Egypt courts private sector

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No new wind power was installed in Egypt last year, leaving national capacity at 230 MW. But with 80 MW nearing completion and two 120 MW projects well advanced, the next few years should see a lot more activity.

The 80 MW, all of it Gamesa turbines, is the latest phase of the huge Zafarana development on the Red Sea coast, where 80 square kilometres was set aside in 2001 for up to 600 MW of wind power under the auspices of the New and Renewable Energy Authority (NREA), a division of Egypt's energy ministry. So far 225 MW has been installed with financial and technical assistance from Denmark, Germany and Spain. The remaining 5 MW of grid connected wind power is an old pilot project located at Hurghada, also on the Red Sea coast.

At Zafarana, NREA signed another contract with Gamesa last year to build two projects totalling 241 MW for commissioning mid-2009 and early 2010, with Danish and Japanese assistance. The Japanese Bank for International Cooperation is providing a loan of around EUR 85 million and Japan Carbon Finance will buy the carbon emissions certificates (CERs) issued under the UN's Clean Development Mechanism.

Wind installations in the past have been financed with a mix of concession loans and overseas aid money, but such grants will no longer be available as Egypt is now rated as a middle-income country by the OECD. Revenues from CERs will not fill the shortfall entirely, but they will be of crucial importance in ensuring projects get built. The average Egyptian electricity price on the wholesale market is EGP 0.12/kWh (EUR 0.015), too low to make wind power viable even given Egypt's strong winds.

The government is courting the private sector, both local and international, to invest in wind power. A draft law going through parliament allows for guaranteed third-party access to the grid and includes long term power purchase agreements. Generation and distribution licences will be put out to public tender in the first instance, with plans to introduce a guaranteed price system at a later date.

The Egyptian Electric Utility and Consumer Protection Regulatory Agency, in charge of evaluating bids, says a number of companies have already expressed an interest in developing large scale projects at Gabal El-Zeit, south of Zafarana on the Gulf of Suez. Among them is BP, for a possible 500-1000 MW, and Italgen, a subsidiary of Italy's Italcementi. Italgen has signed a memorandum of understanding with the Egyptian energy ministry to build 120 MW. The feasibility study should be completed by the summer.

NREA has earmarked 700 square kilometres for wind power projects in the Gabal El-Zeit area, which could yield up to 3000 MW. Wind speeds average a high 10.5 m/s. Other studies under way in the area include a 200 MW project with assistance from Germany's KfW Bank and the European Investment Bank, and a 220 MW project in co-operation with Japan.

The combined wind industry activity makes Egypt's latest renewables target look possible, as long as there are no hiccups. Last April the government set an objective for 20% of electricity to come from renewable sources by 2020, of which 12% is to be wind generated, requiring around 7200 MW of capacity.

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