Electricity generation in Egypt: Fraunhofer ISE study shows, renewable energy technologies are already cheaper than conventional power plants
On December 5, 2016 Fraunhofer Institute for Solar Energy Systems ISE and the German Science Centre Cairo (DWZ) hosted a one-day workshop, presenting a recently conducted study by Fraunhofer ISE on Electricity Costs from Renewable Energy Technologies in Egypt. The event brought together more than 80 stakeholders from Egypt and Germany, active and interested in the field of renewable energies, including members of the Egyptian parliament, researcher and representatives of private sector entities as well as governmental authorities. In their function as members of the Egyptian parliament and its Energy committee, Dr Ahmed El Oteify, Dr Al-Badry Deif and Dr Heytham Moddather attended the event. Furthermore, the undersecretary of the Energy committee of the Egyptian Parliament Eng. Mohamed Rashwan was present. The Federation of Egyptian Industries was represented by its vice president Dr Ahmad Fikri Abdul Wahab. Various presentations given by experts in the field, highlighted legal, financial and technical challenges, barriers and opportunities for the sector of renewable energies in Egypt.
On behalf of Fraunhofer ISE, Dr Thomas Schlegl thanked the German Federal Office for funding the study and all companies especially SolarizEgypt for their technical support. Laura Oexle from the German Embassy in Cairo congratulated Fraunhofer ISE and SolarizEgypt for the fulfilment of the study and emphasized the importance for Egypt to use its huge potential for renewable energies in order to gradually substitute the conventional energy supply.
According to Prof Dr El-Sobki from the New and Renewable Energy Authority (NREA), currently more than 94% of Egypt’s total energy production is covered by fossil fuels and natural gas while hydro power contributes to only 5% and the share of other renewable energies like wind and solar represents less than 1%. This reflects a huge potential for renewable energies, as by 2022 the energy demand will further increase leading to an additional energy need of 37%, assuming that oil and natural gas levels are retained. Therefore, Prof Dr El-Sobki urged for further investment in renewable energies and proposed a quota for the state and private owned energy production sector. As a result, the share of renewable energies could increase tremendously to 27% (quota of 3% annually) respectively 45% (quota of 5% annually). Furthermore, renewable energies represent a clear international market edge for Egyptian export products and could bring Egypt into the position to export excess energy to neighbouring countries in the future. The following discussion, primarily focused on the feed-in tariffs for renewable energies and the role of net-metering introduced in February 2013. Furthermore, the planned phase out of the subsidies on electricity by the Egyptian government over the next years was discussed controversially. Prof Dr El-Sobki explained that the government is currently drafting a voucher system for fuel and electricity, in order to lower the financial burden of underprivileged end-users.
On behalf of Fraunhofer ISE, Eng. Noha Saad Hussein presented the study on Electricity Costs from Renewable Energy Technologies in Egypt which was conducted in the last months and funded by the German Federal Foreign Office. The study aimed to compare the electricity costs of renewable energies like photovoltaic, concentrated solar power plants and wind power plants with conventional power plants based on diesel generators and gas combined cycle power plants. In economic terms already today, wind energy and ground mounted photovoltaic is competitive to conventional technologies. Furthermore, due to a continuous progressing in the learning curves, the renewable energy technologies get even more competitive by each year. The support schemes for renewable energy technologies play a vital role in the cost of electricity and could immediately reduce the costs in Egypt almost by 50%. However, the study also showed, that photovoltaic is not as cheap as it could be compared to other countries like Germany. This is primarily due to policies creating incentives for low-interest loans programs, attractive feed-in tariff systems or higher costs for fuel. The participants showed a high interest in the results in the study and had further questions on technical issues like on-grid and off-grid systems or economic issues like the recent devaluation of the Egyptian Pound. Moreover, it was emphasized, that the study primarily focused on economic figures and did not take into account broader factors like social, health and environmental benefits through renewable energies. Already today, Egypt is affected by the impacts of climate change like sea level rises visible at coastal areas of the country. It was highlighted, that without the subsidies on fuel in Egypt, conventional energy production would be much more expensive compared to renewable energies already today.
In a nutshell – Electricity cost from Renewable Energy Technologies in Egypt
- The study analyzed the levelized cost of electricity (LCOE) of renewable energy technologies with conventional power plants and predicted their future cost development up to the year 2035 in Egypt.
- The method of LCOE makes it possible to compare power plants of different generation and cost structure with each other including the costs for constructing and operating a power plant.
- Already today, wind power at very good onshore wind locations (0.048 US$/kWh) has lower costs than diesel generators (0.078 US$/kWh) or gas combined cycle power plants (0.064 US$/kWh).
- By 2035, also the cost for ground mounted photovoltaic plants (0.055 US$/kWh) will drop considerable below the average of all fossil fuel power plants (0.072-0.085 US$/kWh).
- Due to the expected increase in prices for fossil fuel power plants, the LCOE of renewable energies like wind or ground mounted photovoltaic will become even more cheaper than conventional power plants.
- Besides the positive impact renewable energies have on environment, health and climate, the study shows, that they have also the potential to become a cheaper way for Egypt to produce its electricity than today.
Yaseen Abdel-Ghaffar, Managing Director SolarizEgypt gave a quite enhancing presentation on the status-quo of small- and medium-sized photovoltaic projects in Egypt. SolarizEgypt was founded in 2013 by graduates of the American University of Cairo (AUC) prequalified for mega scale projects of 70 megawatt and certified by NREA. Since 2013 SolarizEgypt executed 62 projects and signed contracts of a value of 56 million EGP in 2016. Moreover, it became the first official partner with a commercial bank offering financing for residential solar systems. Despite the difficult economic situation Egypt is facing, companies in the sector of renewable energy like SolarizEgypt are a great example not only to survive but also to expand rapidly. Yaseen Abdel-Ghaffar highlighted the positive development within the sector, resulting in more than 200 certified companies so far. Moreover, first banks are now also focusing on investing in companies producing renewable energies, Egypt is one of the few countries where the feed-in tariffs increased and the government introduced loans for small- and middle-scale enterprises (SME) with an interest rate of 5% only, which is crucial especially for SMEs. However, it seems that a lot of companies are simply not aware of important policy changes benefitting the production of renewable energies or some laws with a good intention are often not implemented fast and comprehensive enough.
The financial and banking consultant Hoda Sabry spoke about financial challenges related to renewable energies in Egypt. She highlighted especially the challenges of financing renewable energies, like the lack of information and awareness regarding potential benefits and the failure to emphasize good energy management.
Dr Thomas Schlegl from Fraunhofer ISE gave a presentation on the importance of quality assurance for photovoltaic power plants, highlighting measures of quality assurance at all phases of the development of large PV power plants.
After the last presentation, all speakers were invited for a general discussion with the audience, which was highly appreciated by all participants. Several questions were posed on technical issues like peak loads, maintenance or grid fluctuation. Other issues of concern were the economic situation of Egypt, the second round of the feed-in tariff programme launched at October 28th 2016 and the development for interest rates on loans. In his résumé, Dr Christoph Kost from Fraunhofer ISE highlighted the strong consensus among all participants, that the future of renewable energy in Egypt but also globally is less dependent on technical issues, rather than the political willingness to make them more attractive for investors, companies and residents.
Download all the presentations and agenda from here.
Learn more about the study here.