REC is Europe’s leading brand of solar panels, producing millions of high-quality panels for global customers. In September, REC signed a deal with Orascom subsidiary O Capital to provide turn-key solar power solutions in Egypt, Africa and the Middle East.
Daily News Egypt spoke with Luc Graré, Senior Vice President EMEA, about REC’s activities in Egypt. Graré highlighted the importance of the Egyptian solar sector for Middle East and Africa, saying Egypt is in an ideal position to export electricity to Africa, leading the way for the development of Africa’s solar-power industry.
What is your view regarding the energy sector in Egypt?
Egypt’s demand for electricity is higher than its production capacity. This is the reason why there is a lack of electricity, and that needs to be solved. Today, Egyptian electricity generation depends entirely on fuel imported from outside. So it is a logical decision for Egypt to move to renewable energy.
For example, the sun’s radiation in Egypt is much greater than in the UAE. The UAE is buying a 1GW solar plant in the desert, so Egypt can produce more than this amount. In addition, the conditions for wind power in Egypt are also good. The conditions are excellent for Egypt, and so the government and President Al-Sisi are right to promote renewable energy to reduce dependence on importing oil, coal and gas.
I think Egypt is in a leading position to show Africa the way to generate electricity from solar power, because it also has the workforce capable of doing this. Moreover, I think Egypt could export electricity in the future to Sudan and Ethiopia. I think in 2020 or 2025 Egypt might have the possibility to export power to other countries.
What are the revenues of REC and how much power does it produce?
REC is the largest European brand of solar panels, with more than 15 million high-quality panels produced at the end of 2014. With integrated manufacturing, from polysilicon to wafers, cells, panels and turnkey solar solutions
In the third quarter (Q3) of 2015, we had the highest revenue for that quarter in the history of the company, making $234m. That’s a big increase on the revenue for Q2, which was $215m.
The all-time highest production output of our factory for the manufacture of 362 MW solar modules was in 2014. We sold also all of them, so we sold 100% of factory output. Of those, the majority, about 60%, went to the United States. The rest were spread out over Asia, Europe and Japan.
What are the results of the Solar Market Insight report for Q3 2015?
The market in general is still very positive for solar energy. The global solar market will be around 59 GW and is expected to grow about 10% to reach 69 GW. That is mainly driven by China and the US. For the time being, most of our sales are with the US, but about 23% goes to Europe, and a small part goes to Asia and Japan.
Of course, we hope all activities we are doing now in the Middle East and Africa will result in more sales in those parts of the world.
If you look at the European market, it is still very slow because Germany is still a slow market in solar energy. This has to do with the feed-in-tariff support scheme, which has been reduced. In general, there is still a somewhat negative climate around this in Germany, and in terms of public opinion about what Germany has done. Now the UK is a very strong market in Europe, but this might be changing also at the beginning of next year. The government has announced its plan to reduce feed-in tariffs that support solar power in the UK.
The European market still needs around 7 GW, so in the last quarter 82 MW was produced in the European market. If you look at Europe, the Middle East and Africa, we need to do much more to reach the Middle East and Africa.
Sub-Saharan Africa is a potential market to address because about 620 million people still have no access to electricity. By 2014, the economy of sub-Saharan Africa is expected to be four times what it is today, and the population might also double. Every year, they spend about $46bn on electricity and distribution of electricity in sub-Sahara African. There is lots of work to do in many of parts of sub-Saharan Africa. We are building solar-power stations in Ghana, South Africa and Kenya to be able serve the surrounding countries.
What is your business in Egypt?
Two months ago, in Egypt, we signed an agreement with O Capital for Services and Contracting, a fully-owned subsidiary of Orascom Telecom Media and Technology Holding (OTMT). O Capital is our partner in Egypt, and two weeks ago we had a conference in Cairo called “Solar Projects Egypt” at which we had a presentation with Orascom. We had a panel meeting, and so we had some interesting discussions with the conference participants.
We are working together now on a 50 MW project, which has been awarded to Orascom as part of a feed-in-tariff programme.
What are the challenges for investing in Egypt’s energy sector?
The government published the PPA [Power Purchase Agreement] document as part of the feed-in tariff that has been published recently by the authorities. But the problem now is that the feed-in tariff is paid in Egyptian currency. Therefore, we probably need the support of the National Bank of Egypt and the Ministry of Finance regarding this issue, especially with the devaluation of the Egyptian pound against the US dollar. In the last conference on energy, there was a consensus on this issue. The finance has to come from outside in dollars, but the PPA tariff is payable in Egyptian pounds. The lending bank pays the loan in dollars and we have to pay the loan back in dollars. We hope this issue will be solved, especially since many people who have developed projects bring in equity of between 20% and 40%, and the rest of money has to come from outside Egypt.
I think that Egypt and international banks have to find a way to translate the feed-in-tariff amounts from Egyptian pounds into dollars. It might reduce the amount of the feed-in tariff, but it should at least transform into dollars and provide security for the finance.
What is your schedule for executing the project with O Capital?
We are hoping to build the project by Q3 of 2016.
Are you in discussions with other companies in Egypt?
No. Let’s say that we started working with Orascom, and having started with Orascom we are now approaching potential customers through Orascom for contracts on PPA. Orascom is our partner in Egypt and we are talking to a number of companies in Egypt to engage them to sell them electricity by PPA. Orascom is still at the stage of talking to these companies. The PPA documents are available from the government, but it is still too early to discuss this with other companies.
What is your strategy for investing in Egypt?
For us, Egypt is an important market, not only for investing but also for manufacturing, because we have a lot of knowledge in building solar plants, developing and maintaining them. This is our investment in the Egyptian market to transfer the knowledge to local companies.
Do you plan to cooperate with Scatec Solar or other international companies in the solar energy sector?
Scatec Solar is a little bit like Orascom, a developer and builder of plants, whereas REC is a manufacturer of solar modules. If Scatec wants to buy modules from us, that is possible of course.
Will your solar projects in Egypt impact plans to import coal from abroad?
I think in the future coal will be replaced. Hopefully, coal will be the first thing that the country will drop, to protect air quality, and then the oil. The renewable programme set by the government, and in the future there will be no need to import coal and oil. In addition, there will be a combination of renewable energy, meaning solar and wind, and maybe gas turbines.
Do you discuss the development of solar energy in Egypt with the government?
No, we limit our discussions to Orascom, who then deal with the government. They are much better at it than we are.
What is the company’s plan for solar plant maintenance, and who is responsible?
The solar plants need to be kept clean from dust and sand. It is too early to be sure about this, but we will outsource this to a local Egyptian company, which can do the maintenance, and we can train them and educate them. But we will keep the ultimate responsibility for the project as long as it continues. In addition, REC is responsible for training the project’s employees and workers, Orascom acting as coordinator. The training programme will start with the construction of the plant.
What is your view on climate change in region and in Egypt?
Regarding climate change, the Kyoto Protocol said that global warming might not be more than 2 degrees Celsius. Now, the way things are going, we will exceed this figure, reaching 3, 4 or 5 degrees of warming, which is not very good.
The companies should increase the mix of energy from renewables, solar and wind, and a very efficient gas plan – but no coal or oil – with these sources making about 60% of electricity generation by 2040. It needs to be like this and we should stop burning fuel to generate electricity.
Despite that, Egyptian people produce relatively low carbon emissions, if you compare with the UK. The UK is creating five times more carbon emissions than Egypt. Therefore, emissions are low in Egypt, and Egypt is doing okay.
However, the impact of the global warming will be very strong on Egypt. About 3.8m people are affected in the Nile Delta, so they will have to relocate, because a large part of Alexandria will be under water, and also Port Said will be completely under the water.
Even if there is no more than 3 degrees in global warming, we will see rising sea levels in the Mediterranean, and Alexandria and Port Said will be sunk in sea, while the rain in the south will be stronger and drier.