The transition to green energy is now a top priority worldwide, as it is clear that the impacts of climate change will affect every country.
One of the contested issues in climate policies, debated at every UN COP (Conference of the Parties) meeting, the highest-level gathering for those involved in environment-related decision-making, is climate finance, or the money provided to help poorer countries cut emissions and protect themselves from climate-change impacts.
At this year’s COP26 meeting in Glasgow, world leaders said the developed countries should deliver more resources to help the less developed adapt to the impacts of climate change. They also agreed to double the collective funds for adaptation efforts.
Recognising the urgency of the issue, the participants agreed that countries should come back to next year’s COP meeting, to be held in Egypt, to submit stronger targets for reducing emissions as part of efforts to keep global temperature rises close to 1.5 degrees Celsius.
In 2015, 197 countries signed the Paris Agreement that aimed to keep global warming below 2 degrees Celsius, and to aim for 1.5 degrees Celsius, in order to avoid climate catastrophe.
In 2009, the developed nations promised to mobilise $100 billion in climate finance annually by 2020 to help the developing nations cope with mitigation and adaptation efforts by 2020. A delivery plan released ahead of the COP26 climate summit concluded that the target will probably not be met until 2023.
The UN Intergovernmental Panel on Climate Change (IPCC) has said that between $1.6 and $3.8 trillion are needed annually for the transformation of energy systems alone between 2016 and 2050.
Many countries including Egypt have been trying to benefit from green finance initiatives and funds offered by international financial institutions, while accelerating the pace of renewable energy projects.
“A growing interest in green finance has been witnessed in Egypt, thanks in part to a number of programmes that have been established and supported by international financial institutions,” said Hoda Sabri, a financial and banking expert.
The Central Bank of Egypt (CBE) and international financial institutions such as the European Investment Bank (EIB), the European Bank for Reconstruction and Development (ERBD), and the France Agency for Development (AFD) have introduced funding initiatives to encourage the private sector to invest in green financing to cover resource efficiency, the circular economy, and renewable energy installation, Sabri said.
Egypt has also received a total of $300 million from the Green Climate Fund (GCF) created as part of the Paris Agreement to support developing countries realise their Nationally Determined Contributions (NDCs) towards lower emissions. It has carried out projects worth billions on its path towards the transition to clean energy.
Sabri said that international financial institutions in cooperation with Egyptian banks had offered private companies facilities to raise capital by creating new lending programmes to channel financing into green projects and encourage them to achieve energy savings and reduce their environmental footprints.
Sabri said that financial entities like the ERBD give loans to Egyptian banks that then re-lend to small and medium-sized businesses (SMEs) in the private sector at a reduced interest rate of five to eight per cent.
“Some projects can receive 10 to 15 per cent cash back grants as incentives to help companies bear the initial cost of switching to greener technologies,” she said.
Egypt has also been pursuing green finance since last year on the institutional level, issuing the first government green bond in the Middle East and North Africa (MENA) region in September 2020. In this offering, Egypt sold green bonds worth $750 million with five-year maturity at a yield of 5.25 per cent.
The EBRD announced last June that it was lending the National Bank of Egypt (NBE) $100 million to support green efficiency, climate-change mitigation, and the introduction of adaptation technologies.
The EBRD said in a statement that the loan would also be allocated to fund SMEs in industry, commerce, and agriculture to help improve the use of energy and water and land resources and investments in high-performing technologies.
“Egypt is encouraging clean-energy projects and facilitating procedures while removing any obstacles we have faced,” said Abdel-Rahman Shawki, chief executive and managing director of Ona Solar, one of Egypt’s leading solar-energy companies.
Ona Solar alone, according to Shawki, has a total installed capacity that can power almost 10,000 homes each year, helping to avoid some five billion kg of carbon dioxide emissions each year as well as saving more than five million gallons of fuel.
He added that the government through the Egyptian Electricity Utility and Consumer Protection Agency (EgyptEra) is facilitating procedures for licences for installations. However, there was a problem in the quota set at 300 MW (Megawatts) for all solar-energy projects installed via the net-metering system, he said.
“About 50 per cent of the 300 MW are already consumed by small and medium-sized solar projects that produce a maximum of 20 MW each,” Shawki said.
EgyptEra is the body regulating solar-energy projects, and it issues licences for any project from 0.5 up to 20 MW.
More individuals and businesses are becoming aware of the benefits of solar energy for their businesses and the environment, Shawki said, adding that some were even keen on installing solar-powered projects for the sake of the environment before thinking about the economic return for their businesses.
He said that most solar-energy projects were in the industrial and agricultural sectors, followed by the tourism sector, all through the net-metering scheme.
Net-metering is a billing system approved by EgyptEra since 2013 under which individuals or businesses generate their own electricity using solar cells and channel excess power to the national grid at fixed prices.
Photovoltaic (PV) cells convert sunlight into electricity and have become more cost-effective in recent years. The cost of solar panels has decreased by about 60 per cent during the last five years, Shawki said.
However, the cost of cells has increased by 10-20 per cent due to the Covid-19 pandemic and the electricity crisis in Europe and China.
The revenues of Egypt’s New and Renewable Energy Authority (NREA) have reached LE2.8 billion, rising from LE2.2 billion last year.
Mohamed Al-Khayat, head of the NREA, said that the total budget during the fiscal year 2020-21 was about LE7.5 billion.The approved budget for fiscal year 2021-22 exceeds LE8 billion.
*A version of this article appears in print in the 25 November, 2021 edition of Al-Ahram Weekly