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Egypt’s RE Transition: Focus on becoming a regional energy hub [free access]

February 12, 2021

Egypt, the most populous country in the Middle East and North Africa (MENA) region with around 100 million residents, is steadily moving towards the adoption of clean energy generation and its integration into the national grid.

 

In order to meet the power demand of the rising population and an expanding economy, the country is focusing on increasing the share of renewable energy (RE) in its power generation mix—given the high potential for RE resources particularly solar and wind—and relying less on fuel and gas-based resources, which are depleting and limited. This will also help decrease the country’s overall carbon footprint.

 

To this end, the Egyptian government developed the Integrated Sustainable Energy Strategy (ISES) 2035, which focuses on exploring the potential of RE resources. As per the strategy, Egypt aims to generate 20 per cent of its electricity through RE sources by 2022, and this share will increase to 42 per cent by 2035. Over the years, the government has formulated various policies and strategies to attract private sector investment in the RE generation segment, and going forward, majority of the RE projects will be developed by private companies. 

 

To fully reap the benefits of the upcoming capacity and increase regional power exchange via the establishment of cross-border interconnections, the country’s high voltage grid developer, Egyptian Electricity Transmission Company (EETC), is dedicatedly working towards establishing a robust grid network across the country. Over the past six years, the transmission utility has successfully added 3,640 km of lines, 30 substations and 44,250 MVA of transformer capacity to its 500 kV backbone network.  

 

Further, in the future, after achieving a power surplus of 15,000 MW, the country foresees transforming itself into a regional energy hub and exchanging electricity with the Middle East, Africa and Europe. To this end, EETC is implementing various cross-border links with African, Middle Eastern and European countries to facilitate power trade. In addition, EETC is undertaking initiatives to establish a smart and reliable grid network across the country.

 

Egypt’s electricity industry structure and privatisation plans

Currently, the state-owned Egyptian Electricity Holding Company (EEHC) dominates the electricity sector in Egypt. EEHC has 16 affiliated companies—six for electricity generation [Cairo, Hydro Power Plant Executive Authority (HPPEA), East Delta, West Delta, Upper Egypt and Middle Delta electricity production companies]; nine for distribution (North Cairo, South Cairo, Alexandria, Canal, North Delta, South Delta, Behera, Middle Egypt and Upper Egypt electricity distribution companies); and one for transmission—EETC. Egypt also has privately-owned power plants that have been financed under the build-own-operate-transfer (BOOT) model.

 

The Ministry of Electricity and Renewable Energy (MERE) is responsible for drafting the sector’s development plans, recommend electricity prices, and supervise the study and execution of essential projects. Egypt’s electricity sector is regulated by the Egyptian Electric Utility and Consumer Protection Regulatory Agency (EgyptERA).

 

By 2025, the Egyptian government plans to privatise the electricity sector and transition it from a vertically integrated, regulated state monopoly model to a fully competitive market. The privatisation programme includes separating power generation from transmission and distribution.

 

The priviatisation plan is in line with Electricity Law 87 passed in 2015 aimed at reforming the electricity sector by gradual liberalisation (unbundling into different utilities) along with increasing private sector participation and establishing a competitive electricity market throughout the value chain. 

 

The law will pave the way to end the single-buyer model and allow private generation to sell directly to end users. At the same time, third parties will have access to grids while the EETC will become an independent transmission system operator (TSO).

 

The new law also proposes the creation of two electricity markets. Under the first market, large consumers will get permits to negotiate and purchase electricity directly from various suppliers. The second market will more closely regulate consumers who are going to purchase electricity from distribution companies at regulated prices. However, no major progress has been made so far to unbundle EEHC.

 

Existing power sector infrastructure

As of June 2019, Egypt’s installed capacity stood at about 58.3 GW, increasing at a compound annual growth rate (CAGR) of 13 per cent from 2015 to 2019. Of the total, 91.3 per cent was thermal-based, 4.9 per cent was hydro-based and the remaining 3.9 per cent was renewable-based.

 

So as to reduce dependence on fossil fuels, Egypt has been increasing its share of RE-based resources (mainly wind and solar) over the years. The share of RE sources increased at a CAGR of 35 per cent during the past five to six years. One of the biggest achievements was the completion of the 1,465 MW Benban solar park in 2019. Built at an investment of USD2 billion, it is the largest solar power plant in the world.

 

Figure 1: Overview of the Benban Solar Park


Source: Presentation by Sabah Mashaly, Chairwoman and Managing Director, Egyptian Electricity Transmission Company at Global Transmission’s recent conference on Power Transmission Africa 2021

 

By the end of June 2020, Egypt’s high voltage network was estimated to comprise 27,266 km of transmission lines at the 132 kV to 500 kV voltage levels. Egypt’s transformer capacity at the transmission level increased from 53,600 MVA in 2014 to 118,850 MVA in 2020, representing a CAGR of 14.2 per cent during the period. There were 216 high voltage substations as of June 2020.

 

The transmission utility has for years been working on strengthening and expanding its 500 kV backbone network. From 2014 to 2020, around 3,640 km of lines, 30 substations and 44,250 MVA of transformer capacity have been added at the 500 kV voltage level, representing a CAGR of 23.55 per cent, 21.67 per cent and 50.71 per cent respectively between 2014 and 2020. 

 

Figure 2: Growth in EETC’s 500 kV transmission line network


Source: Presentation by Sabah Mashaly, Chairwoman and Managing Director, Egyptian Electricity Transmission Company at Global Transmission’s recent conference on Power Transmission Africa 2021

 

Figure 3: Growth in EETC’s  500 kV substations and transformer capacity


 

Source: Presentation by Sabah Mashaly, Chairwoman and Managing Director, Egyptian Electricity Transmission Company at Global Transmission’s recent conference on Power Transmission Africa 2021

 

Further, to control the grid infrastructure across the country, the transmission utility owns and operates six regional control centres and one national control centre. In addition, Egypt’s grid is interconnected with those of Jordan and Libya via a 400 kV and a 220 kV line, respectively. In April 2020, the first phase of the 500 kV Egypt–Sudan interconnection project officially commenced. Up to 80 MW of power will be transmitted under the project.

 

 

Transitioning towards RE

As per Egypt’s Vision 2030, the country’s overall target is to achieve a diversified, competitive and balanced economy within the framework of sustainable development. Since the country is endowed with solar and wind energy, RE plays a central role in the ISES 2035 published in 2015.

 

The ISES 2035, which has been developed based on a least-cost scenario, aims to ensure the technical and financial sustainability of the energy sector, while targeting energy diversification through RE penetration. The ISES targets the production of 20 per cent of the country’s electricity from RE sources [including solar, wind, concentrating solar power (CSP) and hydro] by 2022 and 42 per cent by 2035. Further, coal has been excluded from the energy mix and replaced by RE.

 

 

Currently, the country has 5.9 GW of renewable-based sources (hydro, wind and solar), while 500 MW of capacity is under construction and will become operational by 2021. Further, 2.4 GW of wind and solar projects are in the pipeline. 

 

Figure 4: Current renewable energy target in Egypt


Source: Presentation by Sabah Mashaly, Chairwoman and Managing Director, Egyptian Electricity Transmission Company at Global Transmission’s recent conference on Power Transmission Africa 2021

 

 

Figure 5: Egypt’s energy mix by 2035


Note: ISES 2035 has been revised and coal has been excluded from the energy mix and replaced by RE using the build-operate-own (BOO) scheme.

Source: Presentation by Sabah Mashaly, Chairwoman and Managing Director, Egyptian Electricity Transmission Company at Global Transmission’s recent conference on Power Transmission Africa 2021

 

Under ISES, the country will have 52 GW of both large-scale and distributed on-grid RE capacity by 2035. The planned RE capacity was/will be implemented by both the Egyptian government and the private sector, with the latter executing the majority of the planned capacity. Therefore, to encourage private sector investments in the country, the government initiated the electricity tariff reform programme in July 2014. This included a comprehensive energy subsidy reform and was adopted for five years, and under which power tariffs will increase to reach a level reflecting the true cost of electricity to the consumer.

 

Private utilities can invest in the country’s green energy sector via various modes such as engineering, procurement, construction and finance (EPCF); build, own and operate (BOO); the feed-in tariff (FIT) programme; the net metering scheme; and the auction mechanism. One of the awarding winning projects is the Benban solar park in Aswan (received the best project annual award from the World Bank), which played a major role in enhancing private sector involvement in the sector.

 

Figure 6: Sourcing mechanisms for RE projects in Egypt


Source: Presentation by Sabah Mashaly, Chairwoman and Managing Director, Egyptian Electricity Transmission Company at Global Transmission’s recent conference on Power Transmission Africa 2021

 

Transmission expansion plans

Future transmission investments will be largely directed towards developing grid infrastructure to evacuate power from new generation plants, including a significant number of RE projects. Investments are also envisaged in grid refurbishment and modernisation.

 

Egypt’s cabinet recently approved a EUR182.9 million loan from the European Bank for Reconstruction and Development (EBRD) for improving Egypt’s transmission network. The loan agreement regarding the same was signed in November 2019 between EBRD and EETC. The loan will help EETC integrate the upcoming 1.3 GW of RE into the country’s grid network by developing new connections between the RE plants and new/refurbished high voltage substations. In addition, it will focus on establishing a robust grid network across the country in order to reduce transmission losses and also save 77,000 tonnes of carbon emissions annually.

 

Further, the total cost of the planned transmission projects during fiscal year (FY) 2020–21 is EGP20 billion. In addition, the Ministry of Planning and Economic Development has allocated EGP5 billion for the implementation of the strategic electricity projects’ item in the FY 2020-21 budget, as part of an investment plan for four years.

 

Egypt’s transmission projects have also received financial support from multilateral funding agencies such as the European Investment Bank (EIB), the World Bank, Arab Fund for Economic and Social Development (AFESD) and Agence Française de Développement (AFD).

 

Smart grid solutions

The country is also undertaking initiatives and programmes to establish a secure and reliable network in the country. Currently, the transmission utility is modernising some of the existing regional control centers (RCCs), namely those in Cairo, Canal Area, Upper Egypt and Alexandria, as well as establishing new regional controls in the Delta region and Central Egypt. These control centres are also steps towards building a robust and efficient grid to allow for faster utilisation of RE sources in the country.

 

Recently, in December 2020, EETC awarded two contracts cumulatively valued at USD66.7 million for the establishment of a new national control centre and regional control centre.  Siemens Smart Infrastructure and Hassan Allam Construction will construct the National Energy Control Center, valued at USD54.5 million, in the New Administrative Capital.  The power grid control centre will be equipped with advanced software and equipment to monitor, manage and control extra-high voltage (220 kV and 500 kV) transmission networks and power generation stations across Egypt. Meanwhile, Egytech Cables (a subsidiary of Egypt’s Elsewedy Electric) will build a new regional control centre for the transmission network for Delta Zone Control Centre (DRCC), valued at USD12.2 million.

 

Egypt as an energy hub

The transmission utility plans to fully utilise the north African country’s strategic geographical location and develop various grid interconnections with North African, Middle Eastern and European countries to facilitate power trade, thereby boosting economic growth and development in the country. The country envisions transforming itself into a regional energy hub after achieving a surplus of 15,000 MW.

 

In 2017, Egypt, along with Kuwait, Saudi Arabia, the United Arab Emirates (UAE), Bahrain, Algeria, Sudan, Iraq, Oman, Qatar, Comoros, Libya, Morocco and Yemen signed a memorandum of understanding (MoU) to create a common Arab market and include a political commitment for attaining power integration between the Arab countries. To this end, in mid-2020 the Arab Ministerial Council for Electricity approved two key agreements—General Agreement and Arab Common Market Agreement—for the functioning of the Arab Common Market of Electricity.

 

Further, to fully utilise surplus electricity, EETC is implementing grid links to strengthen regional cross-border links as well as construct new high capacity lines connecting to European and Middle Eastern countries. Some of the key planned interconnection projects are as follows:

 

Egypt–Saudi Arabia grid interconnection project involves the construction of a 1,300-km-long, 500 kV multi-terminal high voltage direct current (HVDC) line from Badr in Egypt to El-Madinah El Munawara via Tabuk in Saudi Arabia, along with associated converter stations and switching stations in both countries. Of the total overhead line length, 820 km will be laid in Saudi Arabia and the remaining 480 km in Egypt. A 20-km submarine cable crossing the Gulf of Aqaba will also be laid to link the two countries.  

 

The EuroAfrica interconnector project aims to connect the electricity grids of Egypt, Cyprus and Greece through a subsea direct current (DC) cable and HVDC onshore converter stations. The interconnection will have a transmission capacity of 1,000 MW in its first stage, which will be increased to 2,000 MW later. The line will begin from Damietta in Egypt and connect to the Kofinou station in Cyprus via a subsea route. Further, Cyprus will be connected via another subsea route to Korakia in Crete (Greece), and from there, the cable route will continue to Attica on mainland Greece. The interconnector will be 1,707 km long and will also involve the construction of four converter stations—one each in Egypt, Cyprus, Crete and Attica—with multi-terminal operation to link Egypt to Greece via Cyprus. The project is being developed by EuroAfrica Interconnector Limited, a unit of the Cyprus-based Quantum Energy.

 

The Egypt–Sudan interconnection project comprises two phases. In the first phase (completed), a 220 kV interconnection line was constructed from Toshka, Egypt, to Dongola, Sudan. Of the total line length, 69 km is in Sudan and 100 km is in Egypt. In the second phase (currently under implementation), the line will be upgraded to 500 kV. The transmission line will carry up to 300 MW of electricity. As per reports, Sudan’s share in the project will be over USD20 million, while Egypt’s share is estimated to be around EGP650 million.

 

The Iraq–Jordan–Egypt grid interconnection project has been proposed with a capacity of 1,000 MW to support exchange of power and take advantage of the different peak times in the respective countries. Currently, Iraq is working on connecting its grid with Jordan's grid networks via a 300-km line. The project is scheduled for completion within two years. Post this, Iraq will complete its electricity connection with Egypt over three years.

 

Going forward

The ISES 2035 has formulated some ambitious RE targets to attain surplus power and thereby transform the country into an energy hub by utilising its strategic geographical location and developing various grid interconnections with North African, Middle Eastern and Mediterranean countries to facilitate power trade, thereby boosting economic growth and development in the country. In line, the Egyptian transmission utility is taking the necessary initiatives to create a robust and smart grid to fully evacuate power from the planned RE generation.