Egypt has visible fast increase in its renewable strength zone during the last decade, pushed via way of means of favorable policies, declining era costs, and the country’s plentiful sun and wind resources. The government aims to generate 42% of its electricity from renewable sources by 2035. This affords fundamental funding possibilities because the united states of america builds out solar, wind, hydro, and different smooth power infrastructure.
This guide provides an overview of the investment landscape, key policies and incentives, major projects and opportunities, challenges, and an FAQ on investing in renewables in Egypt.
Overview of Renewable Energy Growth in Egypt
Egypt has set ambitious targets for renewable energy growth under its 2035 Integrated Sustainable Energy Strategy. The goals include:
- Generate 42% of electricity from renewables by 2035, including 31% from wind and solar.
- Install 7.2 GW of solar, 7.2 GW of onshore wind, and 2.8 GW of concentrated solar power (CSP) capacity by 2035.
Solar and wind power are seen as the most promising renewable energy technologies for Egypt given the country’s favorable conditions:
- Egypt has huge solar resources with direct normal irradiance (DNI) between 2000-3200 kWh/m2. It has 8+ hours of sunshine daily.
- High wind speeds of over 10m/s are consistently available across parts of the Gulf of Suez and East Nile regions.
- Vast desert expanses provide ample land for large-scale renewable projects.
The government aims to meet growing electricity demand, curb expensive gas imports, and meet climate goals through renewables expansion.
Renewable energy generation has already grown from 3% in 2014 to around 10% in 2021. However, more sustained growth is required to meet the 2035 targets.
Key Policies and Incentives to Support Renewables Growth
The Egyptian government has introduced various policies, programs, and incentives to accelerate renewables deployment. Key initiatives include:
Feed-in Tariff (FiT) – Introduced in 2014, the FiT program offers long-term contracted pricing for renewables projects across technologies. Tariffs range from $0.084/kWh for large solar PV to $0.242/kWh for CSP plants.
Net Metering Scheme – Allows rooftop solar PV system owners to export excess power to the grid in return for credits. Surplus credits are paid out annually.
Renewables Purchase Obligations – Electricity distributors must source an increasing percentage of power from renewables. The obligation started at 3% in 2014 and rises to 42% by 2035.
Competitive Bidding – The government has held bidding rounds for large-scale renewables projects where tariffs are set through competitive auctions. Bid rounds will be held annually.
Sovereign Guarantees – The Egyptian Electricity Transmission Company (EETC) provides sovereign guarantees to private renewable IPPs to reduce off-taker risks.
Import Duty Exemptions – 100% exemptions from customs duties apply for renewable energy equipment imports.
Tax Breaks – Corporate tax reductions from 22.5% to just 2% for renewable power plants. 10-year income tax holiday also available.
Land Allocation – Renewables projects can utilize unused state-owned land through flexible lease agreements.
One-Stop Shop – Investors deal with a single government entity for permits, approvals, land leasing, licenses and other processes.
Investment Law 72/2017 – Provides incentives like tax holidays and exemptions, subsidized utilities, and customs duty relief.
These policies and programs create an attractive environment for renewable energy investment in Egypt.
Major Projects and Opportunities in Solar, Wind and Other Renewables
Egypt is planning and developing multiple gigawatts of renewable energy projects across technologies like solar PV, CSP, onshore wind, hydropower and biomass. Many opportunities exist for domestic and foreign investors across the sector.
Solar Energy
With its world-class solar resources, Egypt aims to install 7.2 GW of solar PV and 2.8 GW of CSP capacity by 2035. Opportunities exist for both utility-scale and distributed solar projects.
Benban Solar Park – The flagship project with 41 solar PV plants totaling 1.8 GW capacity. Developed under theFiT program by over 30 global developers including EDF, Eni, Engie, and Siemens. Projects are now operational.
Floating Solar PV – 150 MW floating solar project tendered for the Aswan High Dam reservoir. More floating projects planned on irrigation reservoirs and lakes. Attractive due to land constraints.
Kom Ombo Solar Park – Planned 200 MW solar PV park by Saudi developer ACWA Power. Approved under Round 2 of theFiT scheme.
West Nile Solar Park – 500 MW solar park planned in West Nile near Libya border. EETC recently signed contracts with UAE’s Alcazar for phase 1.
Gulf of Suez Wind Projects – 5 GW of wind capacity planned for development in the Gulf of Suez region near Red Sea coast. Multiple projects in planning and regulatory stages.
East Nile Wind Projects – Around 2 GW of wind power projects planned for East Nile region south of Cairo. Several projects obtained FiT approvals and underway.
Gulf of El Zayt Wind Farm – 120 MW wind power project developed by Engie and Toyota in Gulf of Suez region. Commissioned in 2021.
West Bakr Wind Farm – 262 MW wind farm developed by Lekela Power in the Red Sea governorate. Commissioned in 2019.
CSP, Hydro, Biomass and Other Renewables
Egypt also aims to build 2.8 GW of CSP plants. Smaller scale opportunities in hydro, biomass and other technologies also exist.
Kom Ombo CSP Park – Planned 200 MW CSP solar park by Saudi developer ACWA Power. Approved under Round 2 of FiT scheme.
Aswan Pumped Storage – 2.4 GW pumped hydro storage project planned near Aswan High Dam. To provide storage solutions and grid stability.
Biomass and Waste-to-Energy – Over 1.4 GW of electricity generation potential from biomass and municipal solid waste. As per Electricity Ministry study.
Small Hydropower – About 380 MW of additional small hydropower capacity feasible across Nile river and irrigation canals. Per studies by NREA and UNDP.
Geothermal Power – Egypt has some geothermal potential in Eastern desert and Red Sea rift valleys. Small pilot projects underway.
These upcoming projects across technologies offer investment avenues for local and foreign investors, project developers, EPC contractors, equipment suppliers, and other players.
Key Challenges Facing Renewable Energy Investments
While Egypt’s renewable energy outlook is positive overall, some key challenges remain:
- Electricity oversupply – Temporary generation overcapacity has delayed government tenders over the past 2 years. Requires demand revival.
- Transmission constraints – Grid connectivity and infrastructure limitations especially to remote renewable zones. Upgrades needed.
- Policy and regulatory risks – Delays in project approvals, FIT payments, agreements affect timelines. Requires stability.
- Financing challenges – Renewable projects face financing and loan access issues. Higher country risk premiums.
- Local component requirements – High localization requirements pose technical and cost challenges for some developers and EPC contractors.
- Land development constraints – Issues securing land access, permits, leases for some renewable zones. Bureaucratic delays.
- PPA risks – Weak finances of state utility EEHC add to power purchase agreement risks. Sovereign guarantees provide partial cover.
Addressing these challenges through appropriate policy, regulatory, financing, and infrastructure measures will be vital for growth.
Comparison of Renewable Energy Investments vs Traditional Power
Renewable Energy
- High upfront capital costs but low operating costs
- Shorter construction periods of 1-2 years
- Lower fuel cost volatility risks
- Lower O&M costs due to no mechanical equipment
- Higher capacity factors of ~25-45% for solar/wind vs ~50-60% for gas/coal
- Lower water usage than thermal plants
- Incentives available – FITs, carbon credits, tax breaks
- Lower emissions – aligns with climate goals
Traditional Power (Gas, Coal, Oil, Nuclear)
- Lower upfront capital costs
- Longer construction timelines of 4-6 years
- Higher fuel price volatility risks
- Higher O&M costs due to mechanical equipment
- Lower capacity factors of ~50-60% for gas/coal plants
- Higher water consumption for cooling
- Tougher to obtain permits and financing
- Higher emissions intensity
While traditional power plants have lower upfront costs, renewable energy offers lower operating costs, shorter construction times, reduced fuel and water usage, and incentive benefits. Renewables align better with climate goals and have minimal fuel price risks. The lower O&M costs also offset the higher capital costs over time.
FAQ on Renewable Energy Investments in Egypt
What are the steps to invest in renewable energy projects in Egypt?
The key steps are:
- Identify investment opportunity in solar, wind, hydro, biomass or other technologies
- Obtain relevant permits and approvals from Egyptian government entities
- Secure land lease agreement if required
- Obtain generation license from Egypt ERRA
- Sign long-term PPA with EEHC (off-taker)
- Secure financing through debt and equity
- Complete construction and commissioning
- Commence commercial operations per PPA terms
What are the minimum capital/investment requirements for renewable projects?
For private investments, minimum capital requirements are generally:
- Solar PV and onshore wind – $50 million+
- CSP, biomass, small hydro – $100 million+
Higher investment requirements apply for larger utility-scale projects above 50 MW capacities.
What financing options are available for renewable energy projects?
- Debt financing from multilateral agencies like IFC, AFD, World Bank, AfDB
- Commercial debt from local and international banks
- Equity investments from developers and institutional investors
- Infra bonds, green bonds, project bonds
- Vendor financing from equipment suppliers
- ECA/bilateral agency financing support
Blended financing from various sources is commonly used.
How much return on investment can be expected from renewable projects?
Typical return expectations for utility-scale projects are:
- Solar PV – 10-15% equity IRRs
- Onshore Wind – 12-18% equity IRRs
- CSP – 15-20%+ equity IRRs
Expected returns depend on tariff rates, taxes, incentives, costs, financing terms etc.
How can foreign investors participate in Egypt’s renewable energy market?
Options for foreign investors include:
- Bid as an IPP for renewable tenders and contracts
- Partner with local developers as co-sponsor and equity partner
- Provide financing, equipment, EPC services to projects and developers
- Acquire operational assets to gain stable long term yields
- Participate in government renewable programs as approved supplier/contractor
Multiple avenues exist across the project development value chain.
What government incentives are available for renewable energy projects?
The main incentives are:
- 20-year guaranteed Feed-in Tariffs for power sales
- Purchase guarantees from state utility EEHC as off-taker
- Reduction in corporate tax rates from 22.5% to just 2%
- 100% depreciation in 1st year of operation
- 10-year income tax holiday from start of operations
- Exemptions from custom duties, sales tax, stamp duties
- Allocated land leases at flexible terms
These improve returns and offset higher capital costs of renewable power projects.
Are there any restrictions on foreign ownership of renewable assets?
No restrictions apply on foreign ownership of privately developed IPP renewable projects. Full 100% foreign ownership allowed under Electricity Law.
How can renewable energy help Egypt meet its sustainable development goals?
Renewable energy helps Egypt meet UN SDGs through:
- Expanding energy access and affordability (SDG 7)
- Creating jobs and boosting economic growth (SDG 8)
- Building resilient infrastructure and industrialization (SDG 9)
- Enhancing sustainability of cities and habitats (SDG 11)
- Promoting responsible production and consumption (SDG 12)
- Combating climate change and its impacts (SDG 13)
The growth of renewables supports many UN SDGs that Egypt aims to achieve.
