Egypt’s twin-track power plan

Domestic gas, along with solar and wind resources that have been barely tapped up to now, will fuel Egypt’s continued power growth into the next decade.

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Gas dominates the energy sector in Egypt’s sixth five-year plan, which will run from 2007 to 2012, both as a domestic fuel for electricity generation and as an important export for the country.

This reflects a turning point in Egypt’s energy resources. After many years as an oil exporter, domestic demand is expected to outpace supply in the next few years, turning Egypt to a net importer of oil. In response, and to maintain its export capacity, the Egyptian government has been encouraging the production of natural gas.

To increase domestic sources a new company, the Egyptian National Gas Holding Company (EGAS), was spun off from the national oil company some years ago, and it has been developing joint ventures with a variety of international partners including British Gas, BP Amoco, Exxon Mobil and Fernosa. Power company RWE, for example, has a total of eight local concessions focused on the Nile Delta and recently announced it had signed an eight-year concession agreement with EGAS and the Oil Ministry for a new field in North El-Amriya between two existing concessions.


Installed capacity development by type of generation (MW)
Source: Egyptian Ministry of Electricity & Energy
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These joint ventures contributed to a doubling of gas production in Egypt between 1999 and 2003: according to figures from the US Energy Information Administration (EIA), gas production reached 99 million m3 per day by the end of 2003, and by next year it is expected to rise still further to 141.6 million m3 per day.

Part of Egypt’s gas production is exported through a pipeline running along the Mediterranean coast to Israel and Jordan, which may be extended to Lebanon and Turkey. Much of the gas is, however, required to supply Egypt’s fast-expanding suite of gas fired power stations.

Following a construction programme, and an initiative to convert Egypt’s oil fired stations in the late 1990s and early 2000s, gas fired stations now meet 65 per cent of the country’s power needs, using around two-thirds of the country’s gas. The remaining power is provided by the hydroelectric plants on the Aswan Dam and a growing renewable energy sector.

Market liberalization

The power industry’s development is set against a planned liberalization of the energy sector that has been under way – albeit slowly – since the mid 1990s, when the government committed itself to a market-based economy, including greater private sector participation. The electricity sector was an early target for reformers, as power demand was growing rapidly and is continuing to do so. During the next five-year plan growth of between 5 and 8 per cent is anticipated, so large investment is required along with efficiency improvements.


Expansion plan for wind energy in Egypt until the year 2010
Source: Egyptian Ministry of Electricity & Energy
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So far the reforms have focused on increasing private sector participation in the power sector. The Ministry of Electricity and Energy is still responsible for all aspects of the power sector in Egypt but in 2000 the Egyptian Electricity Authority (EEA), established in 1976 to run the power sector, was restructured and renamed as Egyptian Electricity Holding Company (EEHC). It has embarked on a programme to promote private sector entities to build and operate power generation plants and sell the output to EEHC via power purchase agreements (PPAs). One such is the Delta Electricity Production Company, which owns and operates the Ataka power station in the Suez region. The station houses two 150 MW units and two 300 MW units that supply power to four million residents.

The Egyptian Electricity Transmission Company (EETC), is responsible for high voltage transmission, system control and dispatch. It also handles some energy contracts, buying direct from the country’s several independent power projects (IPPs), some plants built under ‘build, own, operate and transfer’ (BOOT) financing schemes, and wind and solar power generated under the New and Renewable Energy Authority. BOOT-style plants have been built by Intergen (a joint venture between Bechtel and Shell Generating Ltd) and by EDF.

The industry is overseen by an Electricity Regulatory Agency set up in 2000.

Five-year plan

Expansion over the next few years will be two-fold, with the aim of adding around 8000 MW to the country’s generating capacity between now and 2012. Minister of Electricity and Energy Hassan Younis, detailed the plan for local newspapers. He said that under the sixth five-year plan (the period 2007-2012), ten new generating stations would be built that together would add 8375 MW, with total investment estimated at $2.9 billion for the foreign component and Eà‚£8.2 billion ($1.43 billion) for the local component.

To meet this target the Egyptian government is said to be planning on loans of around Eà‚£36 billion from international financial institutions. Among current projects the World Bank has already allocated some $250 million for a 650 MW plant in Tippin, while the OPEC Fund for International Development and Kuwait Fund of Arab Economic Development have together contributed $53.4 million for another power plant near Cairo.

Projects in the pipeline include a 750 MW combined cycle plant at Kureimat 3, and a second at Nuberiya 3, on which contracts are expected to be awarded in late 2006. Project completion is expected in 2009/10. Following these two plants, two more combined cycle developments of similar size are planned by EEHC at Sidi Krier and Al Apfa.

The plan adds to an already-ambitious fifth five-year programme to add 5000 MW to the country’s electricity capacity by 2007. Younis also said generating capacity would be improved by plans for greater interconnection with neighbouring countries, allowing more import and export of power. Egypt’s electric transmission grid is currently interconnected with Libya and through Jordan with Syria, Iraq’s and Turkey’s electric grid.

Renewable expansion

The Minister’s second priority for the sixth plan was for expansion of renewable energy. Renewables are an important part of Egypt’s long-term energy planning, not just because of its natural resources – favouring wind and solar power, in particular – but also because of the benefits they offer in managing power transmission and distribution across Egypt’s unique geography. Egypt is characterized by a population that is highly concentrated along the banks of the River Nile and across the Nile delta, but also has centres of population along the Mediterranean coast. There are also a number of settlements inland, in the so-called Western Desert that represent two-thirds of the country’s area. Since the middle of the last century the government has tried to encourage migration to these areas and its success means that power demand is growing in these areas.

NREA says renewable energy systems can provide an appropriate solution for energy needs in remote areas in Egypt, and the Agency also points to promising markets for solar cooling, solar refrigeration, solar desalination, PV lighting, large scale wind farms and large scale integrated solar combined cycle systems. The area of lake Naser South of Aswan, some 250 000 km2 in size, it regards as a promising market for all types of renewable energy, to supply needs for energy, ice and air conditioning systems.

The advent of Kyoto mechanisms that allow carbon credits to be generated and traded internationally have given added impetus to Egypt’s renewable energy plans. Germany’s KfW banking group for example, recently announced that it had signed an agreement to acquire Certified Emission Reductions (CERs) from a wind farm project in Zafarana. The wind farm is situated in a high-wind area in the Gulf of Suez on the Red Sea, where three wind projects have already been built under German-Egyptian financial co-operation. The new project is scheduled to go into operation at the end of 2007 and further projects for the acquisition of CERs in Egypt are in preparation, according to KfW. That decision will be welcome news for NFEA, which has extensive plans for the area. Zafarana was chosen as its leading wind development area by NREA because of its highly beneficial wind conditions, and NREA aims to establish further large scale wind farms in the area, increasing capacity from 140 MW at present to reach 600 MW by the year 2010. The organization is also already preparing a follow-up site at Gabal El Ziet, where plans are even more ambitious, aiming for 3000 MW by the year 2025.

In the field of solar energy, NREA is investing in large-scale power stations, as well as encouraging roof or building-mounted PV and hot water systems. Its planned integrated solar combined cycle power station would use solar thermal concentrators to drive a steam turbine in an otherwise-conventional 150 MW plant, and it is investigating a combined plant that could use solar heating by day and gas fuel at night. The project is at an early stage but a successful project could be scaled up and replicated: NREA’s indicative programme would see two such power stations rated at 300 MW installed in Upper Egypt by 2024.


Table 1. Egypt’s electricity sector 2004/2005
Peak load (MW) 5678
Total power generated (GWh) 100996
Installed capacity EEHC (MW) 18544
Installed capacity private sector (MW) 2048
Net exported power (GWh) 699
Thermal efficiency (%) 38.8
Total fuel consumption (k toe) 17028
Source: Egyptian Ministry of Electricity & Water

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