Egypt reveals feed-in tariffs for renewable energy

Ahram Online, Sunday 21 Sep 2014

Government sets feed-in tariffs and offers reduced interest rates to encourage private sector participation in energy sector

Power-generating windmill
Power-generating windmill turbines of The Zafarana project, Egypt (Photo: Al-ahram)

Egypt's cabinet approved new feed-in tariffs for renewable energy production, announced electricity minister, Mohamed Shaker, at a press conference on Saturday.

Feed-in tariffs will allow the government to guarantee a certain price for energy produced to encourage investment in the renewable energy sector, said Shaker.

Commercial and household producers will supply the government, which will redistribute electricity through the national grid, he explained.

Tariffs will depend on production categories, LE0.848 for each kilowatt (kW) per hour produced by households, LE0.901 for commercial producers of under 200 kW, and LE0.973 for producers of 200 – 500 kW.

Because large-scale projects are expected to resort to foreign financing for lower costs, their tariff rates were calculated in US dollars.

Projects producing 500 KW – 20 Megawatts (MW) will be paid 13.6 cents per kilowatt per hour and those producing 20 – 50 MW will be entitled to 14.34 cent per kilowatt per hour.

These will be paid in domestic currency according to the exchange rate at the time of payment, said the minister.

Though the government set a maximum production level for each project at 50 MW, the cabinet will have the right to consider requests for increasing productions.

Tariffs will be reviewed regularly as the cost of renewable energy production is expected to decrease, said Shaker.

Last week, investment minister Ashraf Salman, revealed that fixing feed-in tariffs is expected to generate eight Gigawatts of solar and wind energy. 

The finance ministry will subsidise the financing of the projects, offering four percent rates for household and commercial productions under 200 kW, and eight percent for commercial producers of 200-500 kW. 

Land will be provided to private investors through usufruct agreements priced at the value of two percent of the electricity produced.

For solar energy projects, land will be offered for 25 years whereas wind energy projects will have 20 years of land use.

Investors will also be charged only two percent customs on material imported for the projects.

The government secured a LE2 billion loan to develop the distribution grid to be able to absorb higher production levels.

Egypt currently produces 547 MW of wind energy and a mere 20 MW of solar energy, said Shaker.  

In a speech earlier this month, Egyptian President Abdel-Fattah El-Sisi said that electricity production and distribution were not developed enough to keep up with consumption.

He estimated that Egypt needs 2,500 megawatts annually for the next five years to meet rising demands, at a total cost of LE1.7 billion ($12.5 billion).

The speech was a response to a large-scale power outage in various parts of the country; seen as a culmination to recurrent power crises.

Currently, the government pays an average price of LE0.47 to produce one kilowatt of energy per hour, while the average selling price registers LE0.22. However, as of last July the government began a five year plan to cut electricity subsidies by 67 percent.

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