Even with more generation, Egypt suffers from power bottleneck

Rolling blackouts in Egypt may be far from over if the country does not expand its electricity grid.

A year ago the North African country faced its worst power crisis in recent times. Residents throughout Cairo went from one power cut a day, lasting about an hour, to more than three cuts a day for longer periods of time.

Many businesses were forced to stop operating. One of the main supermarkets in the capital was unable to complete transactions as the electric register’s cash drawer could not be opened.

This went up the chain to affect even the largest economic boosters such as the Suez Canal. The Suez Canal Authority declared a state of emergency n September 4 last year when blackouts paralysed all movement in the waterway as communications were cut. Ten oil refineries and pumping stations momentarily stopped and other heavy industries such as iron and steel suffered, costing Egypt about US$140 million in lost revenue.

The president Abdel Fattah El Sisi has made power generation a priority of his administration, including a goal of having 20 per cent of the country’s power generation capacity stem from renewable energy sources in just five years.

But electricity does not magically appear at home.

Power is first generated at a plant and then must travel through different channels, or substations, before it arrives to the consumer. If these substations have already reached capacity, no more power can get through. Compare it to using all the RAM, or processor memory space, on your computer. You want to use more of the programs you have saved, but there is not enough space to handle all of them at once. The only way to use more programs at the same time is by adding more RAM.

The energy that is expected to be generated from these renewable projects could face the same sort of bottleneck.

“Egypt needs to expand by a further 2,000 megawatts at least – just for solar energy – and that means more high-voltage stations,” said one renewable energy financier operating in Egypt. “What’s clear is that the investment required is in the billions of dollars,” he said.

The investor said that the 2GW of transmission and distribution upgrades at Benban in Upper Egypt was enough for contracts awarded to date, which total 1.8GW of solar photovoltaic projects. However, it is not enough to cover the 1.2GW of wind tenders or even the latest 500MW of renewable energy projects up for grabs.

If the network cannot handle the additional load, the electricity generated from these projects will not have a home and is in essence wasted.

Mohammed El Sobki, the head of the New Renewable Energy Agency in Egypt, said that the country was working aggressively on the transmission network. He admitted that the grid needed further work on distribution. “The transmission and distribution networks need to be strengthened as fast as possible – almost doubling capacity over the next 10 years or less,” he said.

The entity that would be in charge of that expansion is the Egyptian Electricity Holding Company (EEHC). The company’s director Lamya Hady said it was working on updating the network to accommodate the ambitious plans. However, no further details have been released about the timeline beyond the Benban upgrades.

So what happens to this power if the network does not expand on time for these projects to come online? Under the “take it or pay” programme, Egypt has guaranteed that it will pay for the power even if the electricity cannot be fed into the grid for consumption.

Mohamed Hazzaa, a senior associate at the Cairo-based Sharkawy & Sarhan law firm, said that while it was not necessarily the best scenario for the government, at least it was a guarantee for investors. “They still have some time because even the first projects awarded aren’t expected to reach financial close until the end of May or June next year, and from that it will take two years for the construction phase,” he said.

Preparations to install high-voltage substations, including a master plan, feasibility studies and the environmental impact assessment, take about a year.

One grid expert who works for a company previously involved in Egypt’s grid expansion said that even if the EEHC is basing expansion plans based on a previous study conducted in 2008, it would still take more than three years to expand the grid to the levels necessary if everything went without any hiccups. However, that is all dependent on the size of the scale-up, substations and technology applicable to specific areas. He said Egypt would need a large transmission investment.

There is talk that Egypt is in discussions with the European Investment Bank and the French development bank Agence Française de Développement to secure financing for those upgrades. In Benban, all of the investors are sharing the cost of the interconnection of their stations to the grid. However, upgrading the grid to accommodate those added capacities is the job of the government, and right now it may be a wait-and-see policy.​

This continues our series of weekly analysis articles by a rotating group of The National’s beat reporters. LeAnne Graves covers renewable energy