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Developments Relating to Solar Ener

Developments Relating to Solar Energy in Egypt
Following several recent developments regarding Egypt’s energy sector and energy production, it appears that renewable energy – and solar energy in particular – are becoming key focus areas for both the government and for investors. On 27 October 2014, the Prime Minister issued a decree outlining the values of new feed-in tariffs for solar and wind energy, which set the prices at which the Egyptian government is willing to purchase electricity generated by renewable technologies (the "Decree").[1] Prior to that, the government allocated more than 11,400 feddans1 for the establishment of solar energy plants. These recent amendments mean that investment in renewable energy may become more viable and attractive for investors. The impending auction for the supply of around 2.3GW capacity of solar energy, and 2GW of wind energy, is only the beginning of an ambitious government plan to auction the supply of up to 30GW capacity to investors over the next 10 years, according to the Minister of Investment. By comparison, the total amount of installed electricity capacity in 2006 was 18GW.  These are positive signs, and reflect the commitment undertaken in Article 32 of the 2014 Egyptian Constitution, which states: “The State shall make the best use of renewable energy sources, motivate investment therein, and encourage relevant scientific research”.
New Power Plants and Feed-in Tariffs
The government has recently shown greater commitment to invest in and regulate the field of alternative energy. On 28 August, a Presidential Decree designated 8,843 feddans west of the desert road between Cairo and Aswan for the New and Renewable Energy Authority ("NREA") and the Ministry of Electricity and Renewable Energy ("MOEE"), to be utilized in the development of solar energy stations.[2] On 25 September, the President issued another Decree designating a further 3,621 feddans near Komombo in the Aswan governorate for the same purpose.[3]  These stations will either be established by the same public bodies, or will be subject to a bidding process for private investors, according to the regulations to be set by the Cabinet of Ministers. Opening the door for private investors represents a shift in policy, at least with regards to some plots which were designated in previous decisions but were exclusively placed under the mandate of the NREA (for example the lands near Komombo). More importantly, on 20 September, a few days before the announcement of the Komombo projects, the Minister of Electricity announced the values of new feed-in tariffs for renewable energy generation in a press conference. This took legal form a month later – on the 27th of October - through a decree by the Prime Minister on 27 October. The newly applicable tariffs are meant to attract both investors and home-owners; anyone investing in renewable energy, particularly solar energy, will be able to accurately calculate expected returns on potential investments. In the same conference, the Minister stated the government’s intention of increasing investment in solar and wind technology, with the aim of generating up to 4300 MW, with 2300 MW designated specifically to solar energy. The feed-in tariff system works as follows: a household or entity will install a solar energy generating system (solar panels). These solar panels will generate electricity that is then fed-in to the electricity grid. To incentivise the installation of such technology and make the uptake of solar energy more attractive, the government will buy the electricity generated for a price (see below). The electricity generated is not fed-in directly into the house or other construction. Households will continue paying their normal energy consumption bills. However, as the government will be purchasing the electricity being generated and fed-in to the grid, it is possible for households to be energy self-sufficient, meaning that the value of electricity purchased will break-even with the value of energy bills, or generate profit. In line with the Prime Minister’s Decree, the government will now purchase electricity generated from solar energy at a maximum price of 14.34 cents (USD) per KW for 20-50 MW of production. The prices for solar energy have been divided into five bands, with the price increasing in correlation to the size of the solar energy project, in order to incentivise investment in larger projects and to make these projects more cost-efficient.
  • EGP 0.848 per KW for electricity produced by households;
  • EGP 0.901 per KW for 200 KW of production;
  • EGP 0.973 per KW for 200-500KW of production;
  • 6 cents (USD) per KW for 500KW-20MW of production;
  • 34 cents (USD) per KW for 20-50MW of production.
While the government has set the upper limit for energy generation projects at 50MW, it will consider applications for larger projects. Furthermore, the government has announced its intention to subsidise investments by private companies in solar energy projects through loans from the Ministry of Finance, at a 4% interest rate.
Background
Several donor-funded solar energy projects have already been established in Egypt, but large-scale implementation is still missing. It is estimated that solar energy currently makes up less than 1% of Egypt’s energy supply, with that figure expected to increase to around 2% by 2020, which is still a relatively low figure considering that renewable energy is intended to make up 20% of the country’s supply by then, with more emphasis on wind energy and biomass.
Legal and Institutional Framework of the Solar/Renewable Energy Sector
From a legal perspective, the regulatory framework currently in place with regards to solar energy is limited and is in need of further development. The Egyptian Electric Utility and Consumer Protection Regulatory Agency ("EEUCPRA"), commonly referred to as "EgyptERA", is the general regulatory body for the electricity sector in Egypt, while renewable energy is the domain of the New and Renewable Energy Authority ("NREA"), established by Law 102/1986, and operating under the supervision of the Ministry of Electricity and Renewable Energy. As the general regulator for all electricity matters, EgyptERA oversees all production, transmission, and distribution of electricity in Egypt. Presidential Decree No 339/2000 reorganised EgyptERA, which is overseen by the Minister of Electricity and Energy. EgyptERA’s mandate covers the supervision of the electricity industry, the review of electricity usage, the setting of guidelines regarding electricity usage, the licensing of companies producing, transmitting, and distributing electricity as well as ensuring fairness, competitiveness, and the financial security of the electricity sector. Notably, Presidential Decree No. 339 of 2000 lacks any provisions on renewable energy. Renewable energy remains within the domain of the NREA, which is responsible for the research and development of new and renewable energy in Egypt in general. It is also responsible for the implementation of government projects in this field, as well as providing consultations on projects to be undertaken, training personnel, and setting technical requirements. Interestingly, there is no Authority dedicated specifically to the promotion of solar energy, despite there being separate Authorities for Nuclear Materials, Nuclear Power Plants, Atomic Energy, and Hydro-Power Projects. In 2008, Egypt was close to instituting a legal framework for the electricity sector; a Draft Unified Electricity Law was compiled with the intention of solving the variety of outstanding issues facing Egypt, including providing guidelines for the development of the renewable energy sector. It was anticipated that the Draft Unified Electricity Law would be deliberated before the 2011 Egyptian Parliament, but following political upheaval it was shelved for more pressing matters. The time may be ripe for the introduction of such law now.   [1] Prime Minister’s Decree No. 1947/2014 on Purchase Prices of Electricity Generated by Renewable Technologies, Official Gazette, Issue No. 43 (bis) (c), 27 October 2014 . [2] Presidential Decree No. 274/2014 designating 8,843 feddans for the New and Renewable Energy Authority, Official Gazette, Issue No. 35, 28 August 2014. [3] Presidential Decree No. 320/2014, Official Gazette designating 3,621 feddans for the New and Renewable Energy Authority, Official Gazette, Issue No. 39, 25 September 2014.
Following several recent developments regarding Egypt’s energy sector and energy production, it appears that renewable energy – and solar energy in particular – are becoming key focus areas for both the government and for investors. On 27 October 2014, the Prime Minister issued a decree outlining the values of new feed-in tariffs for solar and wind energy, which set the prices at which the Egyptian government is willing to purchase electricity generated by renewable technologies (the "Decree").[1] Prior to that, the government allocated more than 11,400 feddans1 for the establishment of solar energy plants. These recent amendments mean that investment in renewable energy may become more viable and attractive for investors. The impending auction for the supply of around 2.3GW capacity of solar energy, and 2GW of wind energy, is only the beginning of an ambitious government plan to auction the supply of up to 30GW capacity to investors over the next 10 years, according to the Minister of Investment. By comparison, the total amount of installed electricity capacity in 2006 was 18GW.  These are positive signs, and reflect the commitment undertaken in Article 32 of the 2014 Egyptian Constitution, which states: “The State shall make the best use of renewable energy sources, motivate investment therein, and encourage relevant scientific research”.
New Power Plants and Feed-in Tariffs
The government has recently shown greater commitment to invest in and regulate the field of alternative energy. On 28 August, a Presidential Decree designated 8,843 feddans west of the desert road between Cairo and Aswan for the New and Renewable Energy Authority ("NREA") and the Ministry of Electricity and Renewable Energy ("MOEE"), to be utilized in the development of solar energy stations.[2] On 25 September, the President issued another Decree designating a further 3,621 feddans near Komombo in the Aswan governorate for the same purpose.[3]  These stations will either be established by the same public bodies, or will be subject to a bidding process for private investors, according to the regulations to be set by the Cabinet of Ministers. Opening the door for private investors represents a shift in policy, at least with regards to some plots which were designated in previous decisions but were exclusively placed under the mandate of the NREA (for example the lands near Komombo). More importantly, on 20 September, a few days before the announcement of the Komombo projects, the Minister of Electricity announced the values of new feed-in tariffs for renewable energy generation in a press conference. This took legal form a month later – on the 27th of October - through a decree by the Prime Minister on 27 October. The newly applicable tariffs are meant to attract both investors and home-owners; anyone investing in renewable energy, particularly solar energy, will be able to accurately calculate expected returns on potential investments. In the same conference, the Minister stated the government’s intention of increasing investment in solar and wind technology, with the aim of generating up to 4300 MW, with 2300 MW designated specifically to solar energy. The feed-in tariff system works as follows: a household or entity will install a solar energy generating system (solar panels). These solar panels will generate electricity that is then fed-in to the electricity grid. To incentivise the installation of such technology and make the uptake of solar energy more attractive, the government will buy the electricity generated for a price (see below). The electricity generated is not fed-in directly into the house or other construction. Households will continue paying their normal energy consumption bills. However, as the government will be purchasing the electricity being generated and fed-in to the grid, it is possible for households to be energy self-sufficient, meaning that the value of electricity purchased will break-even with the value of energy bills, or generate profit. In line with the Prime Minister’s Decree, the government will now purchase electricity generated from solar energy at a maximum price of 14.34 cents (USD) per KW for 20-50 MW of production. The prices for solar energy have been divided into five bands, with the price increasing in correlation to the size of the solar energy project, in order to incentivise investment in larger projects and to make these projects more cost-efficient.
  • EGP 0.848 per KW for electricity produced by households;
  • EGP 0.901 per KW for 200 KW of production;
  • EGP 0.973 per KW for 200-500KW of production;
  • 6 cents (USD) per KW for 500KW-20MW of production;
  • 34 cents (USD) per KW for 20-50MW of production.
While the government has set the upper limit for energy generation projects at 50MW, it will consider applications for larger projects. Furthermore, the government has announced its intention to subsidise investments by private companies in solar energy projects through loans from the Ministry of Finance, at a 4% interest rate.
Background
Several donor-funded solar energy projects have already been established in Egypt, but large-scale implementation is still missing. It is estimated that solar energy currently makes up less than 1% of Egypt’s energy supply, with that figure expected to increase to around 2% by 2020, which is still a relatively low figure considering that renewable energy is intended to make up 20% of the country’s supply by then, with more emphasis on wind energy and biomass.
Legal and Institutional Framework of the Solar/Renewable Energy Sector
From a legal perspective, the regulatory framework currently in place with regards to solar energy is limited and is in need of further development. The Egyptian Electric Utility and Consumer Protection Regulatory Agency ("EEUCPRA"), commonly referred to as "EgyptERA", is the general regulatory body for the electricity sector in Egypt, while renewable energy is the domain of the New and Renewable Energy Authority ("NREA"), established by Law 102/1986, and operating under the supervision of the Ministry of Electricity and Renewable Energy. As the general regulator for all electricity matters, EgyptERA oversees all production, transmission, and distribution of electricity in Egypt. Presidential Decree No 339/2000 reorganised EgyptERA, which is overseen by the Minister of Electricity and Energy. EgyptERA’s mandate covers the supervision of the electricity industry, the review of electricity usage, the setting of guidelines regarding electricity usage, the licensing of companies producing, transmitting, and distributing electricity as well as ensuring fairness, competitiveness, and the financial security of the electricity sector. Notably, Presidential Decree No. 339 of 2000 lacks any provisions on renewable energy. Renewable energy remains within the domain of the NREA, which is responsible for the research and development of new and renewable energy in Egypt in general. It is also responsible for the implementation of government projects in this field, as well as providing consultations on projects to be undertaken, training personnel, and setting technical requirements. Interestingly, there is no Authority dedicated specifically to the promotion of solar energy, despite there being separate Authorities for Nuclear Materials, Nuclear Power Plants, Atomic Energy, and Hydro-Power Projects. In 2008, Egypt was close to instituting a legal framework for the electricity sector; a Draft Unified Electricity Law was compiled with the intention of solving the variety of outstanding issues facing Egypt, including providing guidelines for the development of the renewable energy sector. It was anticipated that the Draft Unified Electricity Law would be deliberated before the 2011 Egyptian Parliament, but following political upheaval it was shelved for more pressing matters. The time may be ripe for the introduction of such law now.   [1] Prime Minister’s Decree No. 1947/2014 on Purchase Prices of Electricity Generated by Renewable Technologies, Official Gazette, Issue No. 43 (bis) (c), 27 October 2014 . [2] Presidential Decree No. 274/2014 designating 8,843 feddans for the New and Renewable Energy Authority, Official Gazette, Issue No. 35, 28 August 2014. [3] Presidential Decree No. 320/2014, Official Gazette designating 3,621 feddans for the New and Renewable Energy Authority, Official Gazette, Issue No. 39, 25 September 2014.