Mohamed El-Khayyat, chairperson of the New and Renewable Energy Authority (NREA), inaugurated on Tuesday the first roundtable on renewable energy investment and sustainable development in Egypt, organised by Media Avenue.
The roundtable was attended by Mohamed Salah El-Sobky, former NREA chief; Hend Farouh, director of Small Scale Photovoltaic Systems; Ahmed Zahran, executive director of KarmSolar, Sherif El Gabaly, president of the Egyptian Junior Business Association (EJB) and Enara Capital; Mennatallah Sadek, CEO of Hassan Allam Utilities; Soraya Hassan, Business Development Manager at Infinity Solar; Hossam Allam, CEO of Hassan Allam services; and Hassan Amin, regional director of Acwa Power.
The first session of the roundtable discussed the future of renewable energy after the feed-in tariff projects, and the benefits of launching the largest solar gathering in the world for the Egyptian market. It also discussed the economic and social impact of Benban solar complex in Aswan, after the completion of sustainable development plans and waste treatment.
The session, moderated by Mohamed El-Sobky, shed light on Egypt’s vision for development, and the strategy of diversifying the sources of energy production. It also tackled ways to provide incentives and legislation that contribute to the acceleration of renewable energy growth rates, as well as the challenges facing the sector and their impact on investment opportunities.
The attendees discussed the mechanisms of transforming Egypt as an energy producer, opening new horizons for the private sector in investment, the problem of providing land for the implementation of new projects, the government’s plan to buy energy from the private sector in light of the availability of electric power reserves, and local manufacturing methods for solar energy missions and components. They also discussed investment opportunities, the future of wind energy projects in Egypt, the role of banks in financing stations, and ways of lending companies to carry out other projects.
El-Khayyat said the renewable energy market in Egypt started in 1986, and succeeded in attracting the confidence of a large number of investors as it signed agreements to purchase energy with 32 companies with a total capacity up to 1,465MW.
He added that after the launch of new energy projects within the feed-in tariff programme, the NREA has received applications for production of 10GW. He explained that 30 companies are currently working in the Benban Solar Park, with only two stations underway.
“We implemented eight wind power projects with a total capacity of 545MW, including the Zaafarana complex project and Jabal al-Zeit complex,” he elaborated.
With regards to private sector participation, he explained that the idea started after the issuance of Law No. 203 for 2014 to regulate the relationship between the bodies working in the new and renewable energy sector.
El-Khayyat said that despite the fear of investors of investing in the new energy sector, they received requests for the implementation of projects with capacity of 10GW, five times the government’s target, immediately after the announcement of the feed-in tariff projects.
Moreover, the NREA aims to produce 2GW solar cells, El-Khayyat revealed.
“Egypt remains an attractive market for foreign investment in the renewable energy sector, which will enable us to achieve our goals,” he stated.
El-Khayyat said that most of the Benban projects are relatively large, with capacities ranging from 200 to 250MW, emphasising the need to work on relatively medium and small projects as well.
In response, El-Sobky said that despite the establishment of large projects, the country is currently moving to support small and medium enterprises in the new energy sector.
Small Scale Photovoltaic Systems
The Small Scale Photovoltaic Systems project aimed at removing obstacles faced by solar energy producers, and it is being implemented in conjunction with the country’s plan to open the market for large projects, which is also reflected in attracting small projects, according to Hend Farouh, the project’s director.
The Small Scale Photovoltaic Systems is implemented by the United Nations Development Programme (UNDP) and the Industrial Modernization Centre (IMC), and funded by the Global Environment Facility (GEF). The project aims to promote the installation of small scale PV systems on roof tops of residential, public, commercial and industrial buildings which are connected to the grid.
“Last and current year, we have been working to remove financial obstacles, and we have implemented projects with a capacity of 8.25MW, through 133 stations, each 5-500kW allocated to residential and commercial areas, hotels, industrial, and some public buildings,” Farouh said.
She pointed out that the market has become open for small scale PV systems, but the government is still working on providing easy financing mechanisms, since the small projects are mainly dedicated to the household sector.
“The main objective of the project is to create pilot models for citizens wishing to invest in clean and renewable energy,” Farouh said.
In 2018, the project was providing about $250 per kW, but currently the situation is different, and many people are requesting technical rather than financial support, and provide quarterly reports.
She said that some of the small scale PV systems on roof tops of hotels produced more energy than predicted during the design phase, and proved to be much cheaper than traditional energy, which has encouraged many potential buyers to request installation of solar panels at their establishments.
She continued that they trained 178 engineers in the banking, engineering, and consulting sectors.
Renewable energy feed-in tariffs
Ahmed Zahran, co-founder and CEO of KarmSolar, said his company was one of the pioneers in small scale feed-in tariff projects.
He added that KarmSolar is currently working on a new energy project with a capacity of 12MW and is expected to increase to 30MW by the end of the year.
He pointed out that financing small and medium sized enterprises operating in the solar power sector in the Middle East, is still a new criteria for financing bodies, especially that the energy buyers are from the private sector. When the energy buyers are government bodies, the financing process will be much easier, as it represents a guarantee for financing.
He stated that the first project to sell energy to the private sector was for Juhayna, and was financed by the Social Fund for Development. Zahran pointed out that the sector was facing financing problems at the beginning, but the accumulation of projects provided more experience for banks and gaining financing approvals for renewable energy projects became faster.
Future of investment in large energy projects
Hassan Amin, regional director of Acwa Power, said the company operates in 12 countries with total investments of $35bn and total output of more than 28GW.
He said that the renewable energy sector went through different stages, the first energy shortage, and since moved on to the surplus stage.
“To avoid the trap of energy shortage in the next ten years, we need a plan to increase production by 20% based on the real needs of the market. By 2024, we will need to increase the capacity of the national grid,” he said.
Amin attributed the need for upgrading the national grid to the obsolescence of some stations, in addition to the need to absorb the newly produced capacities.
“Renewable energy is the future, but that does not mean abandoning conventional energy,” he noted. The implementation of Benban project was not an easy journey, he continued.
He added that the plan, which was put in effect, attracted more than 30 investors in the Benban project, despite the challenges that Egypt initially faced, especially at the organisational level.
New comers in energy sector
Sherif El Gabaly, chairperson of Enara Capital, said what was achieved in the Benban project is much more than just producing energy. It has increase the confidence of companies to invest in the renewable energy sector in Egypt, especially in their negotiations with banks to finance projects.
He explained that his company implemented 180MW projects in the Benban Solar Park in cooperation with Spanish company Acciona. The company has completed some of these projects with a total capacity of about 800MW so far.
El Gabaly pointed out that his company is expanding in emerging markets, where the company has completed new projects with a total capacity of 50MW in Kazakhstan, thanks to Benban.
He stressed that the challenge in Egypt is to restructure the electricity sector, a process that began in 2014 with lifting subsidies.
He pointed out that the level of cooperation between energy companies would not have occurred without the Benban project, which increased the market’s size and contributed to increasing the demand for this type of energy, with the help of the Ministry of Electricity in particular.
Benban Solar Park: story of success
Soraya Hassan, Business Development Manager at Infinity Solar, said that the sector is facing daily challenges. She added that the presence of specialists and experts in the sector gives it hope to continue and solve more common challenges between government agencies, financial institutions, and private entrepreneurs.
She added that the first phase of the project was some of the most difficult times the company had to go through, but getting success stories means facing the challenges well. In the first and second phase of the work, “we faced challenges in the implementation of 30 projects as per the agreed schedule with government agencies.”
She noted that the funding challenges were always the most difficult part of any project, as it was a separate side with its own risk management.
Hassan stated that the company started 13 projects with one financing institution, then implemented 16 others with another institution, which shows the amount of risks that are faced by the company and the financing institutions.
Mennatallah Sadek, CEO of Hassan Allam Utilities, said that Benban is the only project that involved Egyptians in its implementation. Hassan Allam Utilities, in cooperation with another company, implemented a 50MW project in the second phase of the Benban project..
The company is working with a British company, 43% stake of which is owned by BP, the third largest developer in the world, and the first in Europe, which aims to produce 10GW by 2023.
She added that the Egyptian market recently saw some confusion, but a company such as Hassan Allam proved that the market is good. Another evident is the investments of BP, which has been one of the largest investors in Egypt in the last three years.
Moreover, Hossam Allam, CEO of Hassan Allam Services, said his company has a regulatory role in the Benban project, and worked through three departments to organise the project’s logistics. The first included providing 20,000 trucks and waste management of the project. The second department was concerned with maintaining international rules in terms of industrial security. The third is the coordination and communication with civil society about the project, especially in the village of Benban, which has a population of 20,000 citizens, where they organised 23 meetings, and met about 1,400 citizens.
He added that the project created over 10,000 jobs, and that contractors in Egypt have gained good experience in this period.