Egypt s Solar Energy Market: FiT Program and Beyond 2015

Transcription

1 Egypt s Solar Energy Market: FiT Program and Beyond 2015 Page 1 of 7

2 Contents Foreword... 3 Introduction... 4 Electricity Sector Overview... 4 Feed-in-Tariff Program... 5 Perspectives: Law Firms... Error! Bookmark not defined.5 Marc Norman, Associate, Chadbourne & Parke... Error! Bookmark not defined.6 Mohamed Nabil, Senior Associate, Sharkawy & Sarhan... Error! Bookmark not defined.6 Perspectives: Developers & EPC Contractors... Error! Bookmark not defined.8 Wael El Ezabi, CEO, Sun Infinite... Error! Bookmark not defined.8 Rana Alaa, Cofounder, Solarizegypt... Error! Bookmark not defined.8 Wael El Nashar, President & CEO, Onera Systems... Error! Bookmark not defined.10 Ease of Financing... Error! Bookmark not defined.11 Beyond the FiT scheme... Error! Bookmark not defined.12 Public Tenders... Error! Bookmark not defined.12 National Postal Authority of Egypt... Error! Bookmark not defined.13 Outdoor banners... Error! Bookmark not defined.13 Cairo New Airport City... Error! Bookmark not defined.13 Residential Compounds... Error! Bookmark not defined.14 Egypt s Governorates... Error! Bookmark not defined.14 El Fayoum... Error! Bookmark not defined.14 Luxor... Error! Bookmark not defined.14 Marsa Alam... Error! Bookmark not defined.14 Qalyubia... Error! Bookmark not defined.15 Wadi Al-Gedid (New Valley)... Error! Bookmark not defined.15 Local Manufacture Outlook... Error! Bookmark not defined.15 Local Solar Firms... Error! Bookmark not defined.16 Arab Organization for Industrialization (AOI)... Error! Bookmark not defined.16 Aton Solar Power Solutions... Error! Bookmark not defined.17 Cairo Solar... Error! Bookmark not defined.17 EGreen... Error! Bookmark not defined.17 International Technology Group (ITG)... Error! Bookmark not defined.17 Page 2 of 7

3 Onera Systems... Error! Bookmark not defined.17 Orascom Construction Industries (OCI)... Error! Bookmark not defined.17 Solar Energy Development Association (SEDA)... Error! Bookmark not defined.17 Solaracil... Error! Bookmark not defined.17 SolarizEgypt... Error! Bookmark not defined.17 Sun Infinite... Error! Bookmark not defined.18 Sun Vision... Error! Bookmark not defined.18 The Solar Energy Co. (Shamsak)... Error! Bookmark not defined.18 Foreign Investment... Error! Bookmark not defined.18 Gulf Region... Error! Bookmark not defined.18 Europe... Error! Bookmark not defined.18 Canada & The United States... Error! Bookmark not defined.19 Foreword It is quite a promising time for Egypt to adopt solar energy. The government has and continues to put solid policies to help make solar energy a true alternate large-scale source of Egypt s energy mix, with 2.3 GW of power to be generated by solar photovoltaic energy in the next couple of years. The world is taking notice; major international players are coming to Egypt, forming key relations with local enterprises to make this ambitious goal a reality. This report provides a detailed insight of the current environment and perspectives from some of the key stakeholders. I hope you find it insightful, and let us all work together to make Egypt a global hub for solar energy! Alan Elyousfi Executive Director Egypt Solar Industry Association Page 3 of 7

4 Introduction With more than 87 million inhabitants as of 2014, Egypt is the most populous country in North Africa and the Arab World, and the fifteenth most populous in the world. It covers an area of 1,002,000 square meters, of which 78,990 km2 is populated, representing 7.8% of the total area. A combination of population growth, development of energy-intensive industries, and the use of electrical household appliances, particularly air conditioning, has resulted in a soaring demand for electricity that is increasing at an annual rate of seven percent. Along with the rising energy demand, natural gas supply shortages, ageing infrastructure, and inadequate generation and transmission capacity, have together led to frequent blackouts and service interruptions of up to 14 times a month. To cover the shortfall in natural gas during the summer months, the country usually imports fuel oil and diesel. Egypt s generating capacity currently stands at around 28 GW. However, according to the Egyptian Energy Strategy for 2030 and its update to 2035, the country is expected to be a net importer of oil and natural gas by 2040, and will need more than 32 GW by then. Electricity Sector Overview The electricity sector in Egypt is divided into three major subsectors: generation, transmission, and distribution. The generation and distribution subsectors are run by both state-owned companies and private sector companies, all under the supervision of the Egyptian Electric Utility and Consumer Protection Regulatory Agency (Egypt ERA). On the other hand, the Egyptian Electricity Transmission Company (EETC), a state-owned company, monopolizes the transmission subsector and the national power grid. In the generation sector, state-owned companies operate under the authority of the Egyptian Electricity Holding Company (EEHC), while private sector projects are either Build-Operate-Transfer (BOT) and Build-Operate-Own-Transfer (BOOT) projects with the government, or independent power projects (IPPs). The New and Renewable Energy Energy Authority (NREA), a public authority established in 1986 under the supervision of the Ministry of Electricity, implements, operates and maintains new and renewable energy projects, sells power generated from these projects, and delegates the implementation and operation of such projects to investors. So far, the majority of renewable energy projects are owned and operated by the state, although Egypt s new Renewable Energy Law (Law 203/2014), enacted in December 2014, envisages projects that are tendered and operated by NREA. At the same time, the new law provides considerable flexibility in implementing such projects, as it permits a gradual move away from NREA- administered projects to privately financed projects. Egypt s electric transmission grid is already connected to Jordan, Syria, Iraq, Turkey, and Libya. The country is also part of the Nile Basin Initiative and has tentative plans to interlink its transmission grid with some countries within the organization. Finally, construction is due to begin this year on a US$1.6 billion, 3,000 MW electricity cable that will connect Egypt and with Saudi Arabia. The project, planned for completion within three years, will indirectly expand each country s electricity capacity by pulling from each other s supplies during peak demand times. Page 4 of 7

5 Feed-in-Tariff Program Despite receiving an average solar radiation of between 2,000 to 3,000 kwh per square meter, and having outstanding wind conditions and hydropower potential, as of 2013, Egypt s installed renewable energy capacity accounted for a mere one percent of the country s primary consumption In September 2014, after experiencing one of the country s most severe blackouts in decades, the Ministry of Electricity and Renewable Energy (MoERE) embarked on EPC procurement, conventional IPPs, renewable IPPs and efficiency programs for existing plants. The government also announced it would be increasing petroleum fuel prices in 2016 in attempt to decrease the budget deficit to eight percent in three years. Complementing these efforts is the renewable independent power project program that was launched in September 2014, which in the first round, targets the installation of 2,000 MW of wind energy and 2,300 MW of solar PV, the latter comprising 300 MW in projects producing less than 500kW, and 2,000 MW in projects between 500kW and 50MW. Consequently, feed-in-tariffs (FiTs) were announced for projects producing up to 50 MW. The first round of FiT projects will run from 2015 to 2017 or end when the targeted 2,300MW of solar capacity has been realized. According to the Dubai-based law firm Chadbourne & Parke LLP and Egypt s Sharkawy & Sarhan Law Firm, the FiT program received 177 submissions for solar and wind projects, out of which 110 bidders qualified. Because the aggregate capacity of the large-scale solar projects exceeds the government s target of 2,000 MW by around 50%, a certain number of qualified bidding consortia will eventually be excluded, at least in the first regulatory period. Yet the fact that the tender was twice oversubscribed is the biggest indicator of the FIT program s success. To incentivize developers and investors, the New and Renewable Energy Authority (NREA) announced it will be offering 36 ready plots of land to qualified bidders for large-scale solar projects. The land plots will be sold to private companies on a first come, first served basis, for a small fee under the BOT scheme, granting them use for years. Similarly, contracts for approved projects will be offered for a 25-year term. Moreover, products used in the production of renewable energy will not be subject to taxes or customs duties. Those who are not allocated one of these plots will be free to source their own sites. To qualify for a plot, the applicant must establish a Special Purpose Vehicle (SPV) for the project and make a down payment to cover grid connection costs. Page 5 of 7

6 Perspectives: Regulator Dr. Mohamed El Sobky, Chairman, New and Renewable Energy Authority, Ministry of Electricity and Renewable Energy What are some of the latest developments at the New and Renewable Energy Authority? With regards to the procedure of land availing, this has been established and discussed with the developers and it s agreed on now by for everyone. As for the Power Purchase Agreement (PPA), the draft has been prepared, we met with the different national and international financiers, and we ve sent them the PPA. Over the last three weeks, we ve been receiving comments from the different financiers, and we re currently incorporating most of these comments. On the other hand, after doing that, we ve hired an international consultant, who will look at harmonizing all the legal agreements like the PPA, usufruct agreement, land agreement, and cost sharing agreement, in which the developer will share the cost of the infrastructure to connect to the grid. Primarily, we ll be look at a cost sharing agreement, where based on the FiT scheme, it s the responsibility of the developers to connect to the grid. In order to reduce the burden on the developers, the transmission company has offered to do the connections. They will be doing upfront the construction of the cables, substations and connection to the grid, which should save the developers at least 27% off the cost of the interconnection. When can we expect the various agreements to be ready? All the agreements (PPA, usufruct agreement, land agreement, and cost sharing agreement) are being looked at as one package and being harmonized by the consultant. The consultant has promised to complete the drafts of these agreements within the third week of March, after which we will go through and check them to hopefully get them ready around mid-april. I would like to add something for everybody to consider: this is all being done the first time in Egypt, so there is a bit of back and forth between the electricity entities, developers and financiers, and we re getting the feedback at the same time. We re developing all this together so there s a learning aspect in doing so. In the second round of the FiT, all these documents will be ready and there, and the process will definitely be much faster. There is an open communication channel with all the developers and it s helping us in understanding the various points of views and developing the related documents. For example, the rules of establishing the special purpose vehicle were recently circulated for the developers to get their feedback. What about companies that are interested in projects outside of the FiT scheme; how can they participate in the market? Such developers have to first work on their technical and financial feasibilities based on satellite information, which we can give to them. We provide them with the solar radiation and wind speed information through the solar and wind atlases. They then need to do their analyses based on this satellite information, and as soon as they provide the NREA with the technical and financial feasibility studies, our specialized staff will go through them, discuss with developer, and come up with a conclusion. And if this conclusion is positive, it means we would like to consider the project into the renewable energy expansion plan. We then submit the outcome to both the Supreme Council of Egypt and the Cabinet of Ministers to get their approval as well as the commitment of the state-owned transmission utility to be the offtaker, which would set the price for that. Page 6 of 7

7 For the complete report please contact: Executive Director: Alan Nagi Elyousfi Mobile: Page 7 of 7