Low price good indicator of attractiveness of projects in Egypt: Salmawy

Mohamed Farag
8 Min Read

The prices of renewable energy technology have fallen globally following increased production, hence encouraging its widespread use domestically.

The Egyptian market has attracted Arab and international companies to invest in new and renewable energy projects through various contractual systems.

Companies have reduced the value of their financial offers to sell energy to rival with international prices, especially since the main reason is the decline in the prices of renewable energy equipment; China’s entry into this market, and the export of large quantities to various world countries at competitive prices.

Managing director of the Egyptian Electric Utility and consumer Protection Regulatory Agency, Hafez El-Salmawy (EgyptERA), said that the decline in the prices of renewable energy technology is a global occurrence, which increased the volume of investments in projects, and the entry of China into the manufacturing of equipment resulted in a surplus, as well as technological development, therefore decreasing energy prices.

Chinese companies have successfully entered into new markets and raised their shares in Europe, Japan, the Middle East, and Africa, and this prompted the reduction of average costs, El-Salmawy pointed out.

He added that decreasing offers to sell kWh from solar power plants in Egypt down to 2.75 cents are a good indicator of attractive investments and competitive international prices.

“State-run bidding systems can help lower energy costs depending on the large competition among developers that will push them to offer the lowest prices,” he added.

Market endurance and stability ensure low prices, and Egypt does not need additional incentives, however it ought to work with the highest degree of professionalism and commitment with respect to contracts, schedules, and procedures, and to eliminate bureaucracy, El-Salmawy highlighted.

He added that the renewable energy feed-in tariff programme approved in 2014 targeted the opening up of the market to Arab and foreign companies, and what has happened since then indicates the strength of the programme, in addition to being a good indicator of the attractiveness of investment in renewable energy as well as inspiring confidence in investors.

The record for the world’s cheapest solar tariff in Dubai this year was auctioned at 2.4 cents per kWh.

El-Salmawy said that Egypt is close to the price of the last tender in the UAE of 2.4 cents with different circumstances compared to Dubai, where projects in the UAE are subsidised by the state, which contributes 60% and buys the production capacity for 30 years, along with tax and custom exemptions on equipment, without grid-linking project fees.

He stressed that Egypt is characterised by the market’s size and ability to absorb all the capabilities of new and renewable energy projects, unlike other countries which determine production capacities.

The Egyptian Electricity Transmission Company (EETC) has set 2.5 cents as the maximum price for kWh from the new and renewable power plants, and received three bids from Chinese companies in the first week of this month to implement solar plants.

Former head of the New and Renewable Energy Authority (NREA) Mohamed Salah El-Sobky said that the low prices from renewable power plants stimulates and encourages the government to purchase production from the projects.

He added that Arab and international companies will compete to provide the lowest prices to seize the implementation of projects and thus achieve positive returns to the state and citizens.

El-Sobky pointed out that the decline in the prices of equipment in parallel with large production quantity resulted in lower prices, and when companies conduct studies on a tender and determine the price they  will be very similar, especially as all prices have declined.

Growth in solar energy projects is due to two reasons. The first is the government subsidy, which started to subsidise solar panels and consumers who want to use them, El-Sobaky said.

The second reason is the industrial growth of this field in China, as China has entered the field vigorously since 2005, as one of the areas of developing industry and technology, and it currently produces two thirds of the world’s solar panels annually at lower prices, which reduces the price of solar energy.

Galal Osman, a full-time Mansoura University engineering professor and an energy expert, said the low prices of renewable energy should be a strong incentive for the government to contract to purchase all the production capacity produced by the private sector and reduce reliance on fossil fuels.

He pointed out that the world’s countries benefited from the decrease in the prices of renewable energy, which opened the way for the private sector to establish projects, develop technologically, and increase production, resulting in reducing the final sale price of production capacity systems from the sun or wind.

Osman also pointed out that the decline in solar energy prices increases Egypt’s chances to achieve its goal of increasing reliance on renewable energy to reach 42% of the electricity grid by 2037.

Hassan Amin, country director of ACWA Power, said that the company offered a competitive offer in the tender of the Kom Ombo solar plant with a value of 2.75 cents, as part of its eagerness to capture the project from competing companies and alliances.

He pointed out that prices have fallen in countries worldwide, and it was necessary to provide a suitable price, and the company always includes long-term plans to invest in Egypt, and set an ambitious plan to participate in major solar projects in the country at reasonable prices.

The Chief Executive Officer of KarmSolar Ahmed Zahran said that low prices will increase the efficiency of new and renewable energy projects, and encourage the private sector to offer the lowest energy selling prices at the highest quality.

KarmSolar aims to provide electricity to the private sector at a lower price than electricity distribution companies, and is contracting to sell electricity for 25 years with a fixed tariff.

“I want to transfer energy in whole regions outside the network, so I see the real market in Egypt, providing electricity at a competitive price and the highest quality of the private sector, and within the mechanisms and controls of the law of electricity,” Zahran said.

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