Energy Central Professional

 

Egypt Renewables Report


Fitch Solutions Sector Intelligence  

 

    Egypt Renewables Report

    Key View

    Key View

    • 23 May 2022
    • Egypt
    • Renewables
    Non-hydropower renewables projects will drive power capacity growth in Egypt over our 10-year forecast period to 2031, making up more than 80% of the total net growth in capacity over this time frame. Robust government support, declining energy subsidies and vast natural solar and wind power potential will make Egypt a highly attractive destination for private renewables investors, boosting competitiveness in the market. Solar power will remain dominant in the market, though we expect technological advancements and declining equipment costs in the wind power sector will prompt significant wind capacity growth over the coming decade. Ambitious plans to build out its green hydrogen sector will also drive growth in the renewables sector, driving up demand specifically for renewable electricity over the medium-long term.

    Key View: Non-hydropower renewables projects will drive power capacity growth in Egypt over our 10-year forecast period to 2031, making up more than 80% of the total net growth in capacity over this time frame. Robust government support, declining energy subsidies and vast natural solar and wind power potential will make Egypt a highly attractive destination for private renewables investors, boosting competitiveness in the market. Solar power will remain dominant in the market, though we expect technological advancements and declining equipment costs in the wind power sector will prompt significant wind capacity growth over the coming decade. Ambitious plans to build out its green hydrogen sector will also drive growth in the renewables sector, driving up demand specifically for renewable electricity over the medium-long term.

    Renewables Headline Forecasts (Egypt 2021-2026)

    Indicator 2021e 2022f 2023f 2024f 2025f 2026f
    Generation, Non-Hydropower Renewables, TWh 6.605 8.099 9.959 11.743 13.488 15.318
    Generation, Non-Hydropower Renewables, % y-o-y 13.9 22.6 23.0 17.9 14.9 13.6
    Capacity, Non-Hydroelectric Renewables, MW 3,773.9 4,810.5 5,635.5 6,534.5 7,486.7 8,461.9
    Capacity, Non-Hydroelectric Renewables, % y-o-y 19.9 27.5 17.1 16.0 14.6 13.0
    e/f = Fitch Solutions estimate/forecast. Source: EIA, IRENA, EEHC, Fitch Solutions

    Key Forecasts And Latest Updates

    • Egyptian authorities have seen a significant uptick in the number of large-scale green hydrogen production projects applied for over recent months. Between January and April 2022, five new green hydrogen production projects were announced, totalling more than 2.3mn tonnes per year (tpy) in hydrogen production upon completion. Four of the projects will be located in the Ain Sokhna and Suez Canal special industrial and economic zones. Investors include Scatec, Petrofac, Mediterranean Energy Partners, EDF Renewables, Zero Waste, AMEA Power, Masdar and Hassan Allam Utilities. The projects plan to come online between 2026 and 2030, with some of these plans including proposals to construct solar and/or wind power capacity to power the plants’ electrolysers. Given the vast amount electricity needed to produce these high volumes of hydrogen, we note that this points to significant growth in the demand for renewable electricity over the long term.
    • ACWA is reportedly finalising the offtaker agreement with the Egyptian Electricity Transmission Company (EETC) for a 1.1GW onshore wind power project valued at USD1.2mn. Reports indicate that the agreement is expected to award the plant a contract to sell its electricity to the EETC at a rate of USD0.0258/MWh. The company is also negotiating a land use contract with the New and Renewable Energy Authority (NREA), and plans to reach a usufruct agreement within the coming months.
    • Orascom Construction, Scatec and Metito Holdings have announced plans to construct a USD1.5bn solar-powered desalination plant in Aswan. The facility will consist of a 400MW solar power plant and a desalination plant with the capacity to process one to two million cubic meters of saline water per day. The project is part of USD2.5bn scheme, which envisages the construction of 17 desalination facilities around the country.

    SWOT

    Renewables SWOT

    • 23 May 2022
    • Egypt
    • Renewables
    Policy reform allowing international arbitrage and the introduction of competitive capacity bidding at auctions has boosted competitiveness in the market.
    SWOT Analysis
    Strengths
    • Policy reform allowing international arbitrage and the introduction of competitive capacity bidding at auctions has boosted competitiveness in the market.
    • Power demand is set to increase significantly over the coming decade, driven by rapid economic and demographic growth and the expansion of cross-border interconnections to boost electricity export capacity.
    • High solar and wind power potential.
    Weaknesses
    • Parts of Egypt's transmission and distribution infrastructure are ageing, and this presents a bottleneck for the integration of intermittent wind and solar power.
    • The country is faced foreign currency shortfalls and an expanding fiscal deficit.
    • Policy continuity is weak and may elicit caution among investors looking to boost long-term exposure to the market.
    Opportunities
    • Government interest in developing big-ticket renewables projects - evident in a series of high-profile memoranda of understanding and contracts.
    • Electricity price hikes and fuel subsidy cuts should improve the competitiveness of renewable energy and boost profitability for private power producers.
    • Plans to expand the country's electricity export capacity will boost overall demand, driving continued growth in the industry.
    Threats
    • Volatility in the Egyptian pound poses a risk of significantly higher costs on foreign currency-denominated renewable projects.
    • Historically unstable political and security environment.
    • An oversupply of electricity will pose a threat to new capacity deployment, making long-term growth reliant on domestic consumption increases and the completion of new transmission interconnections.

    Industry Forecast

    Forecast Scenario

    • 23 May 2022
    • Egypt
    • Renewables
    The rapid expansion of Egypt's non-hydropower renewables sector will continue through our forecast period to 2031, driven by the completion of large-scale solar and wind power projects. Its liberal power market, particularly in the renewables space, sets the country apart from many of its regional counterparts. This will give it one of the region's most competitive power sectors, attracting sizeable foreign direct investment. Plans to boost the country's power export capacity and expand its industrial sector, with particular focus on green hydrogen production, will drive further renewables growth in the long term.

    Key View: The rapid expansion of Egypt's non-hydropower renewables sector will continue through our forecast period to 2031, driven by the completion of large-scale solar and wind power projects. Its liberal power market, particularly in the renewables space, sets the country apart from many of its regional counterparts. This will give it one of the region's most competitive power sectors, attracting sizeable foreign direct investment. Plans to boost the country's power export capacity and expand its industrial sector, with particular focus on green hydrogen production, will drive further renewables growth in the long term.

    Non-Hydro Renewables Generation By Type And Share Of Total Electricity Generation

    (2021-2031)

    e/f = Fitch Solutions estimate/forecast. Source: EIA, IRENA, Fitch Solutions

    Non-Hydro Renewables Capacity By Type And Growth

    (2021-2031)

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