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Austerity threatens Egypt’s green energy progress

Workers set up photovoltaic solar panels at the Benban plant, which will contribute to Egypt's goal of 58 percent renewable energy by 2040 Reuters
Workers set up photovoltaic solar panels at the Benban plant, which will contribute to Egypt's goal of 58 percent renewable energy by 2040
  • Plan for 58% renewables by 2030
  • Deals signed at energy conference
  • Infrastructure development is key

Sprawling over 37 sq km of desert north of Egyptian city of Aswan, the Benban Solar Park is one of the largest photovoltaic power plants in the world. Made up of 41 individual solar plants, the park’s investors boast it can be seen from space.

Launched in 2018 and now at 1.8 gigawatt capacity, in theory Benban produces enough energy to power 1.3 million homes.

Last month Mohamed Shaker, then electricity minister, re-affirmed Egypt’s commitment to the green energy transition.

Speaking at the Egypt-EU Investment Conference he announced a plan to source 58 percent of Egypt’s energy generation from renewable sources by 2040. The pre-existing target was to hit 42 percent by 2030.

Memoranda of understanding and other tentative investment deals potentially worth €67 billion ($72 billion) were also signed at the conference, including agreements on green hydrogen, green ammonia, wind and solar power.

These ambitions are not unreasonable. In 2018 the International Renewable Energy Agency talked of Egypt’s “abundance of renewable energy resources” including “solar, wind, biomass and hydro”.

Yet, despite the current administration’s progress in increasing electricity generation from renewables, analysts worry that the country’s green energy drive may have plateaued, in want of crucial infrastructure development. 

Egypt’s proportion of renewable energy in electricity generation has increased by half from 8 percent in 2015 to 12 percent in 2023. But an ambitious target to more than treble that figure over a similar timeframe may be unfeasible, given the country’s straitened budget and ongoing debt challenges.

Since taking office in 2014, president Abdel Fattah al-Sisi has overseen a massive increase in wind and solar, which made up just 1 percent of the energy mix when he became president compared with 5 percent by the end of last year.

Between 2010 and 2020 total installed capacity of renewable power plants almost doubled from 3.3GW to 6GW before levelling out slightly, hitting 6.3GW in 2023.

“Looking at the last five years, the targets have been met,” says Ashraf Kraidy, planning director at the Regional Center for Renewable Energy and Energy Efficiency. 

Since 2014 billions of dollars in green investment have poured into the country, contributing to Egypt’s installed renewable energy capacity, but creating potentially more of it than the national grid can work with.

More investment means more hard currency. And in Egypt it’s a problem now to get hard currency

According to Ali Habib, an energy consultant, the country may already have an excess of renewable capacity. 

“When you reach high integration of energy in the grid, this requires more investment for your grid to be flexible,” he says, suggesting that the priority now lies with upgrading energy transmission and storage, which have lagged behind the green energy expansion of the last few decades. 

Shaker told attendees at the EU investment conference that the country has invested almost EGP116 billion ($2 billion) since 2014 on upgrading the national grid. Yet Habib says it may require billions more worth of work and upgrades.

It is unclear how the government, which has pledged to scale back spending and expand austerity measures, will finance such projects. 

“More investment means more hard currency,” says Habib. “And in Egypt it’s a problem now to get hard currency.”

With a capacity of 1.8 gigawatts, Benban is one of the largest photovoltaic power plants in the worldReuters
With a capacity of 1.8 gigawatts, Benban is one of the largest photovoltaic power plants in the world

While the country is coming out of a difficult three-year period marked by high inflation and a foreign liquidity shortage, members of the new cabinet, which was sworn in last Wednesday, have signalled they will continue spending reforms and government cut-backs for the immediate future.

The amount of private sector and foreign direct investment that will be made available to Egypt this coming financial year is also unclear. Despite the hype around the European investment conference, it is unclear which of these deals would come to fruition. 

Francis Ghilès of the Barcelona Centre for International Affairs advised taking the billion-dollar announcements with “two pinches of salt”. Plans for green hydrogen projects in particular, Ghilès says, deserve scepticism.

Egypt is frequently cited as a possible centre for future green hydrogen and green ammonia projects.

Coinciding with the EU investment conference, BP, of the UK, and the UAE’s Masdar announced a joint plan to explore green hydrogen in Egypt, “potentially creating a large-scale project that spans multiple phases, including the development of gH2 and its derivatives for export markets”.  

Everyone’s talking about green hydrogen like it’s the next Ford Model T

Infinity, a Masdar-backed consortium, also announced it would invest $12 billion in a green hydrogen plant targeting 300 megawatt capacity, while Orascom Construction, Scatec and Fertiglobe announced plans to build a 100MW green hydrogen plant.

“Everyone’s talking about green hydrogen like it’s the next Ford Model T,” says Ghilès. He says the technology is not yet established enough to play a major role in the national energy strategy, “and it’s not something that’s about to revolutionise everything quickly.”

Meanwhile, ongoing power cuts highlight the country’s continued dependence on imported fossil fuels, mostly in the form of liquefied natural gas. 

Egypt’s gas reliance has been curtailed under the current administration, as a proportion of total electricity generation, but the country still uses gas for more than 80 percent of its energy needs.

Most of the country’s infrastructure remains geared towards burning gas. Without fundamental reforms to the grid, the renewable sector will be unable to take up the slack.

“If you have a car, but you don’t have gas to run this car,” says Habib, “the car doesn’t go.”

The hydrogen rainbow

  • Green hydrogen is produced on a carbon-neutral basis through water electrolysis. 
  • Turquoise hydrogen is created when natural gas is broken down into hydrogen and solid carbon with the help of methane pyrolysis.
  • Blue hydrogen is generated from the steam reduction of natural gas. 
  • Grey hydrogen is obtained by steam reforming fossil fuels such as natural gas or coal. 
  • Sometimes other colours are ascribed to hydrogen, based on how it is produced. For red, pink and violet hydrogen, the electrolysers are driven by nuclear power. 
  • Yellow hydrogen is hydrogen produced from a mixture of renewable energies and fossil fuels. 
  • White hydrogen is a waste product of other chemical processes, while the use of coal as a fuel produces brown hydrogen.

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