Egypt looks to build 1 GW green power for aluminum manufacturing

Egypt is launching at least one new green power generation project as it seeks to maintain access to one of its key export markets, the European Union.

Like other countries looking to export products to Europe, Egypt will have to comply with upcoming EU legislation that will tax imports of certain carbon-intensive goods.

The EU's Carbon Border Adjustment Mechanism, or CBAM, which is currently in its transition phase, and will move to its definitive phase from Jan. 1, 2026, has forced producers of certain goods to reevaluate the energy that powers their production.

Minister of Public Business Sector Mohamed Shimy said there is a need for $750 million over three years to build 1GW of new green, electric power supply for its aluminum manufacturing sector, speaking during a panel at the EGYPES conference in Cairo Feb. 18.

Egypt has also been working to add renewable power sources as a way to stabilize its grid and meet its global commitments to shift toward green energy.

Power cuts

The country suffered power cuts in the summer, as a result of a 7%-18% load increase in some cases, Minister of Electricity Mahmoud Esmat said, adding that introducing greater renewable supply is the first step to greater grid stability.

Boosting domestic gas production and connecting its grid to neighboring countries, including Saudi Arabia, are also crucial to meet domestic power demand.

The Saudi Arabia-Egypt electricity project is expected to be fully operational in 2025 and will send up to 3 GW of electricity to Egypt via a 1,350-km high-voltage direct current (HVDC) interconnection link.

"We have almost 60% of that project completed," Esmat said.

Separately, Esmat said there is also a project being studied to potentially export renewable energy to Greece.

Power to the interconnection link will come from Saudi Electricity Co., which is expanding its international grid interconnections outside the Middle East and diversifying its power mix to use more renewables and gas-fired power plants due to an anticipated increase in demand and efforts to curb emissions.

Egypt targets 42% of its power generation to come from renewables within the next decade and has called for international investors to help meet that goal. As of July 2024, solar, wind, and hydropower make up only 11.5% of Egypt's electricity generation.

According to IRENA data, Egypt's total installed renewables capacity is around 3.7 GW. It's expected to increase to 49.5 GW and 62.6 GW in 2030 and 2035, respectively.

The EU is Egypt's largest trading partner, taking 28.1% of the North African country's exports in 2023, according to EU trade data.

Complying with the upcoming CBAM rules will be crucial for Egypt's export economy.

CBAM

CBAM-exposed importers must report on the quantity of imported goods, direct and indirect emissions embedded in them, and any carbon price payable on those emissions. CBAM certificates will then need to be acquired for 2.5% of emissions in 2026, rising to 100% by 2034.

Under the transitional phase of CBAM, which started on Oct. 31, 2023, traders must only report on emissions embedded in their imports without paying any financial adjustment. But this mechanism is to be phased in from 2026 to 2034, in line with the phasing out of free allowances in the EU Emissions Trading System.

CBAM aims to level the playing field for EU companies, as most exporting countries do not have a carbon price as high as EU ETS, or do not have a price on emissions at all.