Egypt’s Electricity Subsidy Removal and the Unified Electricity Law; Paving the Way for Renewables SME Growth
Presentation’s Contents Egyptian Context: Egypt’s fiscal dilemma Solutions Subsidy removal benefits and plan Renewable Energy potential and plan
Egypt’s Fiscal Dilemma State Budget Expenditure 25.5% Governmental Wages 24.7% Debt Service 32.6% Subsidies 56% Electricity and Energy Subsidies
Egypt’s Fiscal Dilemma Contd This puts the Egyptian government in a dilemma of having less than 25% of its state expenditures to developmental and other programs.
Solutions Long Term Short and Medium Term Government wages restructuring New civil workers’ law Short and Medium Term Removal of Subsidies; mainly Electricity and Fossil fuel subsidies Developing Renewable Energy
Benefits for Energy subsidy removal in Egypt A more relaxed state budget Less budget deficit; which means Less debt More resources can be allocated to developmental efforts
GoE Embarked on a Plan to Eliminate Electricity Subsidies by 2019 The Egyptian government, in 2014, decided to gradually decrease electricity subsidies within 5 years when they will be eliminated.
New Unified Electricity Law It allows for private sector participation, in the generation of electricity, for both locals and foreigners Allows for the first time for private sector participation in the transmission of electricity Introduces the concept of competitive electricity markets for the first time in Egypt
New Unified Electricity Law Contd Restructures the roles of both the Egyptian Electric Utility & Consumer Protection Agency (“ERA”) and the Egyptian Electricity Transmission Company (“EETC”) Codifies the fundamentals of permitting and licensing; and Unifies various regulations relating to the electricity sector
Renewable Energy Plan Increase the share of generated energy from Renewable Energy Renewable Energy to be 20% of the total electricity generation by 2022 12% Wind 4-6% Hydro 2-4% Solar Power (Targeting to install 3,500MW) The Egyptian government has embarked on an ambitious plan to produce 20% of electricity generation by 2022.
Solar Potential in Egypt Egypt is a prime location for the use of Solar Energy. The country enjoys 2,400 hours of solar operation with high intensity of solar radiation equivalent to 2,600 KWh/m2 annually. Egypt receives some of the highest solar radiation power levels in the world, coupled with the fact that 96% of the country is desert;
SMEs Challenges Access to Finance is limited Human capacity is limited Government policies have been ignoring SMEs development, but This is beginning to change The Egyptian government realized that SME entities have the potential to act as the backbone of the economy, therefore; Regulations have been put in place for banks to allocate 20% of their loan portfolios to SMEs over the coming 4 years
Renewable Energy: a Fertile Industry to Foster SME Growth Renewable Energy; with the great potential outlined above can foster SME development in a number of ways: SMEs can work as subcontractors for solar power projects without the need for direct access to finance. When SMEs operate alongside experienced solar or renewable energy firms, they will gain first grade knowledge raising their human, technical as well as financial capacities. Solar projects, according to the round 2 FIT program must provide 30% of its’ components from local suppliers This provides SMEs with opportunity to benefit from this regulation, if they were able to seize it and supply what the promising solar and renewable markets in Egypt will offer.
FIT Rounds 1 and 2 FIT Round 1 FIT Round 2 Residential 84.4 P.T/Kwh PV Power Installed Capacity Corresponding FIT Residential 84.4 P.T/Kwh <= 200KW 90.1 P.T/Kwh 200KW <= Installed Capacity < 500KW 97.3 P.T/Kwh 500KW <= Installed Capacity < 20MW 13.6 $.Cent/Kwh 20MW <= Installed Capacity < 500MW 14.34$.Cent/Kwh PV Power Installed Capacity Corresponding FIT Residential 102.8 P.T/Kwh <= 200KW 108.58 P.T/Kwh 200KW <= Installed Capacity < 500KW 500KW <= Installed Capacity < 20MW 7.88 $.Cent/Kwh 20MW <= Installed Capacity < 500MW 8.4 $.Cent/Kwh
Electricity Prices Before and After partial Subsidy Removal 2014/2015 2015/2016 Residential 0-50 7.5 P.T/Kwh 51-100 14.5 0-200 16 201-350 30.5 351-650 40.5 651-1000 71 over 1000 84 Residential 0-50 11 P.T/Kwh 51-100 19 0-200 21.5 201-350 42 351-650 55 651-1000 95 over 1000
Electricity Prices Before and After partial Subsidy Removal 2014/2015 2015/2016 Commercial 0-100 32 P.T/Kwh 0-600 56 600-1000 81 over 1000 86 Commercial 0-100 35 P.T/Kwh 0-600 69 600-1000 96 over 1000
Lower, Middle and Higher Tiers Prices It is clear from the above tables that the lower tiers of electricity consumption will not be affected much by the removal of subsidies. Current Price of Electricity for the middle and high consumers which is expected to increase even further, will render solar PV as a feasible alternate energy sources creating potential for propagation of solar Energy and creating an emerging market for IPPs
Medium Scale PV plants (500kw-20MW) is the Way to Go in Egypt