With a young population aspiring to improved standards of living, Egypt’s surging power demand will require large-scale investment – the resources and structures are in place but investors are still wary in the aftermath of political turmoil.

On 25 January 2011 hundreds of thousands of Egyptians massed on the street. As political unrest swept across North Africa, President Hosni Mubarak stepped down on 11 February 2011, handing power to the army council after 30 years of autocracy. In March a package of constitution reforms was approved and elections have been scheduled for later this year. But this political transition has made many investors wary of Egypt until the shape of the future regime becomes clearer.

Electricity industry structure

Electricity production started in Egypt in 1893 and private companies were responsible for generation until 1961, when the industry was nationalized. The Egyptian Electricity Authority was created in 1976 and took monopoly ownership along with responsibility for implementing electricity generation and transmission activities.

In 2000 the sector was unbundled to create four independent thermal power plant companies, one hydropower company, one transmission and distribution company, and seven distribution companies. All the companies were subsidiaries of the Egyptian Electricity Holding Company (EEHC), owned by Ministry of Electricity and Energy (MOEE).

Construction of the Kuraymat integrated solar combined cycle (ISCC) plant Source: Solar Millennium AG

Today the holding company has 16 affiliated companies embracing generation, distribution and transmission. The power companies are 100 per cent state-owned although the law now permits up to 49 per cent of each to be owned by the private sector. Six other authorities operate in the electricity sub-sector: the Rural Electrification Authority, Hydropower Projects Executive Authority, New and Renewable energy Authority (NREA), Atomic Energy Authority, Nuclear Power Plants Authority and Nuclear Material Authority – report directly to MOEE.

Three gas generation plants have been built by independent power producers (IPPs) under a build, own, operate and transfer (BOOT) regime. They will be transferred to the state after 20 years of operation. The first BOOT project was a gas fired steam power plant with two 325 MW units at Sidi Krir on the Gulf of Suez, which cost $450 million, and began commercial operation 10 years ago. InterGen – a joint venture between Bechtel and Shell – and local partners Kato Investment and First Arabian Development and Investment will run the plant for 20 years. EDF built the other two BOOT projects, gas fired plants near Suez and Port Said. The two plants came online in 2003 generating a total of 1366 MW.

Investment in power installations under the Egyptian government’s sixth five-year plan

A new electricity law to encourage competition was endorsed by the Cabinet in 2008 and was intended to go before Parliament in 2011.

The new law would enable consumers to make contracts with generation companies, provide third-party access to the transmission/distribution networks, and establish an independent Transmission System Operator (TSO). The new law would also establish of feed-in tariffs for renewable energy. It is not clear when the law will be put to Parliament.

Policy objectives

Egypt has reserves of both oil and natural gas and these fuel most electricity generation. Decreases in oil production have been offset by the rapid development of the natural gas sector. Most older power stations have been converted to run on natural gas, which now provides most fossil fuel powered generation, the remainder being met mainly by hydroelectricity.

But the government has ambitious plan to achieve 20 per cent of generated electricity from renewables, including 12 per cent from wind energy, by 2020.

Egypt has also been implementing a programme of economic reform and liberalization. The five-year plan for the period to March 2012 included a target for annual real GDP growth of 8 per cent. Alongside rapid increases in population, an increase in GDP has seen a strong growth in the demand for electricity.

Need for investment

A recent report by Business Monitor International forecasts an increase in demand for Egyptian electricity of 47.9 per cent between 2011 and 2020. It predicts a growth of 18.7 per cent in 2011–15 and up to 24.6 per cent in 2015–20.

The Egyptian government’s five-year plan for the period 2012–17 was based on expected average annual growth rate for energy and peak demand of about 6 per cent. This will require additional generation capacity of about 11 100 MW. Additional capacity will come principally from new thermal plants and expansions, but there is a commitment to build up generation from wind and solar power.

Projected share of installed capacity at the end of seventh five-year plan in 2016–17 Source: Egyptian Government

The previous government planned to gradually liberalize the energy sector, to phase out subsidies, and to restructure the sector to bring in more private sector finance. The 2012-17 plan focuses on developing Egypt’s electricity network by installing new grids and financing new projects to expand capacity by 10 450 MW.

Assuming no change in policy, over the next five years, Egypt will expand electricity capacity with new thermal plants and expansions at Kuraymat 2 and 3, Talkha, Tabbin, Nuberiya 3, Cairo West, Sidi Krir, el-Atf, Abu Qir, Ain Sokhna and Sharm el-Sheikh.

In June 2009 the Minister of Electricity and Energy approved plans for nine new electricity stations at a cost of EGP120 billion ($20 billion). Construction on the new facilities was due to start at the beginning of the 2012 fiscal year. The new stations will add 11 000 MW, mainly from natural gas.

Political uncertainty notwithstanding, some investors are coming forward. In August 2011 the Kuwait Fund for Arab Economic Development, Saudi Fund for Development, Arab Fund for Economic and Social Development, Islamic Bank for Development and other Islamic funds provided EGP780 million ($131million) to finance a gas turbine for a power plant in Banha city, north Egypt.

This is part of a EGP4.4 billion 750 MW new power plant with two gas turbines and a steam unit. The simple cycle of the power plant is expected to be operational by June 2013 and the combined cycle a year later. It is being built by PGESCO for Middle Delta Electricity Production Company.

Diversification into hydro and nuclear

Hydropower became Egypt’s main source of power in the 1970s when the ambitious Aswan High Dam and power plant was constructed on the Upper Nile. The dam lies just north of the Sudanese border and captures the world’s longest river in the world’s third largest reservoir, Lake Nasser. When it was built it provided over 50 per cent of Egyptian electricity but by 2009 hydropower accounted for less than 12 per cent of Egypt’s electricity generation.

Egypt’s total hydropower potential of about 3664 MW has already been harnessed at five locations on the River Nile. Almost all the electricity generation comes from the Aswan High Dam and the Aswan Reservoir Dams. The Aswan High Dam power project has a theoretical generating capacity of 2.1 GW, although low water levels often prevent it from achieving this capacity. A refurbishment programme is underway to extend the operational life of the turbines by 40 years and bring generating capacity up to 2.4 GW. The other Nile hydropower sites are small by comparison to the Aswan sites.

Egypt also has a long-standing interest in developing nuclear power for electricity and desalination. But its plans have been subject to change and are unlikely to be realized in the near term.

In 1955–56 Egypt set up its Atomic Energy Commission and a nuclear regulator, the Atomic Energy Authority. A series of plans for nuclear generating plants with desalination capacity were then proposed between 1964 and 1986, although none progressed and all were abandoned after the 1986 Chernobyl accident. Over the last decade nuclear co-operation agreements have been signed with Russia and China. In October 2006 the Minister for Energy announced plans for a $1.5–2 billion project to construct a 1 GW nuclear cogeneration plant for electricity and potable water at El-Dabaa.

In December 2008 the Energy & Electricity Ministry awarded a $180 million contract to Bechtel to select reactor technology, pick a site, train personnel, and provide technical services over ten years. In May 2009 the government transferred this contract to Australian company WorleyParsons. A $160 million contract over eight years aimed to support the construction of a 1200 MW nuclear station generating by 2017.

Early in 2010 the proposal rose to four plants by 2025, the first online in 2019. Bids were to be sought late in 2010. But the schedule slipped to 2011 and plans seem to have faded with the fall of the Mubarak and the Fukushima disaster.

Renewable Energy

Egypt is aware of its susceptibility to climate change. Much of the population lives in the delta regions and the coastal regions supply up to 60 per cent of the country’s food. Higher sea levels and a reduced flow of fresh water into the Nile would have very serious consequences. Egypt also faces the threat of desertification.

In 1986 the government set up a New and Renewable Energy Authority (NREA) to promote commercial development of renewable energy. The current target is for 20 per cent of electricity from renewable energy by 2020, including about 12 per cent from wind power. To promote the development of renewables, in May 2011 the government exempted renewable energy equipment from customs duties.

The target is ambitious but Egypt has significant potential for wind and solar energy and is getting backing from various sources including the EU, the World Bank and the UN’s Clean Development Mechanism carbon offsetting scheme.

NREA has mapped Egypt’s wind patterns, confirming that the high and stable wind speeds of the Suez Gulf make it one of the world’s best wind farm sites. Wind speeds average 8–10 metres/second in the uninhabited desert area west of the Red Sea, which is also close to load centres and transmission infrastructure. The eastern and western deserts of the Nile River banks offer other promising sites.

Egypt’s Zafarana Wind Farm on the Rea Sea coast is Africa’s largest wind farm, generating 1400 GWh/year. It was part-financed by Denmark, Spain and Germany. The first EU co-financed project was a 200 MW wind park situated in the Gulf of Zayt for which European Development Institutions provided €271 million ($391 million) in loans. Between 2007 and 2010 the EU provided Egypt with €140 million in aid per year and this figure is set to increase to €150 million annually. In August 2011 the EU commission pledged €60 million in aid to be spent on renewable energy projects for post-revolutionary Egypt. Other support has come from the European Investment Bank (EIB) and the World Bank, which has loaned of $220 million to build infrastructure to connect wind farms to the national grid.

The transition government now aims to push ahead with stalled plans to build new wind farms. The government plans to launch a two-phase tender to select companies to build two of the four wind farms planned in the Gulf of Suez, each with a capacity of 250 MW. Investors will be invited to finance, build and operate the power facilities for 20 to 25 years, selling power to the state-owned Egyptian Electric Company at prices approved by the government.

Italgen, the energy generation arm of Italian cement giant Italcementi, plans to invest €140 million to build Egypt’s first privately owned wind farm. The 120 MW facility would be built along the shores of the Red Sea in the Gulf El Zeit area and supply energy to the group’s Suez Cement plant.

For solar generation, Egypt can offer extensive areas of desert that receive sunshine all year round and the country targets 7200 MW of solar energy by 2020. NREA had hoped that the pioneering Kuraymat plant would be the first operational African integrated solar combined cycle (ISCC) plant. But the Egyptian revolution set the project back and Morocco’s Ain Beni Mathar plant won the race in February this year.

Kuraymat, which lies in desert terrain 90 km from Cairo, started operating in July 2011. The plant is designed to work during the night as a conventional natural gas combined-cycle plant and during the day to run in a normal cycle with added solar energy. It collects solar energy through a total mirror surface area of 130 000 m2 and use parabolic trough technology integrated with a combined-cycle powered by natural gas.

Combining natural gas fired generation and solar absorption, the plant will be capable of producing 150 MW, of which the solar share is 20 MW. The project received funding from the Global Environmental Facility (GEF) of the World Bank and the Japanese International Co-operation Agency (JICA).


Secure and efficient supply of electricity is seen as a key ingredient for economic growth. EU countries also view North Africa as a critical source of diversification for Europe’s energy needs. Mediterranean countries are working towards establishing an energy corridor – the Mediterranean Electricity Ring (MedRing) – that will enable electricity exchange across the Mediterranean, improving the region’s energy security. In the long run, this could enable Europe to be supplied with energy from solar farms in the North African desert.

The 220 kV Egypt-Libya interconnection was established in 1998. To the east, the Five-Country 400 kV inter-connector was completed by 2002 linking Egypt’s system with Jordan and thereby to Syria and Turkey.

The government is also launching an international tender for a 500 kV HVDC electricity interconnection project intended to link the power grids of Egypt and Saudi Arabia by 2013. The $1.5 billion project would exploit differing electricity consumption patterns in the two countries, with Saudi Arabia’s peak consumption typically during morning hours, while Egypt’s comes in the evening. Connection would be achieved through a 1300 km aerial cable – 450 km in Egypt territory and 850 km across Saudi Arabia land – and an underwater crossing of the Red Sea.

The path ahead

Egypt’s access rate for electricity is 99 per cent and its consumption rates are significantly higher than neighbouring countries. Yet demand is steadily increasing and new capacity is needed. Meanwhile, Egypt is looking to diversify away from fossil fuel and has ambitious plans for renewable energy. Political uncertainty and an adverse global economic climate currently make investment in the country problematic. Yet a thaw in the financial backdrop could set Egypt on track for an expansion in capacity that could cover innovative renewable technologies. MEE

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