The policy environment for wind power in Egypt

Egypt’s renewable energy sector has gained momentum over the last two decades, thanks to government commitment and successful international cooperation. The New and Renewable Energy Authority (NREA) was set up in 1986 to assess the country’s renewable energy resource and to investigate technology options through studies and demonstration projects.

Another aim of NREA is to introduce mature technologies into the Egyptian market and to support the activities of the domestic industry. Since the 1980s, a series of large-scale grid connected wind energy projects were installed in Egypt, and 120 MW were added in 2010, taking the total installed wind farm capacity to 550 MW.

In 2003, a detailed wind atlas was published for Egypt’s Gulf of Suez coast, concluding that the region has an excellent wind regime with wind speeds of 10 m/s, and the potential to host several large-scale wind farms. This atlas was expanded in 2005 to cover the entire country, indicating that large desert regions both to the east and the west of the Nile River, as well as parts of Sinai, have average annual wind speeds of 7-8 m/s. Large areas with high wind potentials are already earmarked for wind power development on the west of the Gulf of Suez and along the Nile River.

In 2008 the Egyptian government approved an ambitious plan to produce 20% of total electricity from renewable energy sources by 2020, including a 12% contribution from wind turbines (around 7,200 MW). In order to achieve this target, the government has earmarked 7,600 square kilometers of desert land for implementing new wind energy projects.

A draft for a new electricity act was also published in 2008, and is still undergoing consultation with stakeholders. The draft act aims to reflect ongoing market reforms, strengthen the regulatory agency and encourage private investment. In addition, it guarantees third party access and priority dispatch for renewable electricity.

While 2010 saw no progress on this act, the Egyptian Cabinet approved some polices to support wind energy projects to be implemented by private developers, including the following measures:

For the 7,600 square kilometers of desert lands that have been earmarked for future wind projects, all permits for land allocation have already been obtained by NREA, and an Usufruct Agreement (lease) for the area assigned to individual projects will be signed with the investors;

Environmental impact assessments, including bird migration studies, will be prepared by NREA;

20-25 year Power Purchase Agreements are available with government guarantees;

Renewable energy equipment will be exempt from customs duties;

The projects will benefit from carbon credits under the CDM.

The government has outlined two phases for fostering wind power development in Egypt:

Phase I: A competitive bids approach through international tenders. A first tender was launched in May 2009, a second tender in January 2011, and a further tender is expected for July 2011.

Phase II: A feed-in tariff system will be applied taking into consideration the prices achieved in the tendering process.

According to the Egyptian Wind Energy Association, Egypt is set to introduce a feed-in tariff in 2012.

Operating and planned wind farms in Egypt

Zafarana wind farm

The Zafarana wind farm by the Red Sea coast has been constructed in stages since 2001, in cooperation with Germany, Denmark and Spain. 120 MW of wind turbines capacity were added to Zafarana in 2010 in cooperation with the Danish International Development Agency (DANIDA), taking the total installed wind farm capacity to 545 MW. In 2010, the wind farm generated 1,147 GWh.

Hurgahda wind farm

An area north of Hurgahda in the Gulf of El Zayt has an excellent wind regime, and in addition to 5 MW already operating, there are currently about 1,120 MW at various stages of development in cooperation with Germany, the European Investment Bank (EIB), Japan and Spain.

These include:

200 MW in cooperation with KFW, EU and the EIB. After a tender in 2010, the contractor is expected to be selected at the beginning of 2011 and the project is scheduled to start operations by the end of 2012.

220 MW in cooperation with Japan and 120 MW in cooperation with Spain are in the pipeline.

Further projects in preparation include: 180 MW in cooperation with Spain; 200 MW in cooperation with Abu Dhabi’s MASDAR programme; and 200 MW in cooperation with Germany, the EU and the EIB.

Western Bank of the Nile

A further 200 MW are planned on the Western Bank of the Nile in cooperation with Japan.

Gulf of El Zayt

In May 2009, the Egyptian government, in cooperation with the World Bank, published an international tender for a wind farm at the Gulf of El Zayt, inviting private international and local developers to submit their prequalification documents for the first competitive bid to plan, build and operate a 250 MW wind farm. The wind turbines project will benefit from the conditions outlined above.

Following the tender, 34 offers were received and a short list of ten qualified developers was announced in November 2009. A second stage of the tender calling for final bids will be issued mid-2011 and the project is scheduled to start operations by 2014.

Gulf of Suez

The Egyptian government aims to develop 2,000 MW of wind power in the Gulf of Suez region, in four stages. A first tender was published in January 2010 for two projects of 250 MW each, again on a build, own and operate basis and a 20 year PPA. A second tender for the same amount of wind power – two wind farm projects of 250 MW each – is expected for July 2011.