Energy shortages had been hindering Egypt’s development, but the country is now implementing a fast-track plan to boost generation, improve distribution, and increase renewable sources for a better energy mix. National authorities have also recently partnered with an international company, Siemens, to build three high-efficiency mega-plants in record time and raise Egypt’s power generation capacity by over 40%
Egypt’s energy system has been undergoing rapid change. What have your greatest achievements been so far?
Before 2014, when I took up the post, we were suffering enormously from power cuts, but we took quick remedial action, introducing about 3,656 megawatts (MW) of power in just eight and a half months. Since July 1, 2015 there have been no more power cuts caused by a lack of electricity generation, although there might have been the odd cut for other reasons. We have also partnered with Siemens on a very big initiative called Egypt Megaproject to add about 14,400MW to the national grid at three combined-cycle power plants in Beni Suef, Burullus and New Capital. Working with Siemens and local partners like Elsewedy and Orascom, we managed to complete the project in around 18 months, and I do believe this is an unprecedented success story in terms of the power capacity and the record completion time. And because it is very high efficiency, it means that fuel consumption is lower, which is reflected in annual savings in terms of running costs of between $1 billion and $1.3 billion. For the past four years, we have managed to introduce 25.5GW into the system.
What are you priorities looking forward?
We have very ambitious plans that cannot be completed in one year, but we have a strategy. Despite the significant improvement, we still have challenges in the transmission and distribution networks. We are working very hard to improve the transmission network, which carries bulk volumes of energy across the country. Over a period of four years we introduced 500Kw substations with an overall additional capacity of 38GW to the existing 9GW, which means a fourfold increase over a four-year period on what had been built over the previous 60 years, starting from the 1960s and up until 2014. Our transmission network was around 2,300km in length, but by late this year it will be 6,000km, another exponential increase that will improve the quality of service for customers. And we will use the high-efficiency power generation units from Siemens that will cover the whole country, not just the vicinity of the power station. I think we can reach 95% of our targets for transmission. We are nearly doubling the number of regional control centers, and the new ones are smart centers. Our strategy is also to increase use of renewables, and this will require a very solid smart network.
Are there any other significant challenges in your bid to overhaul the Egyptian energy system?
The real challenge now is with distribution. Right now it stands at 75% to 80% of our target, and, in my opinion, it will take another couple of years to achieve a high quality of distribution as we have done with generation transmission. Why is that? Because the distribution networks are old, and even though the expenditure is much lower than with transmission, it still represents a lot of work and you are always interfering with people’s activities, so there’s no easy way to complete it. But if we can manage, in a couple of years’ time, to improve distribution and reach 100% of our target, we will have achieved a fantastic goal. In the big cities the situation is far better, but when I talk about distribution, I always think about the remotest village in the country, and I feel that the quality of service needs to be as good there as in downtown Cairo. Also, keep in mind that consumer habits are changing: lately, more people in the villages are using air conditioning, and this increases summertime consumption by 3,000 to 4,000MW compared to the winter. This means that the distribution system must be improved. I lived in the UK for four years, and there was not a single power cut during the entire time. That’s what I want for Egypt, and until we reach that point, I will not be satisfied. I come from the private sector, so I bring very high standards to the sector, as do my colleagues. Everyone knows the importance of quality of service.
What are you doing in terms of renewable energy?
One of our goals is to improve the energy mix by using sustainable resources, such as solar and wind. We have an ambitious target: to reach 20% of total capacity from renewables by the year 2022. This amount includes hydro power as well, and we already have a hydro power capacity of 2,852 MW. We furthermore have over 1,000MW of wind power, and are currently building what will be the world’s largest solar farm, the Benban Solar Park, with a generation capacity of 1,465MW. If we add all this up, I believe that by 2022 we will have a capacity of around 6,800MW, which is almost 20% of total capacity, and by 2035 this figure will rise to 42%. We started the process years ago by making all the necessary legal changes to allow the private sector to invest in renewables.
What can investors expect from the Egyptian energy sector?
This is a big chance for the private sector. We want to spread the message that we are very serious and we take good care of investors, who are already applying in large numbers. People believe in the success story of renewable energy in Egypt, and they are ready to invest in it because the country risk is much lower than before. So from the technical point of view, we are undergoing a major transformation.
You’ve talked about generation, transmission and distribution. But what about energy that gets lost at the consumer level?
Energy efficiency is also important. If people have very inefficient equipment, it means we are throwing out energy and backtracking on some of our gains. We are working hard on improving this efficiency, starting with housing and lighting; we’ve changed 2.5 million lighting units for LEDs. In terms of energy efficiency, we also need to adopt a smart network; with renewables, you need a flexible system that can accommodate a lack of sun or wind at certain times. This means you need extra capacity from traditional sources. You need to be adaptable.
What changes have you been making to the pricing of energy as part of this overhaul of the system?
We are trying to change the tariff structure, which was putting a lot of strain on a sector that was cash-strapped and had no ability to invest. When I joined in 2014, I said that over the next five years I would eliminate subsidies, except for low earners and the smallest consumers. By charging a little more to those who consume more, we can subsidize the neediest consumers. Then we extended this to eight years as part of economic reforms in Egypt that triggered a major change to the currency exchange rate, and as almost 60% of the cost of electricity is the cost of fuel, any currency change greatly affects us. I also pushed for transparency, insisting on publishing the five-year plan in the official gazette with our targets for the next five years. And every time we change prices or make any changes, I give a press conference over a month in advance, so everyone will know what to expect.
What kind of an impact have all these reforms had so far?
Household consumption was around 47% of the budget, and now it’s down to 43% because people are becoming more conscious and consuming energy in the right way, so overall this is good for the country. Reform could be made in factories to improve energy efficiency, and we want to do outreach work in industry. In the future, companies will be able to sell directly to the final consumer without involvement from the Energy Ministry or the Egyptian Electricity Holding Company (EEHC), using the national grid to transfer power from one place to another. In two years’ time the transmission network will be a separate, independent company, and an investor will be able to use our network to transfer electricity and sell to the final consumer.
What is the importance of Germany as an investor?
We have a lot of cooperation from Germany on big projects from Siemens, such as the Egypt Megaproject. Siemens got this contract for eight years with 600 people (engineers and technicians), and we are using this personnel to run all three stations, which is very efficient. By comparison, other stations with far less power-generating capacity have 10 times the personnel. We’ve already been approached by international investors interested in participating, and we’ve had proposals from three international operators with experience in energy and power stations. We are also pushing hard for renewables, and are open to investments.
What should potential investors remember about Egypt?
Egypt is on the right track. The energy sector is getting is a lot of attention and support from political leaders, and this has made it possible to make the kind of progress that we have, at the pace that we have. One of the goals set by the president was to improve the energy system in the country, and that’s what we’re doing. I believe that the investment environment is very friendly now, after the work that’s been done in terms of taxation and other areas to make it easier for serious investors who want to create an industry here and create jobs. Just look at the road network and how it has improved in a short period of time, or how much housing has been built. We are ready for partnerships.