Visit windpowermonthlyevents.com for the latest on our upcoming conferences and webcasts

Egypt

Egypt

AID TO EGYPT FALLING ON BARREN MARKET

Ten years ago when Egypt began to discover its huge wind resource, generating capacity was in short supply. However, with construction of three fossil fuel plant and with more new fossil generation on the way, Egypt now has an over capacity. Combined with a perceived lack of political commitment to wind power in Egypt, these facts are giving rise to fears that the Danida donation of 60 MW of wind turbines could end in the desert as an eye catching example of how to mispend some 30 million dollars. Views on the Danida project and long term planning needs are presented.

Egypt -- a country with one of the best wind resources in the world -- is on the verge of issuing contracts for purchase of 60 MW of wind power plant. To be developed in two 30 MW phases at Zafarana on the windswept Red Sea coast, the wind farm is intended to be an impressive demonstration of wind energy's technical prowess and commercial viability, a shining example of overseas aid creating much needed jobs in a developing country. So much for good intentions. The reality of wind power in Egypt is a deal more sobering.

The Zafarana wind farm is at least one year behind schedule. Wrangling between Egypt and Denmark over the terms of Danish aid to the Egyptian energy sector has been the cause of the delay. Meantime, the basis on which aid was granted has shifted fundamentally. No longer is Egypt a country with a power deficit. Construction of three fossil fuel plant -- gas and oil -- amounting to some 1280 MW, with more new fossil generation on the way, means Egypt now has an over capacity. What, ask critics of the Danish sponsored wind programme, is the country going to do with 60 MW of wind power?

Compared with other western countries, particularly the US, Denmark is a relatively minor donor to Egypt. Like the rest of the west, its decision to pump aid into Egypt has more to do with Middle East politics than carefully thought out business strategies. Long term peace in the region is of paramount importance to the security of the world and in the great scheme of things, a 60 MW wind farm is no more than an aside.

Lis Jespersen at the Danish embassy in Cairo says Denmark's Egyptian aid programme is based on an appraisal completed some years ago. This estimated that the population of 54 million would grow at a rate of 1.5 million per annum, requiring 600 MW of new electricity capacity a year until 2000, or a 6.1% annual increase. Danida's strategic goal in Egypt is to "promote an economic and ecologically sustainable development in the country," by concentrating on three sectors: energy; environment; and water and sanitation. "When it was decided politically that Egypt was to be one of 20 countries to receive Danida aid we had to decide where a small country like Denmark could help. We have found what we feel to be three important sectors where we can have a good influence," explains Jespersen. With virtually the whole population of more than 55 million concentrated in the Nile valley, pollution is an increasingly serious problem as industry and agricultural compete for the same land area.

According to Danida's economic strategy the three aid sectors are to receive equal amounts of aid between 1995 and 1999 with total spending in that period budgeted at DKK 1.65 billion. Jespersen says renewables are to receive half the sum earmarked for energy, which this year is set at DKK 80 million. Nonetheless, within Danida's overall strategy, wind energy so far dominates as the largest single exchange of know-how and technology. Annual aid from Denmark increased to DKK 190 million in 1995, is expected to be DKK 200 million this year and DKK 225 million in 1997, 1998 and 1999. The 60 MW Zafarana wind farm alone has secured DKK 210 million, albeit this sum is tied to the use of Danish technology.

Explaining its substantial support of wind development in Egypt, Danida states "As well as support for establishing wind power plant, Danish aid to the environment sector will also increase the capacity of the Egyptian authorities to plan, execute and maintain large wind farm projects." Whether the Egyptians seriously intend any such thing remains an area of considerable doubt.

Enthusiastic beneficiaries

The official Egyptian goal is for renewables to meet 5% of electricity demand by 2005. Mentioning this target to experts, however, causes a deal of embarrassed writhing and whispers of "unrealistic." Not that this uncertainty plagued January's Danida sponsored wind energy workshop. Held at Hurghada, home to Egypt's shockingly impressive (Danish sponsored) wind energy technology centre, the two day workshop bubbled with enthusiasm. Perhaps this was not too surprising, though. The majority of participants were on Danish or Egyptian government pay roles, with jobs dependent on wind energy's success in Egypt, or were representatives of the Danish companies shortlisted as suppliers for the Zafarana 60 MW.

With 60 MW in contracts up for grabs, the workshop had a keen competitive atmosphere. The invitation to tender for the job is due to be sent out at the end of this month to the four firms selected from an earlier pre-qualification round: Vestas, Nordtank, Bonus and Micon, though Micon was not at the workshop. From these four, two companies will be chosen to supply 30 MW each, to be built in two consecutive phases. Each of the successful companies must have formed a joint venture partnership with an Egyptian company. The aim is that up to 60% of the contents of each turbine is to be made in Egypt.

At the workshop, packed to its pre-set limit of 135 participants, Nordtank and Vestas put up spirited arguments in support of the merits of their differing technologies. Of those in attendance, about 90 were from Egyptian authorities, with most of the remainder coming mainly from Denmark, reports Jespersen. Of the handful of participants not accounted for in these two categories, a few were from Egyptian industry while the remainder came from other countries. In particular, the head of India's wind energy programme, Praveen Sexena, was enthusiastically welcomed for his words of advice on creating a national wind industry based on overseas aid and joint-venture projects. Many parallels were drawn between the early days of the Indian market and Egypt today, with every hope that the Egyptian market will follow the same pattern of expansive growth. What seemed to be overlooked was that India is in dire need of more generating capacity, while Egypt is not.

In the beginning

Ten years ago, however, when Egypt began to discover that it had a huge wind resource, generating capacity was in short supply. At that time wind was seized upon as an indigenous resource which could be put to use to preserve the country's oil reserves. In 1986 The New and Renewable Energy Authority (NREA) was founded as a specialist division of the Egyptian ministry of energy and is now responsible for all wind energy activity in the country.

One of NREA's main tasks was to attract overseas aid explicitly for the purpose of getting wind energy moving. At one time NREA was discussing wind aid with both the United States and Denmark, an interlude which led to the US ironically financing a small project of Danish Wincon 200 kW units. In the end, though, it was Danida that began formal co-operation with Egypt on wind development, starting in 1990 with an Immediate Action Plan. This was developed with NREA into a four phase programme:

¥ an Egyptian Wind Energy Technology Centre, built by Egypt, but with considerable Danish technical input

¥ a demonstration wind farm of six, 300 kW Nordtank wind turbines, financed by Danida

¥ a wind atlas for the Gulf of Suez, put together by the Danish national laboratory at Risø

¥ and a Wind Energy Master Plan, the next stage of which is supposedly under discussion with Egypt, Danida and the Danish contractor for the job, Carl Bro International (CBI).

From this programme emerged the need for a large scale demonstration wind farm to enable a transfer of wind turbine manufacturing know-how from Denmark to Egypt. The seeds of the large Zafarana wind power plant project were sown.

Since then, however, support for the programme from the Egyptian government seems to have run out of steam. Jespersen is the first to admit that the level of Egyptian commitment to wind energy is an unknown quantity. "We are all worried about NREA's capacity to fulfil the goals," she says. "We keep looking to India as an example, but I am afraid it will take a long time before we can convince the Egyptian government that this is the way to go." Doubts about wind as a viable electricity producing technology are a major factor to be overcome she adds. "They don't really trust wind yet. We are trying to demonstrate that they should do," continues Jespersen. "You could call it [the proposed Zafarana wind farm] a very expensive pilot project, but we have to change public opinion about wind energy and we have to start somewhere."

Far from convinced

The wisdom of pumping large sums of money into one or two prestigious projects in the hope that more will follow is seriously questioned by the president of the Egyptian Wind Energy Association, Galal Osman. He is far from convinced that the Egyptian Ministry of Energy -- demonstrably keen on fossil fuel -- is the right organisation to sponsor a wind power project. "We already have an over capacity. What are they going to do with a few megawatt of wind when they are building a string of new fossil fuel power stations?" he asks, arguing that a gift of DKK 210 million is hardly going to be refused, but that one 60 MW wind farm does not equal a thriving wind market.

Wind energy, continues Osman, cannot yet compete with heavily subsidised electricity prices in Egypt. "Without investment from the commercial sector I see no future for a wind market," he adds. "Unless there is a decent price for energy, the private sector will not come in. What will happen once the 60 MW is operating? I cannot see more wind farms following. There is no real price, no real incentives and no real competition for what we have already. I see no future down this path."

Feeding electricity into the grid from giant wind farms is not the right use of the country's wind resource, argues Osman. There is a far greater need in Egypt for decentralised power plant -- water pumping, wind-diesel systems and small stand-alone wind plant -- yet no provision is being made for these in the current programme. "Choosing a site for a wind energy centre and wind farm because of the proximity of a five star hotel is putting the cart before the horse," he says of the Hurghada technology centre. "Egypt desperately needs to move its population away from the Nile and into other areas of the country. Lack of energy is preventing this from happening. Without energy there can be no industry and nothing to attract young people." Osman argues strongly for a social fund for development of areas of Egypt which are uninhabited, despite their good agricultural potential. Renewable energy could be an integral part of such a strategy, with new townships powered from local grids fed by wind and solar power.

"We need a new perspective on the whole idea of wind energy," Osman maintains. "At the moment there is a lot of effort and money being put into the Danida projects but with no long term vision. Not even the right people were invited to the workshop. Where were the people working in agricultural development, in tourism; where was local industry?" he asks.

Donor countries should not make the mistake of assuming what can work for wind energy in the US and Europe is also the answer in Egypt. "We have a totally different scenario in Egypt; huge areas of land with plenty of wind, but 500 kilometres from the grid network. We need to develop these isolated places and make local area grids." This would encourage the population to migrate away from the Nile, he says, advocating many small local projects instead of one giant wind farm.

Making a start

While accepting that Osman perhaps has a point, Finn Thisted from the Danish embassy in Cairo takes a more pragmatic view. He argues that the Zafarana project is no more than a start. The Egyptians, he says, need to see a large scale demonstration project before even considering wind as a serious alternative. "There is always somebody who says you can start somewhere else, but to make a beginning is what is important," he says. "The aim is to create co-operation between the Danish and Egyptian manufacturers -- to work together and to get going."

His views appear to be shared by at least one politician in Egypt. Amin Mubarak is a member of parliament, professor of the University of Cairo, chairman of the government's energy committee and related to the president of Egypt, Hosni Mubarak. It is the wind industry's fortune that Professor Mubarak is also a staunch fan of wind power. His wholehearted support of NREA's efforts is one of the pillars of the energy agency's existence. At January's workshop he promised publicly to do all he could to push a market incentive programme into place, along with legislation stipulating a fair price for wind generated electricity. But whether a lone man's vision can achieve such radical re-thinking in Egypt remains an open question.

According to Mubarak, within two years of local manufacture up to 78% of a wind turbine's content could be made in Egypt, reducing unit cost by about 21% compared with Europe prices. What's more, local manufacturing would create 1800 jobs if 20 MW is installed each year. Egypt's major goals for the Zafarana project, continues an enthusiastically optimistic Mubarak, are: to generate electricity without pollution, particularly along the Red Sea coast where tourism is a growing industry; to create jobs; to introduce wind turbine manufacture to the industrial sector in Egypt; to encourage use of other energy sources to "prevent any likely dependence by Egypt on oil imports" to meet growing demand; and to create a positive national response to wind power, thereby stimulating its use instead of the use of Egyptian oil. This would allow Egypt's current level of lucrative oil and oil-product exports to continue.

Low morale

While laudable, such goals are viewed at best with scepticism and at worst as totally unrealistic by a number of people deeply involved in the Egyptian wind programme. The effect of shooting at a target out of range has been to lower morale among the programme's foreign and Egyptian staff rather than raise it, argues Kim Dyre, who has recently returned to Denmark from two years in Egypt as Danida's expert advisor on its renewables aid programme. Staff at NREA lack confidence and have become impotent in the face of impossible demands. "Inconsistency, confusion and lack of credibility," have been caused by the country's grandiose plan which has become more of a hindrance than a help to the development of renewables, says Dyre.

A goal for renewables to contribute 5% of Egypt's electricity within the next ten years -- with wind supplying 4.2% requiring 1458 MW of wind plant installed -- is unrealistic, he argues. Egypt lacks that level of commitment. "Progress, advancement and improvement requires the alteration of working habits, procedures and attitudes," he writes in his critical concluding report to Danida. "It is therefore of major importance to be prepared to change and actively back up changes rather than try to fit new ideas into old frameworks." He points out that without change, Egypt is not going to achieve its ambitions for renewables.

What's more, NREA, far from being a dynamic centre of activity, has gradually been pushed into the sidelines of Egyptian consciousness; salaries have decreased and retention of qualified staff has been difficult. "Consequently NREA has suffered from brain drain," says Dyre. "Even at present NREA is trying to handle a number of projects beyond its capacity." He argues that a single organisation such as NREA could not be expected to master the huge range of technical disciplines required of it by the energy ministry.

According to Dyre, a far more realistic goal for 2005 would be for wind to meet 1.1% of electricity consumption with 390 MW of wind generation. Even this goal still requires the current rate of installation be to sharply accelerated, he points out.

From vision to strategy

Controversy about the level of Egyptian commitment to wind energy is rife, not to say symptomatic of the entire aid programme. Jens Carsten Hansen of the Danish national laboratory at Risø has been involved in setting up the Egyptian wind technology centre since 1990. In contrast to Dyre he is an enthusiastic supporter of the programme. For Risø, its involvement in Egypt is a major source of funding. Hansen claims that development of Egypt's wind energy resource is a "national priority" for the country and that wind power can be produced for a price which is already competitive with fossil fuel generation. For this reason there is every expectation that once the technology has demonstrated its viability, other projects will follow. "The political driving force is not to generate electricity but to create jobs. The Egyptians see a good potential for establishing a new industry and new jobs. This is the greatest attraction of wind power for them. They are looking across to India and seeing the jobs there," he says.

From a long term view, wind would seem to make good sense for Egypt. The resource is possibly second to none in the world and letting it go to waste would be nothing short of stupidity. But long term vision requires long term strategies. The current plan seems to end with 60 MW in the desert, even though a "master plan for wind energy" is one of the four components of Danida's original support programme, embarked upon long before Zafarana saw the light of day.

Here, it would seem, lies the crux of the matter -- and of the thinly disguised friction between Denmark and Egypt over the aid programme. Denmark's plan was to assist with project formulation and planning within a long term energy strategy. Egypt, though, seems to have restricted the role of Danish experts to that of technical discussion partners. Lis Jespersen admits the "master plan" exists as little more than a grand thought. "Of course the master plan has to go on, but at the moment we are taking a break. We were afraid that the plan developed with NREA was far too ambitious. There was a review last March and we agreed to take a short break."

This short break appears to have left a yawning vacuum where there should have been a long term strategy for Danida's investment in Egyptian wind. What is the next step after Zafarana? "Nobody can answer you. We are just in the beginning of the formulation for the sector plan which is scheduled for the end of 1996. Obviously we can't just go on building wind farms," says Jespersen. "I do not know if we would build one or two more, but that would be all. There are other renewable sources."

Danida might do worse than listen to the World Bank. In its list of "lessons learned" from granting lines of credit to developing countries, the bank states of the receiving country: "Political commitment, however, is required to create an enabling environment, clear government policies, and co-ordination between government ministries and their agencies." Some political commitment -- such as fiscal market incentives -- from Egypt should perhaps be written into a signed and sealed strategy with a long term view, before Denmark, Germany and even other donors pour more money into the sand at Zafarana.

Have you registered with us yet?

Register now to enjoy more articles
and free email bulletins.

Sign up now
Already registered?
Sign in

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus

Windpower Monthly Events

Latest Jobs