Next year’s challenges include securing energy sources, institutional reform, governance of companies: Electricity Minister

Mohamed Farag
10 Min Read
Minister of Electricity and Renewable Energy Mohamed Shaker

Strengthening the transmission and distribution of electricity is a priority in light of the large production capabilities expected to be added to the sector in the coming years, said Minister of Electricity Mohamed Shaker. This requires powerful and flexible transmission and distribution networks across different voltages.

What is the Ministry of Electricity’s strategy in the coming year?

The strategy of the ministry aims to rely on smart networks and grids for the transmission and distribution of electricity, which will contribute to improving the efficiency of energy, secure electricity production, lower emissions, and cut down on investments needed for the infrastructure.

The strategy will focus on securing energy sources, sustainability, institutional reform, governance of electricity companies, creation of a competitive electricity market, and penning laws to regulate it.

Moreover, we aim to diversify our power sources to include wind power plants, solar power, biofuel, and unexploited new technologies, such as coal and nuclear energy, as well as hydroelectricity.

What are the challenges facing the Ministry of Electricity and how will they be overcome?

The Ministry of Electricity is working on fixing the current distortion within the financial structure of electricity companies. This is conducted through dealing with their current debts and settling financial arbitrations among them, as well as between the companies and foreign bodies. Restructuring the electricity sale price and gradually lifting subsidies is also part of the plan.

The ministry aims to set up a competitive electricity market through separating between the Egyptian Electricity Holding Company (EEHC) and the Egyptian Electricity Transmission Company (EETC). In addition to that, it aims to establish a transmission system operator (TSO) to carry out the role of transmitting energy in the transitional phase.

Moreover, the ministry also plans to encourage participation of the private sector, maximise the regional role of Egypt in global energy markets, and continuing the liberalisation of the electricity market.

Can the Ministry of Electricity maintain the stability of power supply?

The Ministry of Electricity supports the grid through establishing new lines and replacing old ones, as well as using new paths to avoid congestion. Moreover, we are also working on improving the capacity of the network by adding new regional control centres and developing existing ones. This would reduce blackouts and maintain the stability of the grid.

How much investment is needed by the electricity sector for production, transmission, and distribution?

The total capacity targeted to be added until 2018 amounts to 21,952 MW. The required investments are expected to reach EGP 111bn.

The medium-term production plan was put together on the assumption of an annual capacity increase of 7% between 2016 and 2018.

Therefore, the capacity for that period should include adding 8,000 MW. This is done through combined cycle power plants and photovoltaic cells in 2016/2017, in addition to 13,932 MW from combined cycle, steam, hydraulic, and photovoltaic cells, as well as wind farm power plants in 2017/2018.

Based on our studies, the investment required for equipment in the high and ultra-high voltage electricity grid amounts to EGP 15.7bn for installing 11,970 km of lines, and setting up transformer stations of 24,700 MVA for 500, 220, and 66 KV currents.

This vision will be pursued through economic asset management—improving the quality and reliability of the grid and reducing the loss rate.

Investments required for the grid until 2018 total EGP 9.7bn. These include the establishment of 493 medium voltage distributors, 4,845 km of medium voltage lines, 7,249 km of medium voltage cables, 11,277 km of low voltage lines, and 7,235 km of low voltage cables.

The required additions to the distribution grid include 34,340 distribution transformers, with a capacity of 30,102 MVA, and 18,827 distribution boxes for low voltage currents.

When will the contract for the Dabaa nuclear power plant be signed?

The contract will be signed soon. We have agreed on all terms and binding contracts. The announcement of completing the final contracts will soon take place in a press conference.

Russia’s Rosatom has presented the best financial and technical offer. Four nuclear reactors will be established to produce 4,800 MW.

Is there a crisis in new and renewable energy projects?

There are no problems with the competitive tenders or the feed-in tariff. The ministry is committed to its contracts and ready to sign the power-purchase agreements with the first phase companies, if financial closure takes place before 26 October.

The first phase of the feed-in tariff projects to produce electricity from solar panels and wind farms was solved through amending some articles to which investors objected.

What are the main adjustments made in the second phase of the feed-in tariff projects?

A few amendments were made. These include the price per KWH for solar and wind farms, as well as amending the arbitration term, and the foreign and domestic components.

We contacted an international financing corporation to reach a middle ground for the funding problems and to set arbitration outside Egypt in neutral countries.

The taxes set for the renewable energy projects were lowered to 22.5%.

The ratio of domestic components in solar power projects was lifted from 15% to 30% to encourage local production. The locally manufactured components for wind farms are set to 40%, instead of 30%.

What is the tariff per KW in the second phase of the project?

The price of a KWH from solar plants for households is set to 102.8 piasters. Capacities under 200 KWH will buy energy for 108 piasters. Non-household consumers will be paying 102 piasters instead of 84 piasters, and non-household consumers of less than 500 KWH will buy power at 108.58 piasters instead of 102 piasters.

As for solar energy produced from projects of a capacity ranging from 500 KW to under 20 MW, the price is set at 69.9 piasters (7.88 cents) per KWH. Projects of capacities ranging between 20 to 50 MW will sell energy at 74.6 piasters (8.40 cents) per KWH.

Wind farm tariffs will be calculated per operational hours, where they are planned to reach 2,500 hours and sell at 70.7 piasters (7.96 cents) or 5,000 hours at a price of 35.5 piasters (4 cents).

What are the controls of implementation for the second phase of the feed-in tariff projects?

The amended prices for the second phase will be effective starting 28 October.

The second phase of the feed-in tariff projects is limited to investors nominated in the first phase. If we do not reach the required capacity, we will open the door for new investors.

Investors who sign contracts in the second phase are obligated to conclude financial closure within one year for solar plants and 18 months for wind farms. Moreover, they are to present a letter of guarantee from foreign funding institutions within six months for the solar projects and one year for the wind farms.

Furthermore, 60% of funding for wind farms must come from abroad and 40% from Egyptian funding channels. Solar projects should be 70% funded from foreign organisations and 30% from Egyptian sources.

Priority will be given for the first phase companies that will not complete financial closure before 26 October.

What is the method of payment for investors?

Payment for solar energy projects includes 30% of the tariff value at EGP 8.88 against the US dollar, compared to the price while issuing the tariff, in addition to 70% from the tariff value at the exchange rate in time of repayment.

Payment for wind farms projects include 40% of the tariff valued at EGP 8.88 against the dollar, compared to the price while issuing the tariff, in addition to 60% from the tariff value at the exchange rate in time of repayment.

Investors that are to exit the first phase will receive their full payments. Collectively, they paid EGP 350m for the cost sharing agreement regarding the establishment of the transformers station.


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