In recent months, Egypt has announced plans to build the country’s first two coal-fired power plants, following a controversial April decision to allow the fuel to be used for industry and electricity generation. Meanwhile, and despite years of preparation, Egypt does not currently have any functioning on-grid wind or solar power stations.
In late September, the government signed a deal with the Abu Dhabi-based Al-Nowais company to build a coal power plant in the Oyoun Moussa area in South Sinai. In November, Orascom Construction, the mammoth cement and engineering firm owned by Egypt’s richest man, Nassef Sawiris, announced it had formed a partnership with Abu Dhabi government-owned International Petroleum Investment Company to construct a coal-fired power plant near Hamarawein port on the Red Sea coast.
It will most likely be years before the coal plants are actually constructed. Orascom recently announced that it has been granted 18 months of access to its proposed project site in order to conduct technical studies, and construction will take longer still. Nonetheless, by local standards, the projects have proceeded at a rapid clip, moving from illegal in April to signed memorandums of understanding in September.
“It is happening much quicker than we thought, which is sad,” says Sarah Refaat, Arab world coordinator for climate change action group 350.org.
By contrast, state support for wind and solar energy projects has so far yielded little progress. As of 2008, the government has officially aimed to source 20 percent of electricity from renewables by the year 2020. The Aswan Dam, which began generating electricity in 1967, can supply around 2,100 megawatts of electricity. When built, it supplied roughly half of Egypt’s electricity, but that percentage is shrinking as overall demand for power grows. By 2020, the government estimates the dam will supply roughly 8 percent of Egypt’s electricity needs.
As for wind and solar, despite abundant potential for both forms of energy, efforts to harness them as an energy source have been slow to progress.
The country has one wind energy trial project, a 250 megawatt wind farm in Zaafarana on the Red Sea coast, says Marwa Mostafa, a senior planning engineer at state energy regulator EgyptERA. “The project started in 2009 but because of problems with sovereign guarantees, and the political situation, it is still not operational,” she says.
A solar power station in Kom Ombo is still in “very early stages,” Mostafa says. Like the wind farm, it has suffered from a lack of sovereign guarantees — a promise from the Central Bank or Ministry of Finance to settle debts if the primary borrower goes into default.
A third project, a 140 megawatt hybrid solar and natural gas plant at Kuraymat in Upper Egypt, should be generating 20 megawatts of power from solar energy. However, due to technical problems, it is not currently functioning, Mostafa says.
The country has seen a small upsurge in small-scale off-grid energy projects, ranging from solar panels on the roofs of government buildings to billboards to water pumps installed by private companies. Private industrial firms have also launched projects to power their factories with wind and municipal waste.
Due to the small scale, decentralized nature of such projects, it’s difficult to track figures. But those that do exist are not particularly encouraging. Citing data from EgyptERA, pollster Baseera revealed that solar energy production dropped from 479 million kilowatt hours in the 2011/12 fiscal year to 247 kilowatt hours in 2012/13, a 48 percent decline.
Mostafa, along with many others in government, has her hopes pinned on a feed-in tariff, which was approved on September 16. The tariff sets rates at which the government promises to buy electricity from private producers of wind and solar energy. By encouraging smaller-scale installations and private investments, the government hopes to avoid the problems that have bogged down existing projects.
Through this program, the government aims to secure deals with private companies to generate 2,000 megawatts of wind power and 2,300 megawatts of solar power within two years.
Although industry experts welcomed the passage of a feed-in tariff, the details of the plan were met with skepticism from many industry experts.
The scheme provides a framework for producers to sell power to the grid, but does not include measures to stimulate consumer demand, such as requiring the industry to use a set percentage of renewable energy.
Others criticize the purchase prices. “Some items are lower than the government prices for selling electricity,” says Galal Osman, head of Egyptian Wind Energy Association. By contrast, petroleum-based electricity is heavily subsidized.
The legislation for the feed-in tariff is also incomplete.
So far, only the prices for renewable energy have been set. A set of regulations for renewable projects has been approved by Egypt’s state council, but not yet passed into law, explains Mostafa. “It could come in days or in weeks,” she says.
Standards for how EgyptERA will function as a regulator are also awaiting final approval. EgyptERA is also still drafting a power purchase agreement contract, which will set terms for how project owners sell electricity to distribution companies.
Likewise, technical requirements for connecting such projects to the grid are still in the drafting phase. Mostafa says EgyptERA is hoping to finish by the end of the year. “I think things are progressing,” she says.
A faster track
Coal projects, too, are facing incomplete legislation, but this does not appear to have slowed down deals for coal power.
The Cabinet’s decision to allow coal use for industry and power generation came despite objections from environmentalists, civil society groups, tourism industry representatives and then-Environment Minister Laila Iskandar. A report prepared by the Egyptian Environmental Affairs Agency, under Iskandar’s supervision, recommended against permitting coal, citing negative effects on public health, the environment and the economy. It also noted that relying on coal, which Egypt has to import, would degrade Egypt’s long-term energy security.
Proponents of the decision prevailed, arguing that coal was a necessary short-term solution to overcome an energy crisis that was crippling industry and leaving homes and businesses in the dark. When the Cabinet ruled in favor of allowing coal, it said the fuel’s use would be tightly regulated under a new environmental law, in line with World Health Organization and European Union standards for the transport, storage and burning of coal.
Almost eight months later, these laws have still not been published.
Even current Environment Minister Khaled Fahmy, who is in charge of overseeing the development of this legislation, appears uncertain about its status. Speaking at an energy conference on November 21, Fahmy was keen to emphasize his support for the energy industry.
“We can’t protect the environment without a strong energy sector and a strong economy,” he said. “The Ministry of Environment does not stand against industry and a strong economy. On the contrary, a strong economy will build a strong country.”
Fahmy did emphasize that industrial growth should be accompanied by safety standards. “We have to abide by regulations for safe use of coal in the cement industry. They are all efforts to diversify the sources of energy. We must make sure of the impact upon implementation of the project,” he said.
However, Fahmy was vague as to how the government would do so, concluding his speech with a question: “What are the regulations to guarantee safety standards of the industry? So that we can ensure industrial development along safe standards?”
Despite Fahmy’s uncertainty about what Egypt’s environmental laws should look like, cement factories have already begun trials with coal, including at a Suez Cement plant in the Cairo suburbs.
In its November 19 press release, Orascom said its coal-fired power plant would use “advanced clean-coal technology that complies with EU standards for emission control.” The company did not respond to a request for further information about what measures it planned to put in place to mitigate the environmental impact of the project.
“They keep talking about regulations and applying European standards. But nobody really knows what that means,” says Refaat of 350.org. She also worries that even if legislation is produced, weak enforcement could render it meaningless.
This haste to bring coal in before regulations can be established has prompted fears among environmentalists that industrialists and their allies in government are rushing to launch coal projects, while the president and his cabinet, in absence of a parliament, can essentially rule by decree.
Steps such as the feed-in tariff, though still incomplete, are generally viewed as positive steps toward increasing the amount of green energy produced in Egypt. The rapid advance of coal projects has shown what can be accomplished with powerful backers, even without legislation in place.
But without patrons in high places, renewable energy projects may face the same fate as Egypt’s current crop of inoperative, endlessly stalled wind and solar plants.