Egypt rushes to catch up on solar energy as gas prices soar

With few clouds, vast empty deserts and a well-developed electricity grid, Egypt has all the elements for a huge expansion in solar power generation. But it is only now moving to exploit them, after the cost of natural gas imports jumped.

A sharp decline in domestic gas production combined with growing consumption caught authorities off-guard last year and led to rolling blackouts over the sweltering summer.

"It has been a big wake-up call, and this is the reason why the government recently announced a big emergency package," said Ahmed Mortada, head of energy in Egypt for multilateral lender the European Bank for Reconstruction and Development (EBRD).

Egypt had to fork out over $1 billion more than it had expected for imported liquefied natural gas (LNG) last year and analysts estimate it will spend billions more in 2025.

Solar companies say they can supply electricity much cheaper than that generated by gas turbines, using inexpensive panels from China, but complain that market-distorting power subsidies and restrictive regulations have frustrated rollouts.

"God has blessed Egypt with really good solar resources, and very good land resources," Hussain Al Nowais, chairman of United Arab Emirates-based renewables energy producer AMEA Power, told reporters in December.

NEW PROJECTS

AMEA inaugurated a $500 million, 500 megawatt solar array in Aswan, 650 km south of Cairo, last month and plans to build a second, 1,000 megawatt plant nearby.

It will advance $300 million of its own funds so it can start constructing the new plant before a final financing deal is worked out by around May, said Nowais, who expects production there to begin by the first quarter of 2026.

Electricity produced at AMEA solar plants would cost between two and three U.S. cents per kilowatt hour, Nowais said, adding: "Definitely it will be cheaper than a gas plant."

The cost of electricity from gas turbines is hard to measure because it is distorted by layers of subsidies, according to people in the power industry, but one producer estimated the cost of production at seven to nine cents per kilowatt hour.

State oil company EGPC buys gas from local producers at less than market price, then sells it to power stations at a further discount. State distributors sell electricity to the final consumer at lower prices again, even after charges for some households were hiked by up to 50% last year.

AMEA is one of three producers planning large solar arrays to feed electricity directly into Egypt's energy grid.

Norway-based Scatec signed an agreement in September for a 1,000 megawatt project, while a consortium of UAE companies Infinity and Masdar and Egypt's Hassan Allam signed an agreement in November to generate 1,200 megawatts of power.

But Egypt is likely to need thousands more megawatts of additional capacity to meet demand in coming years, Nowais said.

OBSTACLES

Industry insiders say one reason for Egypt's slow shift to solar is that different government departments each have little incentive to focus on the overall cost of energy.

"The problem with Egypt is that it is a bunch of islands. There's no centralised approach where the ministers are coordinating," said Yaseen AbdelGhaffar of SolarizEgypt, which provides solar power mainly to private businesses.

In early 2024, the government enacted a private-to-private law that allows power producers to provide electricity to businesses such as factories, although initially it will only accept 500 megawatts' worth of projects countrywide.

Prime Minister Mostafa Madbouly said in November that Egypt aimed to increase the share of renewables in its electricity mix to 42% by 2030, compared with 11.5% generated by solar, wind and hydropower now.

The government is looking for international support to strengthen the grid and extend it to sites producing solar energy, and the EBRD is discussing how to help, Mortada said.

As renewable energy comes onstream, Egypt plans to gradually close its older and less efficient power plants.

Another obstacle to the solar rollout is a regulation that restricts domestic consumers, who in Egypt's cities mainly live in apartments, from installing two-way electricity meters unless they own their entire building. The meters would let them supply the grid as well as buy from it.

Industry sources say the government has not prioritised proposals to change this rule.

Ayman Rasekh, CEO of installer SolarSol, which serves homes and businesses, estimated that solar will become economical for home consumers when the price of electricity from the state grid rises above three or four Egyptian pounds per kilowatt hour.

Richer households pay 2.35 Egyptian pounds ($0.0462) per kilowatt hour for their electricity at present.

Egypt's $8 billion financial support deal with the International Monetary Fund, signed last March, includes a pledge to reduce energy subsidies, after it repeatedly postponed electricity price hikes amid an economic crisis.

"When the government takes out the electricity subsidies you are going to see solar panels on rooftops like you now see satellite dishes," Rasekh said.