Renewable energy in Egypt

The energy sector in Egypt witnessed key changes including the gradual lifting of government subsidies on traditional fuels and the introduction of a number of legislative reforms as well as incentives and favorable policies to promote and develop renewable energy projects. 

In order to encourage the private sector to produce electricity from renewable energy sources, Egypt has issued the Renewable Energy Law No. 203 of 2014. 

The Renewable Energy Law adopted several development schemes for the private development of renewable energy projects, this includes the following: 

Under this scheme, the New and Renewable Energy Authority (“NREA”) shall issue tenders to private-sector companies to install renewable energy power stations via EPC contracts. Such stations shall be operated by NREA. Produced electricity shall be sold to the Egyptian Electricity Transmission Company (the “EETC”) at a price suggested by EgyptERA and approved by the Cabinet. 

The second scheme allows the EETC to issue tenders to private-sector companies to build, own, and operate (“BOO”) renewable energy power stations and sell the generated electricity to EETC at the terms and prices agreed between the EETC and the investor. 

Private sector investors are allowed to build, own and operate renewable energy power stations and sell the generated electricity to EETC or to licensed distribution companies via power purchase agreements (“PPA”) in consideration for a pre-announced feed-in tariff (“FiT”). 

The period of a PPA will not exceed 25 years for solar energy projects and 20 years for wind energy projects. 

In 2014, the Egyptian Government launched the feed-in tariff program (“FIT Program”) to generate 4.3GW electricity from renewable energy, 2,300MW from solar and 2,000MW from wind. 

Eligible developers are required to establish a project company in the form of a joints stock company with a minimum capital of EGP 15 million. 

A standard form template for the PPA has been announced by the government with the review of international financial institutions and the State Counsel. 

3.1 Restrictions on acquiring FiT Projects 

Although there is no general constraint on acquiring renewable assets in Egypt, FIT projects are particularly subject to certain constraints on its acquisition for a period of 2 years following the commercial operation date (“COD”) of the project. 

According to EgyptERA Rules for FIT Companies, the major shareholder is required to maintain a minimum shareholding percentage of 25% in the project company until the lapse of 2 years after the COD. The investor is also obliged to notify EgyptERA of any amendment in the shareholders’ structure of the FIT company. 

Under this scheme renewable energy independent power producers (“IPP”) are allowed to conclude bilateral purchase agreements with eligible consumers. EETC and distribution companies are mandated to allow investors to sell electricity directly to consumers using their grids, subject to a grid access fee (wheeling charge) via network connection contracts. 

Private renewable electricity producers are provided with guaranteed access to the transmission and distribution grids under a clear, transparent, and non-discriminatory basis. Costs of interconnection with the grids will be borne by the producer. EETC and the distribution companies are committed to buying the electricity generated from renewable energy or pay for it in the case it is unable to transmit the produced energy. 

The IPP model is not currently applicable in Egypt, however, such model should be implemented during the gradual opening of the electricity market in Egypt to ensure that it is competitive. 

EgyptERA issued Circular No. 3 for 2023 to regulate the licensing procedures and requirements for solar self-consumption plants (“Regulations”). 

The solar self-consumption system allows the use of the PV electricity generated on-site to meet the energy needs of the consumer but does not exchange the generated electricity with the grid. 

The Regulations will apply on self-consumption isolated and connected PV plant with generation capacity above 500 kW. 

Projects with generation capacity of less than 500kW can be exempt from the licensing requirements upon submitting a request to EgyptERA. However, a plant that is developed and owned by a qualified developer who has entered into power purchase agreement with the consumer must be licensed. 

A self-consumption solar PV project must locate within the site of the consumer as reflected in its operation license. 

The capacity of the project might not exceed the maximum electricity consumption of the consumer throughout the year preceding the commercial operation date of the plant. In all cases, the maximum allowed generation capacity of the PV plant is 30MW. 

The total generation capacity of the solar PV projects under the net-metering and self-consumption system all around Egypt will not exceed 1000 MW including the existing and the future projects. 

A merger fee will be paid according to the rates announced by EgyptERA, however, existing and future self-consumption projects with capacity up to 10MW will be exempt from paying the merger fee as of the effective date of the Regulations. 

• Isolated self-consumption projects 

In order to establish an isolated self-consumption solar PV plant, the consumer, or the company which will develop the plant for the consumer (the developer) shall be required to obtain the customary license for electricity generation. 

• Connected Self-consumption solar PV projects 

In order to integrate the generated electricity with the electric power system, the consumer/develop shall obtain the prior approval of the network operator, being the EETC or the licensed distribution company. 

• EgyptERA License 

Projects with generation capacity exceeding 500 kW must obtain a prior license from EgyptERA before applying for the approval of the network operator. 

• Licensing Procedures 

The licensing procedures for projects connected to the grid will include the following main steps: 

1. Determination of the allowed capacity: the consumer/developer will submit a request to the network operator to determine the capacity of the PV plant that can be integrated with the consumer’s electricity system. 
2. Selection of the developer: the consumer/developer will choose the company that will develop the solar plant from among the companies qualified by EgyptERA. 
3. Applying for the preliminary approval: The consumer/developer will apply to the network operator for a preliminary permit to establish the PV plant and pay the associated fees.  
4. Establishing the plant: upon obtaining the preliminary approval, the consumer/developer is required to complete the establishment of the plant within six month for plants with generation capacity up to 500kW, or one year for plants with generation capacity exceeding 500 kW. 
5. Inspection of the Plant: The network operator will inspect the project to ensure that it complies with the regulatory rules and applicable codes, and will notify the consumer with any correction actions that need to be taken. 
6. Commercial Operation: Upon successful testing, meters will be installed, and commercial operation will start. 

Batteries are allowed to be used with the self-consumption system provided that the following requirements are fulfilled: 

1. The batteries must be integrated with the plant. 
2. The batteries will be used for the needs of the consumer to reduce any imbalances between the generation and the electricity system of the consumer. 
3. The capacity of the batteries will not exceed 20% of the generation capacity of the plant. 
4. In case of network disconnection, the entire electricity system must be isolated through appropriate circuit breakers equipped with voltage sensors. 
5. Installation of smoke detectors at the battery’s location. 
6. Compliance with the firefighting code IEC 62619. 
7. For batteries with capacity exceeding 100kW/hour, the following safety system must be installed: 

• Over Current Protection. 
• Ground Fault Protection. 
• Over Heat Protection. 
• Automatic AC and DC Open Circuit when Fault Detection. 
• Insulating Monitoring. 

EgyptERA issued Circular No. 3 for 2022 (“Circular”) to apply a merger fee to renewable power generation plants with a capacity of more than 500kW under (1) the net-metering system and (2) the self-consumption system connected to the grid. 

The merger fee will be at the following rates: 

The fee will have an impact on new plants with a generation capacity larger than 500kW. It will also apply retroactively on existing plants in case their generation license stipulated that the plant will be subject to merger fee upon its determination. Isolated self-consumption plants as well as projects under the FiT program are not subject to the fee. 

EgyptERA said previously that the fee is imposed to cover the cost of integrating the plants into the grid network. The Circular therefore provided that the payment of the fee will be made to the Egyptian Electricity Holding Company in settlement for the cost born by its affiliated distribution companies. The merger fee was implemented just a few months after the government imposed a 2% customs duty tariff on imports of components used on solar and wind projects. Renewable players believe that such increased fees affect the cost of renewable projects and contradict the government’s plan of expanding renewable.