With its vast deserts, minimal cloud cover, and a well-developed electricity grid, Egypt possesses the ideal conditions for solar power expansion. However, it is only now accelerating efforts to harness this potential following a surge in natural gas import costs.
A sharp drop in domestic gas production, coupled with increasing consumption, led to widespread power outages during the scorching summer of last year.
“This has been a big wake-up call, and this is why the government recently announced a major emergency package,” said Ahmed Mortada, head of energy in Egypt for the European Bank for Reconstruction and Development (EBRD).
Egypt exceeded its budget for liquefied natural gas (LNG) imports by over $1 billion last year, and analysts predict the country will spend billions more in 2025.
Solar Power’s Cost Advantage
Solar energy companies highlight their ability to produce electricity at a lower cost than gas turbines, primarily using affordable Chinese-manufactured panels. However, they cite market-distorting power subsidies and restrictive regulations as significant hurdles to widespread adoption.
“God has blessed Egypt with really good solar resources and very good land resources,” said Hussain Al Nowais, chairman of AMEA Power, a UAE-based renewable energy producer, in December.
AMEA Power recently launched a $500 million, 500-megawatt solar power plant in Aswan, located 650 km south of Cairo. The company plans to construct a second 1,000-megawatt plant in the same area.
According to Al Nowais, AMEA will invest $300 million upfront to begin construction of the new facility before finalizing financing arrangements by May 2025. The plant is expected to start generating electricity by the first quarter of 2026.
Electricity from AMEA’s solar plants will cost between two and three U.S. cents per kilowatt-hour, which Al Nowais asserts is “definitely cheaper than a gas plant.”
The cost of electricity from gas turbines is harder to determine due to multiple layers of subsidies. Industry insiders estimate gas-powered electricity production costs range from seven to nine cents per kilowatt-hour.
Current and Planned Solar Projects
AMEA Power is among three major producers developing large-scale solar arrays to integrate into Egypt’s national grid.
- Norway-based Scatec signed an agreement in September for a 1,000-megawatt solar project.
- A consortium comprising UAE companies Infinity and Masdar, along with Egypt’s Hassan Allam, secured a deal in November to produce 1,200 megawatts of solar power.
Despite these efforts, Egypt will need thousands of additional megawatts to meet future energy demand, Al Nowais noted.
Structural and Regulatory Challenges
One of the barriers to Egypt’s solar transition is the lack of a centralized approach to energy planning.
“The problem with Egypt is that it operates like a bunch of islands. There’s no centralized coordination among ministers,” said Yaseen AbdelGhaffar, founder of SolarizEgypt, which primarily supplies solar power to private businesses.
In early 2024, the government enacted a private-to-private law permitting power producers to sell electricity directly to businesses, including factories. However, the regulation currently limits such projects to 500 megawatts nationwide.
Prime Minister Mostafa Madbouly announced in November that Egypt aims to raise renewables’ share in its energy mix to 42% by 2030, up from the current 11.5% generated by solar, wind, and hydropower.
The government is seeking international assistance to enhance the national grid and extend it to connect solar production sites. The EBRD is in discussions to provide support, Mortada confirmed.
As renewable energy comes online, Egypt plans to gradually phase out its older, less efficient power plants.
Consumer-Level Solar Challenges
Another obstacle is a regulation preventing domestic apartment dwellers from installing two-way electricity meters unless they own their entire building. These meters would allow them to sell excess power to the grid. Industry experts say the government has yet to prioritize proposed amendments to this rule.
Ayman Rasekh, CEO of SolarSol, a solar installer for homes and businesses, estimated that solar would become cost-effective for homeowners when state grid electricity prices exceed three to four Egyptian pounds per kilowatt-hour. Currently, affluent households pay 2.35 Egyptian pounds ($0.0462) per kilowatt-hour.
Egypt’s $8 billion financial support agreement with the International Monetary Fund (IMF), signed in March 2024, includes a commitment to reduce energy subsidies. The government has repeatedly postponed electricity price hikes amid an ongoing economic crisis.
“When the government removes electricity subsidies, you will see solar panels on rooftops just like satellite dishes today,” Rasekh said.
($1 = 50.8700 Egyptian pounds)
(Reuters)
