German Chancellor Angela Merkel and President Abdel Fattah have inaugurated the first phase of a Siemens megaproject that is set to add a total of 14,400 megawatts of electricity though three power plants, increasing Egypt’s electricity grid by 45% and saving the country at least $1.3 billion a year in natural gas costs.
Siemens, in cooperation with Elsewedy Electric and Orascom Construction, have already started the commercial operation of plants in Borollos, Beni Suef and the New Capital. With the project kickstarting in early March, 4.8 gigawatts have already been added to the grid.
Siemens CEO in Egypt Emad Ghaly spoke with bt to discuss the power plants, renewable energy and the impact of the new projects on Egypt’s electricity problems. Edited excerpts:
With the second phase of the deal with Egypt concluded, Siemens has set a new power generation benchmark in the country. How has Siemens contributed to growing the national electricity grid?
In June 2015, Siemens signed a series of contracts with the Egyptian government to build the world’s largest-ever gas-fired combined cycle power plants in addition to 12 wind parks with some 600 turbines, increasing Egypt’s electricity generation capacity by 45% and adding 16.4 gigawatts to the grid.
As part of the megaproject, Siemens—together with local partners Elsewedy Electric and Orascom Construction—are building on a turnkey basis three natural gas-fired combined cycle power plants, each with a capacity of 4.8 gigawatts. The three power plants, in Beni Suef, Borollos and the New Capital, will be powered by 24 Siemens H-Class gas turbines. The scope of supply also comprises 12 steam turbines, 36 generators, 24 heat recovery steam generators and three 500 kilovolts gas-insulated switchgear systems.
After only 18 months from the date of signing the contract, Siemens has set a new worldwide benchmark for the execution of fast-track power projects. The first phase of the megaproject in Egypt has been finalized and the promised goal of bringing 4.4 gigawatts of new capacity to the [national electricity] grid has even been exceeded, already connecting 4.8 gigawatts to the grid.
When will the commercial operation of the first phase kick off and when is the second phase scheduled to be inaugurated?
We are ahead of schedule and have been able to connect 12 gas turbines in open-cycle configuration instead of the original plan of having 11 connected to the grid by the end of 2016 or early 2017. So we have already achieved 10% more than [what we expecting in] our original timetable.
There are two things we need to deliver now: the combined cycle modules and converting the power plants from open-cycle to combined-cycle operation. At the end of the project we have to have 14.4 gigawatts in combined-cycle configuration. The 12 gas turbines are currently installed in open-cycle configuration—this means without a steam turbine or a boiler. Each power plant will have four combined cycle modules that each produce 1,200 megawatts; it’s basically connecting two gas turbines with one steam turbine. Now we are working to install the combined cycle modules. Later, we’ll start to convert from simple to combined-cycle operation.
Despite recent shortages, Egypt actually has a significant supply of renewable and gas reserves. How has Siemens built its energy solution plan for Egypt given these resources?
We have been carefully analyzing Egypt’s energy system, taking into account the country’s current power generation scenario and upcoming challenges and we’re advising our customer on a certain electricity generation mix based on these findings. The best energy mix for Egypt will rely on natural gas as the most important energy source and on renewable sources of energy. For this reason, we suggested closing the gap with efficient combined-cycle power plants distributed across the country.
So, gas is definitely an important part of Egypt’s future energy mix but also renewable sources of energy should be judiciously represented in the energy mix—especially efficient wind power as well as solar-power plants.
Egypt already has targets to reach some 25% renewables in the energy mix by 2025; the two go hand in hand.
With recent gas discoveries and Siemens’ power generation capacity, are Egypt’s energy problems solved? When is self-sufficiency expected and will Egypt have the capacity to start exporting?
These projects mean that Egypt’s electricity challenges are now solved for good. With these three power plants, Egypt’s total generation capacity will increase by almost 45%; this will fulfill its power needs until at least 2022. It will have 14.4 gigawatts operating on one of the highest combined cycle power plant efficiencies worldwide—more than 60%. We expect that this will save Egypt at least $1.3 billion a year in natural gas costs, that’s comparing the H-class turbines to other combined cycle power plant gas turbines. [If the new solution is] compared to the existing fleet, the saving would be far greater.
So, we are introducing new technologies and training 600 new, highly skilled engineers and technicians. This will not only have an impact on Egypt but on the region as well.
With the recent discovery of the Zohr gas field in the Mediterranean, Egypt’s gas resources received a huge boost. With the development in the field, the Egyptian government expects to stop imports and even become an exporter.
Siemens H-Class gas turbines are extremely powerful and efficient gas turbines with a comprehensive and very positive track record. Our gas turbine and steam turbine technology is ideally suited to match Egypt’s needs for a very fast, reliable, sustainable emission-optimized power supply.
A megaproject like this requires huge investments—how will funds for the power plant be procured?
The financing package for the Siemens part of the contracts was structured by Siemens Financial Services (SFS) and included a tailored guarantee concept. The financing of major parts of Siemens’ and its local partners’ scope for the three power plants was provided by a consortium of international and regional banks. The credit facilities are largely covered by Export Credit Agencies.
Will Siemens train people to operate, manage and maintain the new power plant?
If anything sets Siemens apart from other international companies, it’s that we, at Siemens, are always committed to knowhow transfer, education and localization.
Siemens provides a comprehensive training program for a total of 600 Egyptian engineers and technicians, 200 for each power plant. Over 300 out of the 600 are currently enrolled in training for six months each with excellent progress. The first group of operation managers have finished their full training program and have been certified last January.
Overall, 169 trainees are now available at the three sites and are now able to operate and maintain the first units being connected to the grid after the challenging yet exciting commissioning phase they have just witnessed. Training for a further 300 Egyptian engineers and technicians is foreseen till end of 2017.
What new investments is Siemens planning?
We have already invested in the Suez Canal Development area to build up the rotor blade factory and services center.
Siemens will also join forces with the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH on behalf of BMZ for the establishment and operation of a joint training center. The new training center will serve as a sustainable vocational and industry-specific training provider that enriches the country’s technical talent pool. When completed, it will provide training to 5,500 selected technicians and engineers over four years.
We really like to support Egypt in these projects and all other areas critical to the country’s vision for sustainable development through providing infrastructure solutions and transportation, and delivering the most social and economic benefit to the Egyptian people. For instance, we are developing signaling systems for the Egyptian National Railway that will provide increased safety and enable the increase in the number of passenger trains as well as the freight volume on the developed routes. We are also providing automation and digitalization solutions to Egyptian manufacturing and healthcare sectors.
How do you assess the investment climate post reforms and what are the potential that you see in the Egyptian market?
Egypt provides very good investment opportunities and the country is developing fast. With its young population and its geopolitical and economic significance as a hub between Asia and Africa, Egypt has all the prerequisites for achieving economic development. Equally important is the ever-increasing effort and support we are seeing from the government to attract foreign investments.
The successful private sector investments in the energy sector are likely to have a spinoff effect on the rest of the economy as well. The potential of renewable energy in Egypt is also great: The country’s geography presents good prospects for a significant proportion of the country’s electricity generation to come from wind and sun.
The planned Suez Canal Development project will help the creation of new ports, research facilities and sites for ancillary manufacturing. These facilities will benefit from their location along key shipping routes, providing access into the Egyptian market and possibly beyond into North Africa.
The New Capital project is also planned to be a sustainable, modern capital city that will be home to 5 million Egyptians, providing high-quality commercial spaces for both Egyptian and international companies. This will be coupled with the construction of new airport, recreational and retail amenities. All these infrastructure projects are creating considerable investment opportunities for everyone.