Egypt is suffering terrible economic pain. In April, annual urban inflation in the country climbed to 13.1%, reflecting a surge in food prices; the Ukraine conflict has created supply disruptions, prompting food scarcity in the country; and is the world’s biggest buyer of wheat, importing 80% of its requirements from the Black Sea region.
Despite the economic woes, Egypt is making significant strides in energy policy, and could be set to disprove the dogma that natural gas and renewable power are locked in a zero-sum competition. It is emerging as a leader in renewable energy development while also improving its offshore natural gas production capacity at the same time.
It has found a synergy between natural gas development and the green energy transition through the energy export market. While the country’s environment has helped create the conditions for this success, the balance of renewables and fossil fuels could help set a precedent for countries and companies around the world.
A superior environment for renewables
Egypt possesses an abundance of land, sunny weather and high wind speeds, making it an ideal location for renewable energy projects. Egypt enjoys excellent wind along the Gulf of Suez with an average wind speed of 10.5 m/sec. It is a ‘sun belt’ country with 2,000 to 3,000 kWh/m2 per year of direct solar radiation, and the sun shines for between nine and 11 hours a day from north to south, with few cloudy days.
The government’s 2035 Integrated Sustainable Energy Strategy stresses the importance of renewable energy. Egypt wants to improve the supply of electricity generated from renewable sources to 20% by 2022 and 42% by 2035; photovoltaic solar would provide 21.3% of power, wind would provide 14%, concentrated solar power 5.5% and hydro power 1.98%, while conventional energy sources would provide 57.33%.
Currently, this plan is being revised and renewables could make up 33% of the energy mix by 2025, 48% by 2030, 55% by 2035 and 61% by 2040. The private sector is expected to deliver most of this capacity and while experts regard it as a very optimistic, ambitious targets could help encourage further development.
Balancing Egypt’s power around self-sufficiency
Simultaneously, Egypt is also rapidly developing its offshore gas capacity. In 2019, thanks to production from its massive offshore natural gas deposits, Egypt achieved natural gas self-sufficiency and became a net energy exporter in the form of liquified natural gas.
Egypt’s surplus electricity, in turn, has led to the development of electricity interconnections to Europe, the Middle East and sub-Saharan Africa. At first, most of the electricity exports sold via the interconnections will be generated from natural gas, commonly referred to as ‘gas-by-wire’. However, these interconnections are spurring further investment in the country’s renewable energy sector, having established the transmission infrastructure for an electricity export market.
Furthermore, in March 2021, the Egyptian Government signed an agreement with Belgian conglomerate DEME to conduct feasibility studies on production of green hydrogen in the Gulf of Suez. It plans to desalinate seawater with the help of renewable energy in production of green hydrogen.
Looking ahead to COP27 and a new era of trade
Egypt’s rise as a regional energy power is a major achievement for the country. The energy sector already accounts for around 20% of its GDP and is likely to be an important fillip to the economy at a time when many poor people – who represent the bulk of its 102 million citizens – are suffering considerable hardship. In 2020, the average person in Egypt emitted only 2.09t of carbon dioxide annually compared with the US (14.24t), China (7.41t) and the UK (4.85t).
Egypt could also use its position as host of the 2022 UN Climate Change Conference (COP27) in November in Sharm el-Sheikh to give greater voice to those countries – particularly key economies in Africa – which seek a bigger role for natural gas in the energy transition process.
The whole of Africa accounts for only 2% to 3% of the world’s carbon dioxide emissions from energy and industrial sources. It is roughly the same proportion as Germany and a lot lower than China (27%), the United States (15%) and India (7%). This is one of the reasons African leaders have been pushing for a ‘just’ transition, where the responsibility for decarbonising the world’s industries is placed on countries such as China that have contributed to the environmental damage.
Many countries in Africa depend on fossil fuels – in particular natural gas – for their industrialisation processes and for poverty reduction. This means that transition to renewables in Africa could be slower than elsewhere in world, and could benefit from Egypt’s blueprint of combining fossil fuels into an energy system that prioritises self-sufficiency.
Egypt is in a unique position because it is blessed with massive natural gas fields and is highly suitable to wind and solar power. Not all countries are so fortunate, but it is showing other economies how it is possible to develop an energy sector based on natural gas and renewables at the same time.
Of course, it will lead to higher carbon emissions but from a very low base. In an African context, there must be a trade off between a country’s carbon footprint and poverty reduction, at least in the short- to medium-term.