency financing initiative signed under the GEFF initiative.

The Red Sea Wind Energy Project is also contributing to Egypt’s green transition with the financial support of the European Bank for Reconstruction and Development (EBRD). Launched in 2023, the EBRD’s loan of USD 100 million will allow for the creation of a 500 MW onshore wind farm in the Gulf of Suez region, with USD 50 million provided by the Green Climate Fund and USD 50 million by the EBRD.

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Significant RE Projects

Significant investments made in renewable energy projects helped Egypt add several notable solar and wind farms across the country. One of the largest projects is the Gabal Al-Zait wind farm, located near Ras Gharib, with a capacity of 580 MW. Constructed by Gamesa and Siemens, the project received financial support from the European Union and Germany.

Zafarana is another notable wind farm in Egypt, with a capacity of 545 MW. Built in multiple phases between 2000 and 2010, it was one of the country’s first wind farms. Soft loans from Denmark, Spain, Japan, and Germany helped finance the €110 million project, which is linked to the New and Renewable Energy Authority.

The Gulf of Suez I wind farm is situated near the Gulf of Suez. The project began commercial operation in 2019 ahead of schedule and has an installed capacity of 262 MW.

For solar power, the Kuraymat Solar Thermal Power Plant is a significant project, developed by TSK in 2011. It has a total capacity of 150 MW. In addition, the Siwa Solar Project, with a capacity of 10 MW, is part of a rural electrification plan in Egypt, providing reliable access to power for 264 villages serving approximately 6,000 homes in Siwa City and surrounding areas.

Challenges Holding Back Egypt’s RE Growth

The recent disclosure of a 1 TW potential in renewable energy is undoubtedly exciting for enthusiasts. However, the true significance lies in the practical implementation of projects to harness this enormous potential.

Historically speaking, the growth of Egypt’s renewable energy industry encounters several hurdles, spanning technological, economic, and political aspects. Devoid of these challenges, the current energy scenario of the transcontinental country would have been much better.

On the technological front, there are challenges related to the lack of operational and management specifications. Egypt’s solar energy sector remains in the experimental phase, hindering its progress towards mass production. Additionally, the country faces a shortage of skilled labour proficient in renewable energy technology and appropriate storage techniques.

Economically, the difficulties manifest in diverse forms. Impoverished rural areas, situated below the poverty line, may struggle to afford expensive renewable energy solutions. On the private sector side, the high payback rates and persistently elevated yearly interest rates pose significant obstacles. Consequently, small and medium-sized businesses encounter difficulties in making investments in the renewable energy sector.

Political motivation forms the backbone of renewable adoption for the nation. The political challenges undoubtedly hindered the swift adoption of RE in the past and probably will hinder its future growth too. Inconsistent regulations across different government departments create uncertainty and hinder streamlined growth. Moreover, the absence of standardization and a consistent regional regulatory framework further exacerbate the situation, impeding the industry’s advancement.

A paradox emerges as the country showcases its renewable energy potential while simultaneously preparing to intensify its reliance on fossil fuels. According to a November 2022 Human Rights Watch report, Egypt heavily depends on coal, oil, and gas, constituting around 90 percent of its energy production for electricity generation. Furthermore, Egypt has ambitious plans to expand its oil and gas production. Surprisingly, despite this substantial dependence on fossil fuels, there is little to no public opposition or campaigning against Egypt’s own fossil fuel production, as stated by the Human Rights Watch.

Egypt’s renewable energy industry so far saw an average renewable growth. The country needs to overcome the burden of hindrances impeding its renewable penetration until now. Considering its size and influence in the region, Egypt is an important country and its renewable efforts will have ripple effects across the region toward a green future.