Falling costs support Egyptian renewables funding

Further evidence that the tide is moving quickly in favor of renewables in the Middle East and North Africa is being provided by the rejuvenation of the sector in Egypt.

According to REN21, the global renewable energy umbrella group, recent tenders outside the country have shown that renewables should be as cheap an option, or even cheaper, than thermal power production in Egypt.

While Cairo has been focused on natural gas supply, it is keen to promote all forms of domestic energy.

Renewables have experienced a long hiatus in the country after a promising start.

About a decade ago, the country was the biggest wind power producer in Africa and the Middle East -- a position it has since lost -- as a result of a string of donor-funded projects.

The 545 MW Zafarana wind power project on the Gulf of Suez was financed by development agencies in Japan, Germany, Denmark and Spain. Further phases were planned and even more attractive locations identified.

It was hoped that the area would collectively provide 2-3 GW of capacity by 2015, but no progress was made.

Egypt was also an early starter in solar power. A 140 MW combined Concentrated Solar Power/gas-fired plant was completed at Kuraymat in 2011.

However, enthusiasm for these combined plants has been relatively short lived, and little progress has been made with other solar technologies since.

At present, renewables account for just 3% of Egyptian power generation.

The tumultuous events of the Arab Spring and subsequent political and economic instability are partly to blame, but the subsequent lack of progress may have had more to do with changes in European bilateral funding policies.

Rather than developing wind and solar power schemes purely as development projects, development agencies started to ask for financial contributions from host countries, either directly, or through funding the construction of the required transmission infrastructure.

However, falling costs now offer an opportunity to breathe new life into the sector.

Cairo has committed to raising the share of renewables to 20% by 2022 and 37% by 2035, with more coastal wind farms and solar PV projects near the Suez Canal, on the Mediterranean coast and in the Western Desert.

Cairo is in talks with a range of potential funding organizations and these discussions are starting to bear fruit.

The European Bank for Reconstruction and Development announced June 9 that it had approved a $500 million credit facility to finance 13 large-scale PV projects in Egypt out of 16 planned near Benban in the northern Aswan region.

The 16 projects will provide a combined 750 MW. Construction is expected to begin later this year.

The EBRD money could unlock a further $1.5 billion in funding from other organizations to help Egypt secure 2 GW of solar PV capacity by 2020, while falling onshore wind costs should also now make financing the long-delayed developments around Zafarana viable.