Egypt qualifies 10 firms to bid for wind farm project

According to the ministry of electricity, the new wind farm will have a capacity of 250 megawatts and construction is expected to begin sometime in 2011, after bids are turned in during the first quarter of the year.

Among the competitors are Egyptian Orascom Construction, Enel Green Power SpA, and Electricite de France and a consortium headed by El Sewedy Cables. It is unclear which company has the inside route to the contract, but each are hoping to establish Egypt’s first major alternative energy wind farm.

Sewedy has been getting much of the attention due to its already large interest in wind power. Some 27 percent of its assets involve wind farms.

The sale of the rights for this wind farm is for a build-operate-own (BOO) operation, meaning that whichever company wins the bidding will be responsible for the design, construction, and operation of the facility. It will sell the electricity to the Egyptian Electricity Transmission Company as part of the agreement.

Egypt wants to increase its alternative energy sources to approximately 20 percent of its total output. Wind energy is planned to take the lead among these renewable sources with around 12 percent of the country’s energy.

Solar power is also being looked into, especially in cities, but without the finances to cover such massive projects, the government has shied away from this renewable source in recent years, leaving it to individuals and private companies to take the initiative.

The news agency quoted Electricity Minister Hassan Younes as stating the large number of offers received indicated Egypt’s success in encouraging investment in wind energy.

Egypt, a gas and oil producer, has been developing wind power along its Red Sea coast in the east of the country.

While the country is slowly exhausting its oil reserves, it keeps adding new natural gas reserves. Gas is a cheap and abundant energy source in Egypt , which makes it the country’s vehicle for development.

Egypt wants to improve security of supply and maximize their exports in oil and gas. In order to achieve this, the Egyptian government pledged to generate 20% of its electricity from renewables by 2020 – excluding hydro.

The main contributor for this goal will be wind energy. “Egypt enjoys of an excellent wind regime, particularly in the Suez Gulf, where average wind speeds reach over 10 m/sec,” explains Dr. Paul Suding, director of the Egyptian-German Joint Committee on Renewable Energy, Energy Efficiency and Environmental Protection.

Regarding the other renewables in the region, he adds Egypt won’t experience a substantial development in solar power for the time being unless it receives incentives from Europe. As regards of hydropower, its potential is already almost fully exploit.”

The New and Renewable Energy Authority (NREA), which depends on Egypt’s electricity and energy ministry, forecasts that wind power will contribute to 7.2 GW of the 10 GW for the total renewable energy capacity planned for 2020, which produce enough power to cover around 12% of Egypt’s electricity demand.

Financing for wind projects will not be as easy as it was in the past. Wind installations used to be financed with a mix of concession loans and overseas aid. Yet, today, Egypt is rated as a middle-income country, according to the Organization for Economic Cooperation and Development (OECD), which makes the country no longer eligible for such grants.

Therefore, the Egyptian government is working to create a commercial market for electricity supply in which the private sector can participate. Egypt also counts on revenue flowing to wind plant owners from the sale of carbon emission certificates.

The first approach is the tendering of large wind parks for competitive bidding. “May 2009 was the first time the Egyptian government invited the private sector to invest in wind,” explains Dr. Suding. “It was a huge step. In three years time we’ll see the first wind parks financed privately in Egypt.”

The expected new electricity law is expected to allow for standard long term power purchase agreements is on its way. The law will also provide for third-party access to the grid for renewables as well as priority dispatching when possible, technical support, and rules for purchasing electricity from autonomous producers.

An ambitious renewable target is set by the Government and the stage is being prepared for private investment. Egypt expects a heavy investment in renewables for the years to come.