Is renewable energy really too costly for Egypt?

High prices of renewable energy are consistently used to justify Egypt’s modest renewable energy ambitions, despite the country’s enabling (natural) environment, which includes high solar radiation and adequate wind speeds.

In 2014, in the face of an energy deficit, Egypt went in the opposite direction by resorting to coal as a source of energy. Since then, laws and policies have made way for the decision to take force, including modifications to Egypt’s environmental law, which used to strictly forbid the use of coal as a source of electricity. The Federation of Egyptian Industries, coal’s biggest fan, has often made the case for its low price and availability, also claiming that new technologies make clean coal possible.

In the following years, slowly but steadily, subsidies have been lifted, leaving the Egyptian people with rates of inflation reaching as high as 14 percent. But the energy deficit persists, and energy policies appear to be uncreative and shortsighted.

On the business side — apart from one promising investment of $4 billion from a variety of sources in the Benban solar park — a Chinese consortium has received the bid for a large coal-fired power station in the city of Hamrawein in the Red Sea governorate for $4.4 billion and Russian state nuclear company Rosatom has made an investment of $21 billion in the city of Dabaa nuclear power plant in the Matruh Governorate. These three energy projects are planned to generate 1.6 GWs, 6 GWs and 1.2 GWs of energy respectively. However, in the case of both the coal and nuclear plants, the construction price does not include costs of fuel, making the claim of financial viability questionable.

Energy strategies in countries like Indonesia and India — not very far from Egypt’s GDP and GNI, and even with energy consumption levels that exceed Egypt’s — are quite different. They stand next to economic giants like the US, China and Canada, alongside Mexico and Brazil, to collectively account for 50 percent of the world’s renewable energy in 2030. So what makes countries like India and Indonesia stand side-by-side, or at least realistically plan to, with the big players in terms of renewable energy, while Egypt falls behind?

The Indonesian Renewable Energy Strategy includes a specific rundown of renewable energy sources and energy demand. Targets set by Pertamina, Indonesia’s state-owned energy group, include 2,300 MW of geothermal plants and 600 MW of solar energy by 2030, as well as 300 MW of wind and 200 MW of biomass power facilities, in addition to the distribution of 17,000 barrels of biofuel daily. There is a strategic focus on small-scale biogas plants, which not only enables decentralized generation, but also provides jobs, increases community autonomy, boosts the local economy and contributes to energy security and independence. Energy efficiency plans are planned to reduce energy intensity by 17 percent across the transport, industrial, residential and service sectors. Reducing energy intensity in different industries indicates an increase of energy efficiency leading to an increase in the GDP contributed in comparison with the energy used in these respective industries.

Closer to home, the Moroccan Renewable Energy Strategy is another example for ambition. Renewable energy production has reached an all-time high of 34 percent in 2017, making the plans of reaching 42 percent by 2020 and 52 percent by 2030 quite realistic. The strategy also includes cutting coal power production from 37 percent to 26 percent, a drastic decrease of the use of one of Morocco’s already-existing fuels, all the while increasing the share of wind power from 10 percent in 2015 to 15 percent in 2020 and 20 percent in 2030. Meanwhile, solar energy shares are to be increased from 2 percent in 2015 to 14 percent in 2020 and 20 percent in 2030.

Decentralized bio-fuel generation has proven to be a problem-solver not only in Morocco but in many countries, including India, Brazil, Ethiopia, Kenya and Mozambique. These countries — much like Egypt — have vast agricultural land and produce massive amounts of agricultural waste that is a potential goldmine. Morocco’s regulatory framework of renewable energy production has also witnessed several amendments that have opened the door to self-producers and the introduction of net-metering (a system that allows entities and individuals to feed the national grid with electricity produced from solar energy during peak hours of solar radiation and credits them based on the amount of electricity produced to be remunerated in electricity equal to the amount produced and financially if the amount of electricity produced exceeds the electricity consumed.) Morocco’s 2030 renewable energy strategy is set to decrease national emissions to 32 percent below business-as-usual (BAU) emissions (greenhouse gas emissions expected by the year 2030) in a scenario in which there is no change to the current Moroccan energy strategy.

Reducing emissions is not the only incentive for ambitious renewable energy strategies. In Indonesia, the plan’s net reduction of energy system costs, along with mitigated emissions and air pollution, could stand to save the country $53 billion per year, the equivalent of 1.7 percent of its GDP. The strategy is also expected to lead to an increase in jobs in the renewable energy sector from 100,000 to 1.3 billion. The plan further provides Indonesia greater energy security since it will decrease its oil use by 9 percent, consequently decreasing its petroleum imports. In Morocco, the renewable energy strategy places the country on the export side of the onshore wind power market. More than 13,000 direct jobs are expected to be created, in addition to the creation of over 36,000 jobs in the field of energy efficiency. Furthermore, cutting the heavy fossil fuel subsidies will allow the Moroccan government to offer renewable energy at affordable rates and fund research and development.

While coal use is still very much present in Indonesia’s energy strategy, coal use has long been a part of the Indonesian energy production plan, as opposed to Egypt’s newly introduced fuel imports at a time when there is a global phase-out of coal. It is worth noting that both Indonesia and Morocco use local coal, rather than import it like Egypt, making Egypt’s insistence on using coal for power generation somewhat inexplicable.

In comparison with the global trend, inconsistency clouds Egypt’s plans. According to governmental sources, Egypt’s renewable energy strategy aims at 20 percent renewable energy by 2022, a 2018 MOU with the European Parliament refers to 42 percent by 2035 as Egypt’s official renewable energy target, news articles have Egypt’s Minister of Electricity and Renewable Energy Mohamed Shaker announcing 37 percent by 2035 as the official target, while the minister has also been cited as announcing a target of 42 percent by 2035. The importance of renewable energy targets lies not only in the figures themselves, but in their acting as a frame of reference and an integral part of accountability mechanisms.

On the policy side, Egypt’s energy strategy includes generic recommendations rather than specific energy policies. These include to “strengthen deployment mechanisms for different [renewable energies], and relevant monitoring systems” and to “adopt a regulatory system for solar thermal and biomass applications.”

The energy sector plays a vital role in any national strategy. Renewable energy penetration introduces a new skillset to the country’s job market. According to the International Renewable Energy Agency (IRENA), not only does the deployment of renewables reduce greenhouse gases and, thus, has a role in preserving public health and ecosystems, it also contributes to a significant boost of human welfare due to its contributions to job creation, education and changes in consumption patterns.

Egypt’s solar radiation, one of the highest worldwide (and one and a half that of Indonesia’s) in addition to rapidly plummeting prices of photovoltaic systems — one of the systems used to convert solar energy to electricity using solar cells — are bound to make solar energy more lucrative and much cheaper than coal, nuclear and even diesel in the near future. In Egypt’s current energy and economic climate, a strong renewable energy strategy would contribute to solving the energy deficit but also contribute to the ever-volatile welfare of Egyptians.

Amena Sharaf