Govt grants renewables companies first licenses to sell directly to private sector, ‘speeding up' electricity liberalization

Mada

20 hours ago

Egypt's government has granted four renewable energy companies permission to contract directly with private industrial consumers in what an informed source described as 'a very big step' toward liberalizing the country's electricity sector.
The deal represents a 'slow transition' toward a free energy market, and will likely encourage more actors to enter the sector, said another source, a senior executive at one of the energy companies included in the government's decision.
Regulatory groundwork for the development has been in place since 2015 alongside plans, recommended by international lenders, to cut subsidies on electricity rates for individual and corporate consumers. But the government has been slow to implement these policies in an already turbulent economic environment.
Both the government and the European Bank for Reconstruction and Development (EBRD), which is providing technical support for the policy, announced the deals in recent weeks.
The Cabinet said it had awarded contracts for the supply of solar and wind power to heavy, exporting industries to Enara and Taqa Arabia, both Egyptian-owned, AMEA, a Dubai-based company, and Neptune Energy.
The providers will be allowed to use state-owned transmission infrastructure via the Egyptian Electricity Transmission Company (EETC) to wheel the power to private-sector consumers: Helwan Fertilizers, Alamein Silicon Products Complex, Ezz Steel, AP Moller (Suez Canal Container Terminal), BEFAR Group and Suez Steel.
The informed source said that the companies had applied for an open bid by EgyptERA and were likely chosen on the basis of their experience and financial position.
The total investments will be worth around US$388 million, the Cabinet said at the end of May, producing around 400 MW.
In exchange for the wheeling services, the private companies will pay EETC the equivalent of around LE0.17 per kWh if they transmit the energy using a High Voltage line, and LE0.0725 if they use the Extra High Voltage line, according to the national electricity regulator, EgyptERA.
'There is talk that the wheeling fee could be updated by EgyptERA because there was a request from EETC to increase it a bit,' according to the informed source.
The rate will not bring major revenues to the EETC in fees The real difference will be felt in the electricity sector's business environment, according to the two industry insiders who spoke to Mada Masr.
Private generation companies were previously able to contract directly with consumers outside of the government-regulated sector. This meant companies were limited to using client premises which are often too small for the necessary infrastructure, capping the potential generation capacity especially for renewable energy, the executive source said.
Now, the source continued, private companies will get to install power stations 'wherever' land is available, and get grid access to transmit power to clients 'wherever they may be.'
The informed source noted that land allocations are yet to happen, however, adding that implementation will still take some time for the four companies.
They described the projects approved as a pilot round, intended 'to set down all these rules, so that future projects are able to follow it as a blueprint.'
But the source noted that there is a direction in government to 'speed up' planned liberalization of the electricity sector in general.
They pointed to the recent approval granted in April for the EETC to be separated from the ministry-owned Egyptian Electricity Holding Company, a measure laid out in a 2015 law to turn the EETC into a sector regulator providing wheeling services to private power generation firms, rather than supplying electricity to consumers itself. The EETC's separation is due to be complete in July, according to state media services.
In the government's announcement, the Cabinet said the policy was intended to stimulate 'private investment and increase the participation of private companies in energy projects' in order to 'to enhance competitiveness' in the sector.
They also framed the step as part of efforts toward green transition and sustainable development.
Egypt currently relies on natural gas, a heavier pollutant than coal, for 79 percent of its power needs.
As Egypt's oil and gas production declined in recent years, the government has been increasingly relying on imported fuel to meet rising domestic consumption.