Rising Electricity Consumption and Shortages in the Country

Egypt has seen rapid growth of electricity consumption over the past few years. Consumption in the country increased from 60.5 terawatt hours (TWh) in 2000 to 164.2 TWh in 2017. The increase is mainly attributed to the increased use of electric and electronic equipment in the residential sector and the growth of the industrial sector.

The country has witnessed acute power shortages particularly in the years following the 2011 uprising, which led to frequent summer blackouts and cuts to industrial production. The electricity shortage is more pronounced especially in the summer months. In order to satisfy the increasing demand, Egypt had almost tripled its installed capacity to around 42 gigawatts (GW) by the end of 2017 from around 15GW in the year 2000. However, it is still insufficient to fully meet the high and rising demand, and widespread electricity shortages persisting across the country.

The current government has plans to enact various reforms in the power sector in order to overcome the ongoing crisis. However, this is likely to be a difficult task in a country where millions live in poverty and are dependent on low energy prices, and where the lack of available gas for power generation acts as a bottleneck on development. The government needs to substantially increase the power generation capacity, as the available capacity was overwhelmed by peak demand in recent years.

Egypt is a developing country, with an economy that is largely dependent on revenue earned through the tourism sector, and from traffic routed through the Suez Canal. The country is the largest non-OPEC oil producer in Africa and the second-largest natural gas producer. It became a net importer of natural gas over the course of 2016, due to falling production and increased domestic consumption. It deployed two floating storage regasification units (FSRUs) in Ain Sokhna that serve as the country’s import terminals. However, the rising production at newly discovered gas fields has pushed the country toward halting liquefied natural gas (LNG) imports. The country plans to halt LNG imports by the start of 2019, which is expected to bring around monthly savings of $250 million. The country has good oil and gas reserves, with an estimated 4.4 billion barrels (billion bbl) of proven oil reserves, and 2.2 trillion cubic meters (tcm) of proven gas reserves as of the end of 2017.

Introducing Coal and Nuclear into the Fuel Mix

Egypt’s current installed capacity of 42GW consists of 91% fossil fuel-based technologies and 8.6% renewable energy technologies, of which 77% is hydropower. The country has almost developed all its major hydropower sites with little potential to expand further. The government’s interest in the diversification of the energy mix has been evolving rapidly over the past few years. The total installed capacity is expected to increase to 83GW by 2025, with thermal power to remain the dominant source holding 82.0% share followed by solar, hydro, and wind with shares of 4%–6%. Nuclear power is expected to be introduced in this period, adding 1,200MW to the total installed capacity by 2025.

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By GlobalData

In 2014, the Egyptian cabinet allowed cement manufacturers to start using coal for power production following continuous energy shortages and production losses. Until then, the cement companies used gas for their energy requirements. Currently, Egypt has no coal-fired electricity generation, but it plans to add coal to its generation mix in the near future. In 2017, Egypt announced plans for a $1.5 billion, 6,000 MW coal-fired power plant. The winning consortium to build the plant in the Red Sea port of Hamrawein is expected to be announced by the electricity ministry by the end of June 2018. Three international consortia have already submitted their bids. The lowest bid received was $4.4 billion from a Chinese consortium that includes Shanghai Electric and Dongfang Electric. A US consortium led by General Electric made a bid for $5.2 billion, and a Japanese–Egyptian consortium that includes Mitsubishi-Hitachi Power Systems, Toyota Tsusho Corp, as well as Egypt’s Orascom Construction and El Sewedy Electric, made a bid for $6.19 billion. The country is expected to develop a total of 9.8GW coal-fired plants by 2025.

The country has considered establishing nuclear power since the 1960s. The Atomic Energy Commission was set up in 1955. The government’s Nuclear Power Plants Authority (NPPA) was then established in 1976. In 1978, the country planned to set up 10 reactors with a total capacity of 7.2GW by 1999 in Upper Egypt. In 1983, the El Dabaa site was selected to host a nuclear plant. Germany’s KWU, Framatome, and Westinghouse tendered to provide reactors for El Dabaa, and Australia and Niger agreed to supply uranium. However, the plan was aborted following the 1986 Chernobyl accident. The country signed new nuclear cooperation agreements with Russia supported by Rosatom in 2004 and 2008, reviving its plans for nuclear power and desalination plants. In December 2017, notices to proceed with contracts for the construction of the four 1,200MWe units were signed. Local content for the first unit is expected to be about 20%, increasing for subsequent ones. The first nuclear power unit is expected to be introduced in 2024, attaining a share of 1.4% of the total installed capacity by 2025.

Egypt Eyeing Substantial Capacity Additions through Gas, Wind, and Solar

Currently, the majority of Egypt’s power generation capacity is contributed by gas-based power plants. In 2017, gas-based capacity stood at 35.9GW accounting for 84.9% of the country’s total installed capacity. It is expected to add another 19.6GW of gas-based capacity by 2025. A new 4.8GW combined-cycle natural gas power plant is being built by Siemens for the Egyptian government, as part of the Egypt Megaproject. The power plant will be located in Beni Suef in the southern part of the country, approximately 110 kilometres (km) south of Cairo. It will be the world’s biggest gas-fired combined-cycle power plant complex when fully operational, capable of providing electricity to approximately 15 million Egyptians.

Egypt has significant solar irradiation and appropriate wind conditions for producing electricity from renewable sources. Its large deserts which are sparsely populated are suitable for both solar and wind technologies for widespread application. The global horizontal irradiance is 2,450 kilowatt hours (kWh)/square meter (m2)/year, and direct normal radiation is 2,800kWh/m2/year. Wind full load hours at 3,015 hours (hr)/year is the highest among Arab countries, especially in the Gulf of Suez. Moreover, potential natural gas exports in Egypt have previously been diverted to the domestic market to meet growing energy demand. Developing domestic renewable energy would ensure that more natural gas is available for export. The Government of Egypt and the Ministry of Electricity and Renewable Energy (MoERE) are set to harness the vast potential of wind and solar power and have set a target of obtaining 20% of the country’s energy requirements from renewable sources by 2022 with 12% coming from solar and wind technologies and 8% from hydropower. A feed-in tariff (FiT) program aims to secure an initial 2,000MW of solar capacity and 2,000MW of wind capacity. These incentives are expected to drive installed renewable power capacity from 3.6GW in 2017 to 13.8GW by 2025.