Egypt

1. Brief overview of the renewables sector 

The development of the renewable energy industry has become a priority for the Egyptian government over recent years. Egypt’s current energy strategy aims at increasing the share of renewable energy, a target expected to be met largely by scaling up renewable energy projects. 1 The Solar Atlas of Egypt, New and Renewable Energy Authority’s website, Page 82.
http://www.nrea.gov.eg/Content/files/SOLAR%20ATLAS%202018%20digital1.pdf

Egypt has adopted an integrated sustainable energy strategy to 2035, which aims to increase the contribution of renewable energy to 42% of the aggregate power capacity generated in Egypt by 2035. 2 Page 4.
https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Oct/IRENA_Outlook_Egypt_2018_En.pdf

The Egyptian government is making extensive progress towards becoming a significant player in the renewable energy industry. It has long recognised the need for reform of the electricity sector in order to attract private sector investment in power generation. 3 The Solar Atlas of Egypt, New and Renewable Energy Authority’s website, Page 83.
http://www.nrea.gov.eg/Content/files/SOLAR%20ATLAS%202018%20digital1.pdf

To achieve this goal, the government has taken several steps to reform the legislative environment for the energy sector and increase the investment incentives for renewable energy projects.

These steps have included the enactment of Law No. 203/2014 for the Production of Electricity from Renewable Energy Resources. The law aims at encouraging the private sector to produce electricity from renewable energy sources by adopting several schemes for the private development of renewable energy projects, including: feed-in tariff; build own operate (BOO) projects; competitive bids; and independent power production through third-party access.

In 2015, Egypt witnessed a substantial reform in its electricity legal framework by issuing the Electricity Law No. 87 of 2015 (Electricity Law).

The Electricity Law replaced the previous single buyer model and established a fully competitive electricity market where electricity generation, transmission and distribution activities are fully unbundled. The law ended the single buyer model for electricity and allowed private generation companies to sell their production to end users.

The Electricity Law allowed third-party access to the grids, and changed the government-owned and operated Egyptian Electricity Transmission Company (EETC) into an independent transmission system operator (TSO).

The Electricity Law created two electricity markets. The first is the competitive market where qualified consumers (high voltage customers) may freely choose their electricity suppliers based on bilateral direct agreements and negotiated electricity prices. The second is the regulated market where unqualified consumers (medium voltage customers and low voltage customers) pay a regulated tariff and purchase electricity from the distribution companies who are supplied by a public trader.

The Electric Utility and Consumer Protection Regulatory Agency (EgyptERA) has been restructured to be an independent institutional champion responsible for supervising, developing and coordinating between electricity producers, transmitters, distributors and end users. It has become the electricity regulator for licensing, designing and approving tariffs, providing a separate dispute resolution mechanism, and developing a competitive market design and structure. It is also responsible for ensuring a reliable long-term supply of electricity with reasonable prices and a stable environment.

A further key step taken by the government towards promoting investment in the renewable energy sector is the allocation of land plots to be developed and used by the New and Renewable Energy Authority (NREA) in developing solar and wind projects, whether by itself or through private sector companies.

Electricity subsidies reform

In its moves towards a free competitive market, in 2014 the Egyptian government started a scheme to gradually liberalise electricity prices and achieve the full removal of electricity subsidies by 2022.

To implement this gradual liberalisation, the Minister of Electricity issued an annual ministerial decree setting the new electricity tariffs applicable for that year. The latest one was issued on 21 May 2019 by virtue of decree No. 111 of 2019 determining the new electricity tariffs for the year 2019/2020.

2. Recent developments in the renewables sector

Net metering

EgyptERA’s efforts to encourage the exchange and usage of electricity generated from solar energy have included issuing in 2013, a set of rules regulating the net metering system in Egypt. These regulatory rules were subject to several amendments to improve the system and encourage the investors to produce electricity from solar energy using the net metering system.

The current net metering system now applies to solar photovoltaic plants with a capacity of up to 20MW rather than 500kW. It also allows customers to cover all or part of their needs from electricity provided by their own solar plant or one owned by a third party qualified by NREA to establish PV plants and contracted with the customer through a power purchase agreement to sell the electricity generated from the solar plant.  4 EgyptERA Circular No. 3 of 2018 issued on 16 August 2018.

The main advantage of the net metering system is that it allows the customer to feed any surplus power generated from the solar plant into the national grid, with the option of claiming it back in the following months when needed. The settlement is made on a monthly basis through net metering devices installed by the distribution company to the customer at its own cost.

If there is an electricity surplus at the end of the fiscal year, it is bought by EETC or the distribution company at a price equivalent to the average cost of the generated electric power according to an EgyptERA report on the cost of service. The price will be updated annually for existing and new solar projects. 5 EgyptERA Circular No. 3 of 2017 issued on 6 September 2017.

Waste-to-energy

The Egyptian government is  committed to the safe disposal of waste, and in 2015 it started producing energy from waste recycling.

In 2018, the cabinet approved a unified waste-to-energy feed-in tariff of EGP 1.40/kWh to attract investors and use high technology in waste recycling. The proposed tariff is awaiting the approval of the House of Representative before it enters into force.

The announced waste-to-energy tariff should be borne and distributed between several governmental entities, and the biggest percentage of the tariff will be borne by the electricity sector.

In April 2019, EgyptERA finally approved a rate of EGP 1.03/kWh as the percentage of the waste-to-energy tariff that will be borne by the electricity companies.

Egypt has a Waste Management Regulatory Authority (WMRA), established in 2015 by virtue of the Prime Ministerial Decree No. 3005 of 2015, affiliated to the Minister of Environment. WMRA is mainly responsible for regulating, supervising and controlling all matters relating to waste management and determining the roles and responsibilities of all stakeholders in the waste management system.

It is also responsible for attracting investments in waste collection, transmission and management, and the safe disposal of waste. WMRA works on promoting relationships between Egypt and other countries and international organisations in relation to the waste management. 6 For more information, please visit the following website:
http://www.wmra.gov.eg/en-us/Pages/default.aspx

The Egyptian government is keen to support the private sector’s participation in environmental projects and to benefit from the high technology that follows from private sector involvement. These environmental projects include the conversion of municipal solid waste into electricity.

3. Forthcoming developments / opportunities in the renewables sector

Benban Solar Park

Benban Solar Park is one of Egypt’s most ambitious feed-in tariff projects. It was established on a total area of 37 km2 in Aswan Governorate, aiming to produce 1,800MW through solar energy. Its total capacity was reduced to 1,715MW after the construction of the internal roads and the ring roads, and the allocation of an area within Benban site for the facility management company to carry out the facility management works for the benefit of all the developers.

The Benban project falls under the feed-in tariff program (FIT Program) announced by the Egyptian government in 2014 to generate 4.3GW electricity from renewable energy, 2,300MW from solar and 2,000MW from wind.

The FIT Program was divided into two rounds: Round 1 announced by the Cabinet Decree No. 1947 of 2014; and Round 2 announced by the Cabinet Decree No. 2532 of 2016. The applicable tariff in Round 1 for solar projects with a capacity of more than 20MW and up to 50MW is USD 14.34 cents/kWh; it was reduced to USD 8.40 cents/kWh in Round 2.

Benban Solar Park is expected to be officially inaugurated before the end of 2019. This will see 32 developers with total capacity of 1,465MW – under Round 1 and Round 2 – start producing their full capacity of electricity generated from solar energy. The remaining 250MW has not yet been allocated to a developer.

When it becomes operational, Benban will be the biggest solar photovoltaic park in the world. In March 2019, it was awarded the annual best project award by the World Bank Group –the first time Egypt has won this award.

The project is developed by private investors and financed mainly by the International Finance Cooperation (IFC) and the European Bank for Reconstruction and Development (EBRD).

The development of the Benban site is ongoing. Presidential decree No. 230 of 2019, issued in May 2019, allocated a total area of 15 feddans to NREA to be used in the establishment of a solar photovoltaic plant.

Fatma Salah
Fatma Salah
Partner, Riad&Riad
Heba Elkady