Egypt on a roll: World’s largest solar plant, regional energy hub, thriving economy
Benban, built in the eastern region of the Sahara Desert, is set to produce between 1.6 and 2.0 GW of solar power by mid-2019.
As it stands, the project has received no incentives. Still, it has signed a 25-year contract with the state-owned Egyptian Electricity Transmission Company (EETC), who will buy its electivity at a rate of 7.8¢/kWh, pegged to the value of the U.S. dollar.
Currently, 29 projects have been financed at a total of $1.8 billion, producing almost 1.5 GW of solar power, on the 14.3-square-mile plot of land.
Built on an area that receives some of the best sunlight on the planet, Benban is arguably the second best spot for solar power plants, behind the Chilean desert highlands.
A promising emerging #solar market for 2017 global share leader NEXTracker is North Africa and the greater #MENA region with our 325 MW project within the Benban solar park, the largest planned solar installation in the world: https://t.co/xGNZ06Wp9L@_sterlingwilson#WhatsNEXTpic.twitter.com/zjVR7Y8xMm— NEXTracker, Inc. (@NEXTracker) February 23, 2018
By producing a huge power plant, Egypt is set to reduce the costs of costly power lines, power substations and expensive hardware, which, in turn, is set to lower the cost of electricity.
According to the project’s original
The report continues, “The 41 projects on the Benban site will be connected to the Egyptian high-voltage network through four new substations, which will be constructed on the site by EETC. These substations will in turn connect to an existing 220 kV line, which passes nearby the Benban site at a distance of approximately 12 km. At a later stage, EETC may also construct an additional connection to the neighboring 500 kV line. EETC will construct the high-voltage connections. NREA has prepared site access roads and on-site roads for the Benban project area.”
- 41 Solar photovoltaic plants; total installed capacity 1.8 GW.
- Related infrastructure including roads, administrative buildings and four high voltage substations.
- A high voltage interconnection.
- Sharing costs, reducing overall price of electricity for government and citizens.
The project’s analysis also looks into the environment, employment, local villages nearby and the effect of the project on them, water supply and usage, and many other factors, concluding that the power plant will have an overall effect on the aforementioned topics.
Egypt is increasingly turning to the sun for power as #solar has become competitive w/traditional generation. NEXTracker announced that it will supply 325MW of #NXHorizon trackers to the 1.6 GWBenban park: https://t.co/bzKnm1k6Zh@_sterlingwilsonpic.twitter.com/s3e58O9yYn— NEXTracker, Inc. (@NEXTracker) January 17, 2018
According to the report, Egypt is expected to generate 20 percent of its power from renewable sources by 2022.
“The potential is endless,” says Lamya Youssef, head of the EETC, adding, “Because of the enormous increase in (Egypt’s) population, we need large investments in infrastructure, which the government cannot afford on its own. That’s why we need private sector investments.” For Youssef, Egypt can easily generate the 20 percent by 2022.
In July, the International Finance Corporation (IFC) approved $660 million in funding to 13 feed-in tariff (FiT) projects in Benban, near Aswan, according to a statement from the Ministry of International Cooperation. These projects are worth a total of $730 million and have a total capacity of 500 MW.
The European Bank for Reconstruction and Development (EBRD) is also expected to finance a total of 16 solar projects in Egypt at a total capacity of 750 MW. It pledged $500 million in funding framework for the FiT project.
More than 325 MW of Benban is designed to use NEXTracker’s single axis trackers and 64 MW of single axis trackers will be deployed by German Group Mounting Systems GmbH.
Egypt: A regional energy hub
During a speech on February 21, President Abdel Fatah al-Sisi spoke about Egypt’s route to becoming a regional energy hub. “All gas that comes from countries around us comes to us first. We then work on it, take money for this work, of course, and then we import it to other countries or keep it if it will still enter production phases.… There are many ways to make profit from gas…but the best way to do so is through importing it and adding value to it. The more that we develop our technologies in this field, the more we will gain, the more we will profit and the more returns we can get from their value-added approach. I do not like to give examples of countries; however, if we look at South Korea, we will see that it does this using its advanced technology; we will do the same.”
The president noted that Egypt’s path to becoming the Middle East’s energy hub is facilitated by the fact that Egypt has many facilities and infrastructural capabilities that other countries within the region lack. Dealing with raw natural gas is not easily found in the region, especially given the high quality that Egypt has. Egypt also has three options to becoming the regional energy hub, explained Sisi; namely, exporting gas through Turkey; exporting gas through the producing countries themselves, which are Cyprus, Egypt, Israel and Lebanon; or through Egypt.
Sisi then clarified why private companies have been allowed to import gas in this way, explaining that some of the investors, who use gas a lot in their work, believed that the country had harsh laws on the matter. As per the president’s speech, they thought that the state was imposing a heavy cost on them, saying, “If we were to import gas, we would be able to reduce the cost, but give us a chance.”
The president stated, “So, we thought we would give them a chance. It’ll be a free market, and we let private companies import gas. As a country, of course, we will take fees in exchange for this easing. Investors will import raw gas and use Egypt’s network and infrastructure for purification, refining and treatment, and then this gas will be pumped through our network and we will take money in exchange. We have scored a key goal. Today, Egypt has climbed the first few steps in becoming the regional energy hub; this is what we have been dreaming about. We dreamt of becoming the regional energy hub; we are now on track. Being the regional energy hub has many positive aspects to it, of course.”
Sisi noted that the new law recently passed by the parliament guarantees Egypt’s benefit from the gas, either by manufacturing or exporting it to other countries. “I want people to know, to be certain and sure, that we have allowed for this new law, this easing in the system, as well as many other facilitations, in order for the country [Egypt] to become the regional energy hub. All the gas from the region will come to us first.”
Agreements signed by private companies to import gas from Middle Eastern countries strengthens Egypt against Turkish ambitions to control the sector in the region, a sector that Egypt has continuously pioneered, an energy expert told Egypt Today on Monday.
Likewise, Medhat Youssef, former head of the Egyptian General Petroleum Corporation, pointed out that Cairo has won the competition with Ankara over the sources of gas in the eastern Mediterranean. Egypt also continues to consolidate its alliance with Greece, Cyprus and the region at large, explained Youssef.
Such deals accelerate Egypt’s plan to be transformed into a regional energy hub. Meanwhile, the government is not committed in the short or long terms per the agreement, as Dolphinus will import the gas to use in privately-owned factories or to liquefy and re-export, according to Youssef.
In the Mediterranean, the Egyptian-Cypriot alliance is the strongest of its kind in the region, because the two countries have large gas reservoirs, and it is also friendly with the European Union, which wants to secure its needs for gas away from Russian domination, Youssef emphasized.
The location of Egypt on the map, its infrastructure and recent gas discoveries make the country “pivotal” in connecting the Cypriot and Greek gas with the Egyptian liquefaction plants, he said.
When a gas pipeline is established between Cyprus and Greece from one side to Egypt on the other side, Egypt will be the sole center for the disposal of eastern Mediterranean gas to Europe or any other place in the world via the Egyptian liquefaction stations, the petroleum expert added.
Agreeing with Youssef, Yossi Abu, CEO of Delek Drilling, said, “The export deals establish Egypt’s status as a regional energy center, which allows the supply of gas both to the Egyptian domestic market and for export.” Abu added, “Concurrently with the implementation of the transactions, we are continuing to promote additional agreements.”
Egypt is also set to become the biggest exporter in the region with the Zohr gas field and other fields in the Egyptian Mediterranean and Delta.
Egypt is expected to stop importing liquefied gas by June 2018, after the production of its giant Zohr gas field began by the end of 2017. Zohr contains about 850 billion cubic meters (30 trillion cubic feet) of gas. In addition to Zohr, Egypt accomplished three other gas production projects, which are Torres and Libra, Atoll, and Norse.
These projects added 1.6 billion cubic feet of gas per day, raising Egypt’s daily production to 5.5 billion cubic feet a day. The new discoveries are expected to turn Egypt into a net exporter of natural gas, as the country is expected to halt gas imports by mid 2018.
Mohamed Abdel Azim, deputy chairman of the Egyptian Natural Gas Holding Company (EGAS) for production and fields’ development, said earlier that Egypt’s natural gas production will reach some 6 billion cubic feet a day by the end of fiscal year 2017/18.
Given all this, and with the rise of Egypt as the holder of the biggest solar power plant in the world, Egypt is now surely on its path to becoming the region’s energy hub.
Egypt’s economy and development are on a roll
Egypt’s economy, which is now the second-largest in Africa after Nigeria, according to Greentech Media, is on a roll.
The Benban plant has managed to jump-start economic growth, especially in the region where the project is being built.
With unemployment levels particularly high in that region, the Benban project has led to a decrease in unemployment by opening up the opportunity for more than 10,000 people to work in the construction site. After the project’s completion, the operating park is set to employ some 4,000 people, many of whom will be from this region.
Thus, not only will the plant lead to cheaper electricity and help Egypt on its path to becoming the regional energy hub, it will also lead to economic prosperity and the decline in unemployment rates.
The Benban project is also building confidence in Egypt, with Sunil Kulkarni, chief executive officer of Shapoorji Pallonji, an Indian company specializing in renewable energy that is building one of the plants, calling the project “revolutionary”.
Kulkarni explained, “In many emerging markets, there is always a question about whether a project will go through, but the way (this project) was carried out gave us confidence. Our experience so far has been very good.”
In terms of development, the project will also decrease Egypt’s carbon footprint by decreasing the levels of carbon dioxide emission. According to the IFC, the project is “expected to avoid 2 million tons of greenhouse gas emissions a year, the equivalent of taking about 400,000 cars off the road.”
Mouayed Makhlouf, IFC director for the Middle East and North Africa, said, “This project will help Egypt tap into its massive potential for solar energy and scale back its use of expensive and polluting fossil fuels. That’s especially important with the specter of climate change looming.”
Turning to the overall economy, the IMF-team (International Monetary Fund) led by IMF Chief of Mission Subir Lall, who visited Cairo from October 25 to November 9, concluded that the Egyptian government is committed to its reform program supported by the IMF.
Egypt’s economy is starting to regain its power and implemented reforms are starting to pay off, most notably in the clear macroeconomic stabilization and the return of confidence to Egypt’s market, the statement said, citing Lall's words.
While the reform process has required sacrifices in the short term, Egypt has been able to seize this important economic juncture, leading to the production of a fast-growing economy that is set to improve the living standards of millions of Egyptians and increase prosperity for citizens, the statement added.
The statement read, “Egypt’s growth picked up during fiscal year 2016/17, with GDP rising by 4.2 percent compared to the projected 3.5 percent. Meanwhile, the current account deficit narrowed in dollar terms, supported by the increase in non-oil exports and tourism receipts, while non-oil imports declined. Reflecting increased investor confidence, portfolio investments into Egypt reached $16 billion this year and foreign direct investment rose by 13 percent.”
In an interview with “Hona Al-Asema” on CBC channel, Lall said that the mission will discuss the review with the IMF Executive Board and that the board is expected to approve it by late December, adding that this will be followed by the disbursement of the third $2 billion tranche.
“The annual inflation will noticeably go down in November and December, as the base effect of last year’s depreciation of the pound will ease,” Lall said, expecting that inflation should go down steadily over the next year and into single digits by 2019.
“We are confident that positive results will be felt over the coming months and quarters, and that 2018 will be the year of transformation,” he said.
Speaking about interest rates, Lall said that high interest rates were necessary because of the high inflation. “The only way to reduce interest rates will be through reducing fiscal deficit and debt levels; it takes time, but it is on the right track,” he added.