Wind power in Egipt – Egypt wind farm tender attracts 32 bids

Egypt had announced the tender for the wind farm on a build-operate-own (BOO) basis on May 9. Firms were invited to submit qualification documents by July 21 for short-listing but the deadline was later pushed back to August 20.

The project developer would be required to design, finance, construct, own and operate the power plant for 20 to 25 years, and would sell the power produced during that period to the Egyptian Electricity Transmission Company.

Egypt aims to generate 12 percent of its power from wind farms and a total of 20 percent from renewable sources by 2020.

Wind power in Egipt

2000-5 MW
2002-68 MW
2003-98 MW
2004-145 MW
2005-145 MW
2006-230 MW
2007-310 MW
2008-365 MW
2009-630 MW
2010-850 MW
2011-1,050 MW

During the last two decades, renewable energy has gained momentum in Egypt. Supported by sustained government commitment and fruitful international cooperation, Egypt has passed the stage of initial resource assessment and demonstration projects towards the planning and implementation of large scale grid connected projects.

The New & Renewable Energy Authority (NREA) was set up in 1986, with the establishment of testing & certification laboratories and personnel training. The practical work of NREA began with assessing the renewable energy resource and investigating the choices of different technologies through studies and pilot projects, as well as introducing some of these technologies to the Egyptian market and supporting the initiatives of local industry.

Since then a series of large-scale wind energy projects have been built in Egypt. In 2008, 55 MW of wind power was added, bringing the total installed wind capacity up to 365 MW at the end of 2008. Several additional projects are in the pipeline.

An excellent wind resource

Egypt enjoys an excellent wind regime, particularly in the Gulf of Suez, where average wind speeds reach 10 m/sec. Egypt cooperated with Denmark to produce a Wind Atlas, issued in 1996, for the Gulf of Suez west coast. In 2003, a detailed Wind Atlas for the same area was issued, concluding that the region can host several large scale wind farms.

The atlas was expanded to cover the entire land area of Egypt in 2005, to establish the meteorological basis for the assessment of wind energy resources all over Egypt. The atlas indicates that large regions of the eastern and western deserts of the Nile River and parts of Sinai have average annual wind speeds of 7-8 m/s.

Egypt has large deserts and abundant land mass, only 7% of which is heavily populated. These areas are well suited to host renewable energy projects to increase the country’s share of renewable energy as well as to export excess energy to Europe.

Besides the areas already earmarked with high wind potential on the west of the Gulf of Suez, work is underway to earmark other promising areas for future wind projects. Land lease agreements for these areas will be signed with qualified wind project developers.

Grid infrastructure

The Egyptian national grid is extensive, providing over 99% of the population with modern electric energy services. Currently, grid connected renewable energy projects in Egypt enjoy the right of access and priority in dispatching.

Policy development and investment opportunities

In February 2008, the Egyptian Supreme Council of Energy approved an ambitious plan to produce 20% of total electricity from renewable energies by 2020, including a 12% contribution from wind energy. This translates into more than 7,200 MW of grid-connected wind farms. The plan gives enough room for private investors to play a major role in realizing this goal, and the government anticipates that about 400 MW/year will be undertaken by the private sector, while the NREA will carry out about 200 MW/year.

A recently drafted new electricity act, which is undergoing consultation with stakeholders, has been designed to reflect the ongoing market reforms and to strengthen the regulatory agency. It includes articles supporting renewable energy through encouraging private investment in the sector. In addition, it guarantees third party access and priority dispatch for renewable electricity.

Polices to foster an increasing wind contribution in the Egyptian electricity mix consist of two phases. Phase one will use a competitive bids approach, through international tenders requesting bids from the private sector to supply energy from renewables. The financial risk for investors is reduced through guaranteed long term power purchase agreements. The prequalification documents for the first tender documents of the competitive bids are presently under preparation. In addition, a preparatory workshop will be held to assess the interest and to consider the inputs and concerns of project developers as well as other stakeholders.

In phase two, a feed-in-tariff will be introduced; taking into consideration the prices achieved in phase one.

The private sector is encouraged to play a key role in achieving the 2020 goal by building wind farms to satisfy their own power needs or to sell electricity to consumers through the national grid. Wind farm developers are asked to coordinate with the Egyptian Electricity Transmission Company (EETC) and the Egyptian Electricity Regulatory Agency for issues such as grid connection, wheeling, backup and power purchase agreements.

The NREA supports private investment in wind energy by providing resource assessment, the necessary data for feasibility studies and technical support for potential project developers.

Egypt is fast on track to become the leading country in Middle Eastern renewable energy initiatives. The country has adopted an ambitious plan to cover 20% (12000 MW) of all generated electricity by renewable sources in 2020, including a 12% (7200 MW) contribution from wind energy.

In the 1980s the renewable energy strategy was formulated as an integral part of the national energy planning in Egypt when the New and Renewable Energy Authority (NREA) was founded under the auspices of the Egyptian Ministry of Electricity and Energy. The NREA is entrusted to plan and implement renewable energy programs in coordination with national and international institutions. The Egyptian authorities have, together with Denmark, Germany and the EU, been the front-runners in the establishment of a regional centre for Renewable Energy and Energy Efficiency (RCREEE), an independent think tank based in Cairo. 

Wind Energy is scheduled to be the largest contributor to the generation of renewable energy in Egypt. 12% of the 20% of total renewable energy generation is to come from this source. Therefore its implementation and further promotion is central to the NREA activities and future plans.

Egypt enjoys an excellent wind regime, particularly in the Suez Gulf where wind speeds average 7-10 m/s, comparable to the most favourable regions in North-West Europe. The Wind Atlas further indicates high wind energy resources in large regions of the Western and Eastern Deserts, particularly east and west of the Nile Valley.

By 2020 it is expected that wind energy will contribute 7200 MW to renewable energy generation. Already been installed in El Zaafarana1 and El Zaafarana2, and several other wind farm projects are currently being developed in cooperation with Germany. The Suez Gulf is considered to be one of the most attractive areas in Egypt for investors in tourism and resort development.

Egypt is located in the Sunbelt area which means that the country is endowed with high intensity of direct solar radiation ranging between 2000-2600 kwh/m2/year and sunshine duration that ranges from 9-11 hours with mostly clear days. Egypt’s primary locations are able to offer 500 more hours of solar operation each year compared to Spain and Greece, the most favourable European locations. Especially the Upper Egypt region shows great potential for solar energy development. Solar energy is mainly used for water heating, industrial process heat applications and agricultural drying. There are two principle technologies used in generating solar energy; solar thermal power plants and Photovoltaic (PV) solar energy technology. The first solar thermal power plant has been constructed 90 km south of Cairo at Kuraymat. The power plant is able to contribute 140MW to renewable energy generation. With regard to PV technology, The NREA signed a protocol for cooperation with the Italian Ministry of Environment to electrify two remote settlements in the Matrouh Governorate. The technology behind PV applications is expensive but the higher cost of the set-up is compensated by savings in network construction, maintenance is limited with a life span of around 25 years. The Egyptian government further stimulates investment in solar energy by offering free land to potential investors.

Large scale projects in Egypt

Zafarana wind farm

During the last decade a series of wind projects were established in Zafarana, with a total capacity of 360 MW. The farm has been constructed and operated in stages since 2001, in cooperation with Germany, Denmark and Spain.

A partnership with Japan in 2008 added 55 MW, and an additional 75 MW will begin operation in 2009. In 2007, 120 MW were planned in cooperation with Denmark and will be operational by 2010. All in all, Zafarana will host 545 MW of grid connected wind power, to become the largest wind farm in Africa and the Middle East.

From July 2007-June 2008, 840 GWh of electricity were generated by the Zafarana wind farm with an average capacity factor of 35.5%, saving 466,000 tons of CO2.

Gulf of El-Zayt

Further developments are in the pipeline in the Gulf of El-Zayt, including a 200 MW project in cooperation with Germany and the European Investment Bank; a 220 MW wind farm in cooperation with Japan; and a 300 MW wind farm in cooperation with Spain.

In addition to this, an Italian company expressed interest in establishing a 120 MW wind farm in the Gulf of El-Zayt, to be expanded to 400 MW at a later stage. These projects aim to generate electricity for cement factories in the Suez area. An agreement has already been signed with the NREA, and a bird migration study on the proposed site is expected to be finalized by early 2009.

Africa’s renewable energy plans ‘need incentives’

Africa renewable energy sector must be pumped with incentives to attract investors and flourish. The continent already battles to keep the lights on as demand rises quickly in the face of a growing population that has outstripped the existing power generation capacity.

“Governments need to open their power sectors, introduce mechanisms to encourage participation and bring the costs down,” said Frost & Sullivan energy analyst Sipha Ndawonde. Governments need to regulate their power sectors to convince investors that they can get what they pay for without delays.

Most countries in Africa have begun to reform their power sectors, but regulations are far from perfect, with a lack of transparency and bureaucratic hurdles confusing investors. Feed-in tariffs that allow for good returns, lower import duties for key equipment, reliable transmission and distribution lines and expanded ports were also needed, Ndawonde said.

Tanzania’s Deputy Energy Minister Adam Malima said governments needed to be bold, speed up the introduction of projects and make renewable power more accessible. “The technology has to be cheaper … we need to develop a local renewable industry ,” he said.

North Africa has been the pioneer in developing wind power projects on the continent, with 365MW installed in Egypt alone. “These countries benefit from the proximity to the European markets and the need for Europe to reduce its carbon footprint,” Ndawonde said.

SA is expected to invest in wind power to alleviate short-term pressure on its strained power supply. East Africa and west Africa may use wind for main power capacity, especially after droughts raised doubts about the reliability of the hydro sources they largely depend on.

“Europe will also be looking to trade carbon credits, and wind and other renewables will become a way for Africa to generate additional revenue,” Ndawonde said. Solar power is so far mainly used for off-grid applications, to power farms and game lodges, but together with wind and the conversion of waste could find a market, especially once industries embrace it as part of their power consumption.

The need to conserve and use greener energy has yet to permeate the culture, especially with three- quarters of Sub-Saharan Africa not connected to the grid, analysts said. With the need to boost power supply quickly, governments may need to focus on producing cleaner coal first, analysts said.

The liquidity available in the market has shrunk because of the global financial crisis, but private investors say they are still keen to invest in African energy if projects are realistic, well structured and their risk credentials are sound. “We are very bullish about renewables … the South African market has funds for renewable deals as long as they fit under the new renewable feed- in tariff programme,” said Standard Bank ’s head of energy investment unit Paul Eardley-Taylor.