Egypt expects to significantly expand its energy sector in the coming years, with recent oil discoveries in the Western Desert and big plans to develop its renewable energy capacity. Egypt started the year off by signing $1.8 billion worth of renewable energy agreements. The deals include contracts with Norwegian renewable energy developer Scatec and China’s Sungrow. This is part of the North African country’s aim to achieve a 42 percent contribution of renewable energy to electricity generation by the end of the decade.

The first project to be developed will be the Scatec solar energy plant, which will produce clean electricity, alongside the establishment of energy storage stations in Upper Egypt’s Minya Governorate, according to an Egyptian cabinet statement. The solar plant is expected to have a total capacity of 1.7 GW, with 4 GW-hours of battery storage.

In addition, the government has entered into a power purchase agreement (PPA) with Scatec, which will provide Egypt with 1.95 GW of clean power and 3.9 GW-hours of battery storage. “The agreements reflect growing demand for firm clean power and advanced storage solutions,” Scatec said in a statement.

Meanwhile, Sungrow plans to build a factory to manufacture energy storage batteries in the Suez Canal Economic Zone. It will provide some of these components to the Scatec solar energy plant, with the remainder will be made available for regional export and domestic demand growth. The project responds to the Egyptian government’s push to develop more local manufacturing to enhance supply chain security.

The new investment announcements follow a major bet on the renewable energy sector by the Egyptian government last year. The move was aimed at tackling the severe energy shortages Egypt has faced in recent years, particularly due to the country falling short on its natural gas production targets from its giant Zohr offshore gas field, which has had a knock-on effect on its economy. 

Last year, Egypt opened the door to foreign investment in green energy, announcing the aim of mobilising over $10 billion in private investment in the sector, including wind and solar power production. By the end of 2024, Egypt had attracted just $4 billion in investment. The government hoped to attract higher levels of funding by offering tax breaks, free land, cash rebates, and other incentives to investors, but experts suggested that improvements to national energy policies would also be key to attracting this investment.

By 2024, Egypt had a total installed capacity of renewable energy of almost 7.8 GW, including hydropower, as well as wind and solar energy. The country’s solar power capacity increased from 35 MW in 2012 to almost 2.6 GW in 2024. The New and Renewable Energy Authority estimated that Egypt’s total renewable installed capacity reached approximately 8.6 GW last year. 

While the new projects are promising, the government has said that greater international support will be required to reach its ambitious energy mix target by 2030. The government has encouraged investors to finance a range of clean energy projects, including green hydrogen, ammonia production, and renewable-powered heavy industry in the Suez Canal Economic Zone. However, investors have so far been deterred from developing new projects due to the lack of clarity on long-term power pricing. The PPA-based structure that the Egyptian government has agreed to on its Scatec deal, however, suggests that the country may now be prepared to support more favourable contracts for foreign developers to attract higher levels of investment.

The Energy and Environmental Economist Azza Ghanem said that “Egypt has successfully integrated more than 2,000 MW of wind power and over 2,500 MW of solar power into the national grid—a significant shift compared to the situation a decade ago.” Ghanem added, “Renewable energy has contributed to reducing reliance on fossil fuels and lowering emissions, thereby supporting Egypt’s climate goals.” Ghanem highlighted the importance of public-private partnerships and long-term PPAs in driving investment in the sector.

In addition to developing its solar and wind energy capacity, last year, the Egyptian government announced it was creating investment incentive packages aimed at increasing the country’s green hydrogen production, with the aim of contributing 8 percent of the global share of green hydrogen, or 10 million tonnes a year. Egypt’s strategic position, linking Africa to Europe and the Middle East, as well as its abundant sunlight, makes it well-suited for green hydrogen production and export. The Suez Canal is, therefore, expected to play a major role in the global clean energy supply chain.

The existing green ammonia production at Misr Fertilisers Production Company complex in Damietta, in cooperation with Norway’s Scatec and Yara International, aims to use 480 MW of solar and wind energy to produce 150,000 tonnes a year of green ammonia, starting in 2027. 

Egypt has significant green energy potential, and the government has begun to introduce new policies aimed at rapid sectoral expansion. However, to achieve its renewable energy production aims by the end of the decade, it must attract higher levels of international investment across a range of clean energies.

By Felicity Bradstock for Oilprice.com

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