By Amira Salah-Ahmed
CAIRO: “The potential of solar energy in Egypt is virtually unlimited,” Paul van Son, CEO of Desertec Industrial Initiative (Dii), told Daily News Egypt.
“You have vast areas of desert with the best possible circumstances in radiation. [It just needs to be] captured and converted to electricity and brought to consumers,” he added.
Dii is a private industry joint venture established in July 2009 to accelerate the implementation of the Desertec concept, which aims to utilize solar and wind energy in Europe, the Middle East and North Africa.
Dii plans to use solar and wind to satisfy a “substantial part of the energy needs of the MENA countries and to meet about 15 percent of Europe’s electricity demand by 2050.”
On his short visit to Egypt, one of many regular trips over the past year, van Son met with the industry and energy ministers to discuss ways Dii can help Egypt forge ahead with its renewable energy ambitions.
He held similar meetings at the ministerial level last year, but now, he sees “a much more sense of urgency for renewable energy in Egypt — it’s very clear.”
Two weeks ago, Egypt’s Cabinet abolished all customs on equipment for renewable energy, which should further lower costs and spur investor interest, according to Alaa Ezz, secretary general of the Federation of Egyptian Chambers.
While Egypt already has several wind energy projects, citing the Zafarana farm, van Son said ministers showed willingness to open up more for solar energy and “want to see action” being taken to move forward.
“We can help Egypt define a long-term strategy on renewables and define the best locations for large-scale facilities, and also to reinforce the electrical grid,” he added.
Egypt had set a goal to produce 20 percent of its energy needs from renewable sources by 2020. Ezz, also an executive member of the German Chamber, said not only is this feasible, it may even be achieved by 2019 due to the rising costs of oil.
“The 2020 target was set when the barrel [of oil] was $58. At that time, there were thoughts about subsidizing renewable energy. Today, there are several [renewable energy] technologies that are cost-effective and profitable to operate,” Ezz told DNE.
With private sector interest piqued, the government is looking into a set of incentives to facilitate the establishment of renewable energy projects.
According to Ezz, this may include offering land for free as well as ensuring the purchase of the electricity produced with a sovereign guarantee from the Central Bank of Egypt. With this guarantee, investors can “get a government loan from anywhere in the world, not only commercial [loans]. For investors, this is paradise,” Ezz said.
Prime Minister Essam Sharaf will chair an energy council meeting next week, and this proposal is number two on the agenda, said Ezz. The “offtake contracts” will be set for 15 years initially, renewable for 25 more years with adjustment for currency and other elements, he added.
With Egypt’s plans for renewable energy becoming more vigorous, Desertec thought it the ideal location for its Second Annual Conference, scheduled for November 2011 in Cairo.
The German Chamber is the implementing arm for Desertec in the upcoming annual conference, Ezz said, representing the Egyptian business side.
“We consider Egypt as a central country to the whole area, and Cairo is also very open to the western world. It’s an ideal place for this kind of conference and it is a good signal to the world that we are focusing on the whole of the Middle East and North Africa,” van Son said.
The first annual conference was held last year in Barcelona, and though initially planned on a smaller scale, was made bigger to accommodate the 450 attendees.
This year, the conference will focus on “the socio-economic aspect,” he added, “What must be done for countries like Egypt and the area to create the conditions to ensure these developments take place and to capture the benefit.”
And unlike the old days with oil and gas when there was little benefit to the local population, he said, “new energy sources are a win-win…[they will] build up the country’s industries and create jobs and expertise.”
As far as stability and security issues that are lingering after Egypt’s 18-day revolution toppled president Hosni Mubarak, van Son said this was not an issue. “We are not focusing on the momentary situation. There are some troubles here and there, but you can never avoid some kind of troubles. It is not of a scale that you abort conferences.”
Plan for MENA
Dii’s stated objective is, by year’s end, to publish a long-term plan for the area’s renewable energy infrastructure, including what the electrical grid would look like. This, he said, “would show investors what kind of priorities they should select and try to define concrete projects, like in Morocco and Tunisia. Maybe in Egypt.”
In the works is a “first reference project of about 500 MW solar technology” in Morocco, which should start producing electricity from solar energy by 2015.
“We have a first estimate of €2.2 billion for this total investment,” van Son said, but that number may change. It is the first project of this scale in the MENA region.
There are two types of countries, he said, the first are large oil and gas producers whose revenues mainly come from that area, and so “have no urgent need for [renewable] energy.”
They should, however, use these revenues to “investment in their own future to avoid using fossil fuels, which means they can export more [oil]. They can accelerate this whole development,” he said, citing Algeria, maybe Libya in the future and Saudi Arabia.
Type two have limited energy sources and see renewables as an alternative. “They have to import fossil and it’s expensive. Nuclear is a difficult option, and the only option in the future is solar and wind, maybe hydro,” he explained.
While Egypt’s natural gas supplies are also not yet fully utilized, he says “why burn gas if there’s enough sunshine?” Instead, Egypt should export gas and use the revenue to invest in solar energy.
Ezz mentioned companies such as Sewedy, Taqa and Orascom — already working on renewable energy projects — describing them as “investors who have the long-term vision and understand that this is a golden opportunity.”
Sewedy has a $200 million wind farm project in Ethiopia. On a smaller scale, Italcementi is building a wind farm to lower energy costs.
“Our interest is to create the whole infrastructure for wind or solar, and have the research and development capacity. There are applicable research projects [currently] being conducted for the private sector,” he said.
One of the main challenges facing Egypt are energy subsidies, namely the “absence of a feed-in tariff.”
“In developed countries, even in a household, you can have a solar roof and an electricity utility. Normally you have a feed-in tariff, a preferential rate at which the utility buys the electricity if it is made from renewables,” Ezz said.
Current laws in Egypt do not allow for this, instead electricity produced from renewable energy is bought at the same subsidized price. On the bright side, from a recently launched PPP tender for developing new wind farms should emerge a new feed-in tariff, “and then there is a formula we can calculate according to the size of the project, how much more they will pay.
This change in the regulatory framework should have happened a couple of years ago, but was postponed several times. Two years ago, however, Egypt reduced subsidies for energy-intensive industries, while the rest of the plan should have been rolled out in February but was delayed due to the revolution.
“Already you have a big segment of the community, [energy-intensive industries] which is consuming almost half the electricity of Egypt paying market prices. In parallel, they started doing two things. Very intensive industries like cement and steel started doing their own renewable power plants. Secondly, 90 percent of industry started going into energy conservation,” he said.
These energy conservation technologies are available, but “we never bother to apply them” at the household level because, at the end of the day, “you’re paying peanuts.”
When there’s no subsidy and consumers pay the real cost, they will be more conscious. White goods now carry energy-efficient logos and many people have switched to energy-saving light bulbs.
“Socially at the moment, touching the consumer is out of the question, but industry is non-debatable, because sooner or later we will open our borders without customs, so if I’m not efficient, I’m not only losing export market, but also local,” said Ezz.
Citing the repeated power outages Egypt experienced in the summer of 2010, Ezz emphasized the importance of building a mix of renewable energy projects on top of a stable and concrete foundation of conventional electricity sources. This could also answer Egypt’s water problems by incorporating desalination technology.
Ideally, as an initial phase, Ezz said, Egypt should be considering 1,000 MW solar energy project that will “automatically move and create and industry. We’re looking forward to cooperating with Desertec to realize this — I won’t say it’s a dream, it’s a reality that was a bit postponed.”