THE SOLAR ENERGY SECTOR IN EGYPT

Transcription

1 SOLAR ENERGY IN EGYPT THE SOLAR ENERGY SECTOR IN EGYPT Produced by In partnership with For

2 Egypt s solar energy market, within the country s wider renewable energy plans, is expected to witness a sustainable growth during the coming decades, driven by (1) firm governmental backing and initiatives and (2) a consistently growing gap between the insufficient supply of power and the fast-growing demand for power. 1. MARKET OVERVIEW Egypt has identified a clear roadmap to boost its power capacity for the next decade, where renewable energy is a major focus. As per data gathered from the Ministry of Electricity & Renewable Energy (Graph 1), the total installed power capacity from solar sources is expected to progress from a negligible 140 MW in 2014 to around 9,500 MW by the year 2022, reflecting a noticeable proliferation of solar-related opportunities for the private sector. When compared to total power generation capacity, solar energy is expected to account for 11% by 2022, compared to only 0.34% in 2015 (Graph 2). GRAPH 1: TOTAL INSTALLED CAPACITY OF SOLAR & WIND (MW) GRAPH 2: SOLAR ENERGY AS A PERCENTAGE OF TOTAL CAPACITY 11,500 9, % Expected Call On Additional Supply: 9,360 MW 33x % F F WIND SOLAR Source: Egyptian Electricity Holding Company, New & Renewable Energy Authority, MENA Research Partners Analysis 1

3 From a historical perspective, the total energy generated from renewable energy reached around 1,444 GWh in 2014/2015, and then stagnated over the past 3 years. The sector had grown at a CAGR of 29.1% between 2008/09 and 2011/12 following the Supreme Council of Energy approval of a plan to increase total energy generated from new and renewable energy. But between 2011/12 and 2012/13, due to the political uprising in Egypt, a decrease of 10% occurred. GRAPH 3: TOTAL ENERGY GENERATED BY NEW & RENEWABLE ENERGY (IN GWH) CAGR 29% 2,004 CAGR -10% 1,704 1,497 STAGNANT 1,446 1, , / / / / / / /2015 Source: Egyptian Electricity Holding Company MENA Research Partners Analysis When put into its wider context, diversifying the power generation mix is a major target for the government and will directly benefit the solar energy industry. As shown in Graph 4, the objective set by Egypt is to reduce its excessive reliance on thermal power from a current 91% to only 57% by 2022, whereby solar and wind will account for 25% of the total power generation capacity. GRAPH 4: POWER GENERATION CAPACITY MIX 1% 8% 15% COAL 25% 3% WIND & SOLAR 91% 57% HYDRO THERMAL Source: Egyptian Electricity Holding Company, Minister, MENA Research Partners Analysis

4 2. ACTIVITY DRIVERS The reasons behind this shift in focus are to be found in the current market misbalances which are leading to regular power shortage throughout the country. According to a recent European Bank for Reconstruction and Development (EBRD) report, the rising demand is driven by the rapidly increasing population, growing urbanization, and the high usage of low-efficiency equipment. These factors have put pressure on the supply of power. This is compounded by the fact that thermal capacity is largely fueled by constantly decreasing domestic oil and gas production. Also, the country is witnessing high generation, transmission & distribution technical losses, stolen energy, limited access in remote areas, ageing installations and poor financial accounts of the state-owned utilities. These factors add to the cost of generating power, which is not covered by existing electricity tariffs. Egypt struggles with natural gas shortages, particularly during the summer months and is typically importing fuel oil and diesel fuel to cover the shortfall. Frequent blackouts in Egypt have resulted. KEY DRIVERS POWER SHORTAGE RISING DEMAND RAPIDLY INCREASING POPULATION GROWING URBANIZATION USAGE OF LOW-EFFICIENCY EQUIPMENT THERMAL CAPACITY FUELED BY DECREASING DOMESTIC OIL & GAS PRODUCTION TRANSMISSION & DISTRIBUTION TECHNICAL LOSSES STOLEN ENERGY POOR FINANCIAL ACCOUNTS COST OF GENERATING POWER NOT COVERED BY ELECTRICITY TARIFFS NATURAL GAS SHORTAGES IMPORTING FUEL OIL & DIESEL FUEL FREQUENT BLACKOUTS 3

5 2.1 ACTIVITY DRIVERS: SHORTAGE OF GAS Egypt is Africa s largest natural gas consumer with 40% of total demand, but the country moved from being a net exporter of natural gas to barely being able to meet domestic demand (Graph 5). As shown in Graph 6, Egypt s natural gas production has been decreasing at a rate of 3.4% during the past 5 years, compared to a progression of demand at a rate of 2.1%. This has come after a period of political instability, economic volatility and severe supply shortages. One of the most pressing crises facing the local economy has been the severe shortage of natural gas which involves supply cuts to factories and frequent electrical outages. GRAPH 5 : THE PRODUCTION & CONSUMPTION OF NATURAL GAS IN EGYPT (BILLION CUBIC METER) GRAPH 6: 5-YEAR CAGR OF PRODUCTION NATURAL GAS & CONSUMPTION NATURAL GAS % 50.0 EXPORTS % PRODUCTION NATURAL GAS CONSUMPTION NATURAL GAS PRODUCTION NATURAL GAS CONSUMPTION NATURAL GAS Source: BP Statistical Review of World Energy 2015, EIA, MENA Research Partners Analysis 4

6 2.2 ACTIVITY DRIVERS: ADEQUATE GEOGRAPHIC LOCATION FOR SOLAR ENERGY Due to its location, topography and climate, Egypt has an average level of solar radiation of between 2,000 to 3,200 kwh per square meter a year, giving it significant potential for utilizing this form of renewable energy. (See Image 1.) Typically the use of renewable energy would reduce air pollution levels and create self-sustaining industries that would diversify regional economies. These considerations encourage leaders to undertake a full review of renewable energy opportunities. IMAGE 1: GLOBAL HORIZON IRRADIATION Source: World Bank Group, MENA Research Partners Analysis 5

7 2.3 ACTIVITY DRIVERS: DECREASING COST OF PRODUCING SOLAR ENERGY OVER THE LONG TERM When taking a historical view on the cost of producing power, solar energy has witnessed a pronounced decreasing trend, as opposed to oil and natural gas which has prices that today are 3 to 4 times higher in real terms than 25 years earlier. As shown in Graph 7, the price of global solar panels has gone from an average of $101 for a solar panel per watt 40 years ago to $0.61. This was accompanied by a rise in solar panel installations, from 2MW to 64,892 MW. GRAPH 7: GLOBAL: PRICE OF SOLAR PANEL VS. SOLAR PANEL INSTALLATION PRICE OF A SOLAR PANEL PER WATT GLOBAL SOLAR PANEL INSTALLATIONS $120 $ ,892 MW 70, , , MEGAWATTS $ ,000 30,000 20,000 10, * 0 Source: Earth Policy Institute/Bloomberg, MENA Research Partners Analysis 6

8 2.4 ACTIVITY DRIVERS: DEMOGRAPHICS & ECONOMICS On the demand side, electricity consumption, as reported in Graph 8, is mainly driven by 2 major components: The residential segment accounts for 45% RESIDENTIAL GRAPH 8: BREAKDOWN OF ELECTRICITY CONSUMPTION IN EGYPT 29% INDUSTRIAL 11% COMMERCIAL 6% GOVERNMENT ENTITIES 4% PUBLIC LIGHTING 4% PUBLIC UTILITIES 45.3% of the total, while the industrial segment accounts for 29.5%. Jointly they represent 75% of total demand. Source: Egyptian Electricity Holding Company, MENA Research Partners Analysis As shown in Graph 9, Egypt s population is expanding rapidly, averaging 2.0% over the long-term. This is compared to only 1.2% on a global scale (Graph 10). In other terms, Egypt is growing 1.7x faster than the world s population. GRAPH 9: EVOLUTION OF EGYPT POPULATION GRAPH 10: POPULATION CAGR CAGR 2.0% % 1.7x 2.0% WORLD POPULATION EGYPT POPULATION Source: IMF, MENA Research Partners Analysis 7

9 On the industrial front, after slowing down during the years 2011 and 2012 following the uprising, the manufacturing base has revived with fast growth and largely gained back its momentum (Graph 11). With growth rates of 5.6% and 5.0% in 2014 and 2015 respectively, it advanced respectively 2.5x and 1.6x faster than the total real GDP. GRAPH 11: REAL GDP GROWTH RATES BY SECTOR 8.2% 7.2% 4.7% 5.3% MANUFACTURING GDP CAGR 3.8% TOTAL GDP CAGR 3.8% 5.6% 5.0% 4.2% 5.1% 1.9% 2.2% 1.0% 2.4% 2.1% 2.2% 3.1% -1.0% Source: Central Bank of Egypt, MENA Research Partners Analysis 8

10 3. GOVERNMENT INCENTIVES In 2008, the Supreme Council of Energy in Egypt announced a renewable energy strategy to diversify the energy sources of production. In 2015, the Ministry of Electricity & Renewable Energy signed a cost-sharing agreement with renewable energy companies through the feed-in tariff system which targets an increase of the energy capacity from solar and wind by Among others, we list in the following illustration (Graph 12) the major parts of the Incentives for the Private Sector: GRAPH 12: INCENTIVES FOR THE PRIVATE SECTOR REDUCING PROJECT RISKS THROUGH SIGNING LONG TERM PPA*, FOR YEAR EXEMPTING ALL RENEWABLE ENERGY EQUIPMENT & SPARE PARTS FROM THE CUSTOMS DUTIES & SALES TAXES MORE THAN 7600 SQUARE KILOMETERS OF DESERT LANDS HAVE BEEN ALLOCATED FOR IMPLEMENTING FUTURE PROJECTS CENTRAL BANK WILL GUARANTEE ALL FINANCIAL OBLIGATIONS OF EETC UNDER THE PPA* ALL PERMITS FOR LAND ALLOCATION ARE ALREADY OBTAINED BY NREA INCENTIVES FOR THE PRIVATE SECTOR APPROVING PRIVATE SECTOR PARTICIPATION THROUGH COMPETITIVE TENDER AND BILATERAL AGREEMENTS INVESTORS WILL BENEFIT FROM SELLING CERTIFICATES OF EMISSION REDUCTION FROM THE PROJECT IMPLEMENTED THE GOVERNMENT OF EGYPT WILL GUARANTEE ALL FINANCIAL OBLIGATIONS UNDER THE PPA* GUARANTEE THE SELLING PRICE FOR ENERGY GENERATED FROM RENEWABLE ENERGY WILL BE IN FOREIGN CURRENCY * POWER PURCHASE AGREEMENT 9 Source: PwC, New & Renewable Energy Authority MENA Research Partners Analysis

11 4. THE OPPORTUNITY FOR PRIVATE SECTOR The below table provides an exhaustive list of many key projects announced in Egypt during the past period. TABLE 1: LIST OF MAJOR RENEWABLE ENERGY PROJECTS (IN ALPHABETICAL ORDER) LOCATION PROJECT INVESTMENT SIZE (in USD mn) Ain Sukhna 2 GW of wind power & Ain Sukhna rotor blade manufacturing facility $ 9,000 Aswan Construction of 39 solar power projects $ 3,000 Aswan Construction of a 50 MW PV plant in Egypt $ 75 Aswan 50 MW solar power plant $ 80 Benban 50MW PV plants in Egypt $ 500 Benban, Aswan and Zafarana 300 MW of solar PV project TBA Benban, Aswan and the Gulf of Suez 1.5 GW of solar power and 500 MW of wind energy capacity $ 3,500 Benban and Zafarana Construction of solar energy sites. $ 600 Benban, Ras Ghareb and the West of Nile 2 solar and wind energy projects $ 490 Borg El Arab Airport Alexandria Solar energy for new terminal $360 Egypt (Countrywide) Solar photovoltaic technology $ 3,500 Egypt (Countrywide) Wind farms with a 2,200 MW $ 2,200 Egypt (Countrywide) The construction of two 50MW wind power plants $ 250 Egypt (Countrywide) New Energy targets investment in Egypt during 4 years $ 56 Gabal El Zeit Largest wind power plant which total installed capacity from wind power is about 750 MW TBA Gabbal El Zayt Two wind farms in Egypt with combined capacity of 160 MW TBA Gulf of Suez 250 MW Wind Farm $ 357 North of Egypt Development of a 50-MW solar project in Egypt $ 100 Qena Installing 70 solar water heaters $ 26 West Nile region 2.2 GW Wind farm $ 2,299 Zafarana 50 MW Zafarana wind farm $ 200 TOTAL $ 26, Source: Ministry Of Electricity and Renewable Energy, news portals, MENA Research Partners Analysis

12 TABLE 2: LIST OF MAJOR KEY PLAYERS LARGE PROJECTS (IN ALPHABETICAL ORDER) COMPANY Access Infra Africa ACWA Power Cairo Solar Desert Technologies Enerray S.p.A. DESCRIPTION Access Infra Africa is actively seeking the development of a portfolio of renewable energy projects in 15 Africa countries with the target of establishing a portfolio of $500 million in renewable energy assets. Access Infra Africa is technology agnostic and focuses on developing affordable and sustainable power assets. ACWA Power is a developer, investor, co-owner and operator of a portfolio of power generation and desalinated water production plants currently with presence in 11 countries. An investment value in excess of USD 32 billion to be delivered on a bulk basis to state utilities and industrial majors on long term off-take contracts under Public-Private-Partnership, Concession and Utility Services Outsourcing models. Cairo Solar is to enable the clients to conserve their energy consumption and produce energy through utilizing Egypt s rich sun radiation. Desert Technologies turn-key design and construction team has over 300MW of photovoltaic experience, from ground-mounted installations to rooftops and solar carports. Enerray S.p.A. is leader in the design, development and management of medium and large photovoltaic systems. The Company delivers turnkey solutions of photovoltaic systems for industrial roofing, shelters, grounds and greenhouses. Hareon Solar Technology Co. Hareon Solar based in Jiangyin, Jiangsu Province, is one of China s largest crystalline silicon solar cell and module producers. Hassan Allam Holding INJAZ INTL. Renewable Energy Services Jinko Solar Kaco New Energy KarmSolar Hassan Allam Holding is one of Egypt s largest and best known construction and property groups, serving customers at home and throughout the region. The company signed agreement with NREA to develop a 50 MW solar power plant in Aswan. INJAZ International is an investment company for renewable energies focused on the development, operation and ownership of renewable energy projects in the Middle East, Africa and closer view within Sub-Sahara markets. JinkoSolar (NYSE: JKS) is a global leader in the solar industry. JinkoSolar distributes its solar products and sells its solutions and services to a diversified international utility, commercial and residential customer base in the world. Kaco New Energy is committed to worldwide regenerative energy, based primarily on solar power. They are among the leading companies globally in all their fields of activity. KarmSolar is a solar technology and integration company that delivers innovative solar solutions to the agricultural, industrial, tourism and business sectors. 11

13 THE SOLAR ENERGY SECTOR IN EGYPT COMPANY DESCRIPTION Lekela Power Lekela Power (Lekela) is a pan-african renewable energy generation platform. Lekela s portfolio of projects consists over 1,340MW at the development and construction stages. It is also pursuing further opportunities across Africa. Modern Company of Real Estate Investment (MCR) Modern Company Is a construction and real estate investment with pure Egyptian capital and is regarded as one of the biggest investment companies in Egypt working in the field of construction and real estate investment. Scatec Solar Scatec Solar develops, builds, operates and owns solar power plants that generate cost-effective, clean and reliable electricity. SolarizEgypt SolarizEgypt designs, installs and commissions grid-connected PV solar power plants. It also offers the option of Operation & Maintenance of the plant, according to customer preference. The company intends to focus on its specialization to become the number one grid-tie PV solar power plant supplier in Egypt for small and large scale applications alike. SunInfinite SunInfinite is a key driver in the sustainable development of the region, by leading the Egyptian renewable energy sector in execution and delivery of effective Solar Energy projects. The company leverages its extensive experience and expertise in solar energy engineering, strong local supply network, and construction projects completion to deliver outstanding EPC services for utility scale PV Projects. Terra Sola Group Terra Sola Ventures is an investor and developer of specialized integrated solar power projects in the MENA region. They help MENA countries realize their energy diversification potential through the development and implementation of efficient and reliable solar power projects. Source: NRE, Solargcc, news portals, MENA Research Partners Analysis 12

14 TABLE 3: LIST OF NRE QUALIFIED COMPANIES - PV CAPACITY OF LESS THAN 500 KW (IN ALPHABETICAL ORDER) COMPANY DESCRIPTION BEE Power Energy Solutions The BEE successfully acquired the certification of The New and Renewable Energy Authority (NREA) as a Solar EPC company. They design, install, commission and maintain solar power plants for Residential, Commercial and Industrial applications. 13 Complete Energy Solutions EGE ERCC Esolar Renewable Energy GRE Systems Hammer Electric S.A.E Infinity Solar Systems Onera Systems Q Energy SOLARSOL Complete Energy Solutions formed a Joint Venture with a German EPC solar energy company and started operations in 2006 where there company has been in the solar energy industry for over 15 years in Europe and completed more than 30 projects vary from 50kW to 15MW. The Company also offers on-grid systems, off-grid systems, solar power pump, hybrid power systems, solar powered pump, hybrid power systems, and solar street lighting. EGE is a subsidiary of 3Brothers Group. It is an advanced engineering company which believes in its mission towards the environment to keep it green, established by experiences of its founders that exceed 40 years in electrical field industry. ERCC is an engineering and consulting firm based in Cairo, Egypt. ERCC focuses on developing renewable energy, and greenhouse gas reduction projects in the Middle East and Africa with the goal of providing sustainable, economic power to communities in the region. Esolar Renewable Energy offers solar energy services in the residential, industrial, and agricultural sectors. Gre Systems provide power using different types of technologies as Solar PV, Wind, and Waste to Energy. Also offering Power Plants, Off Grid Systems, annd Hybrid Systems. Hammer as a major project developer for solar systems, processes an expert engineering team and highly experienced construction team and undertakes all stages of PV project, offers Turn-Key solutions: from initial planning and design, to equipment supply, implementation, and long term management. Infinity Egypt was founded in 2010 as an agent of solar leading company one of the largest solar systems companies around the world. They have become a leading producer of solar power systems and complete solar power solutions. OneraSystems is mainly focusing on providing clean, efficient and reliable energy to be burgeoning business to the population of the Middle East by providing integrated solutions, as well as integrating solar energy sources with, Fuel Cells & Wind Turbines. It provides and compliments MEET with complete solar powered systems, for the Telecommunications, Oils and Utilities sectors. Q Energy is a solar energy providers and specialists in Egypt. Their teams is experienced in the Egyptian Solar Market and equipped with professional expertise and know how. They are providers of Off Grid Solar Cell Systems, On Grid Solar Cell Systems, Solar Water Heaters, UPS Systems, Swimming Pool Heat Pumps and Irrigation Solar Pumps. SOLARSOL provides 360º turnkey solutions amended to each client s individual needs. Their capabilities, expertise, and outstanding partners, with global reputation among the world s top solar companies, enable them to manage all phases of the solar resources deployment, from business development and optimum studies to the full service of construction and subsequent plant operation.

15 COMPANY S.S.G Sun Energy Company (SE) SunSwitch SunWayEgypt Taqat Middle East TEC-MERGE TEPCO UniStar Energy Solutions DESCRIPTION S.S.G is one of the most versatile Egyptian companies and fastest growing through extensive relationships with the best local and international companies, they are the first generation in the field of marketing solar energy. And now in 2015 they supply and install solar energy systems. SE has been working in the solar energy field since 1998 in domestic and industrial applications. Mainly working on closed-loop central solar heating systems, manufacturing Parabolic Solar Cookers, being the local representative of the German Company LORENTZ for Solar Pumping & Solar Tracking Systems and the local distributor for the German Company Steca for the Electronic Devices for The Solar Energy Applications. Lastly, SE is the local representative of the Greece Company DIMAS for the Solar Heaters. SunSwitch is a solar power company. They sell and install PV solar panels and Solar Water Heaters (SWH). SunWayEgypt supplies solar power plants to generate electricity in homes and service facilities, commercial and industrial. Taqat Middle East has been recently incorporated with the aim of satisfying the increasing demand for energy solutions in Egypt. The company was established by the shareholders of Select International by joining their competences and organizational skills together with a team of experienced managers in the field of renewable energy. Select International incorporates a group of companies which combined have grown to be one of the leading Data Science providers in Egypt, Middle East and Africa. Realizing the growing need and importance of solar and renewable energy applications in today s world, TEC-MERGE has expanded its traditional telecom and non-telecom power business lines to focus on solar energy applications in the telecom, industrial, agricultural as well as the residential sectors. TEC-MERGE offers a wide range of competitive products and services related to energy saving and substitution to suit different customer needs in homes and businesses extending to support governments in building and maintaining solar power plants. With over 30 years of experience, specifically since 1979, the Technical Projects Company, TEPCO, has manufactured and supplied the Egyptian and neighboring countries markets with products and solutions for electrical energy transmission and distribution. Such products and systems are suitable for different applications including transmission, distribution, renewable energy generation, infrastructure buildings, industries and many more. UNISTAR was established with a specialization in design and manufactory of electrical devices and equipment, incorporating the latest technologies in all products. After years of development, they reached their current position in providing energy solutions in the following fields: efficient lighting, renewable solar energy & its applications and metering systems. UNISTAR started its focus on solar energy in 2013 working on On & Off Grid Solar Stations, Complete Solar Heating Systems, and Complete Solar Irrigation Systems. Source: NRE, Solargcc, news portals, MENA Research Partners Analysis 14

16 YOUR GATEWAY TO THE SOLAR ENERGY MARKET IN EGYPT THE SOLAR ENERGY SECTOR IN EGYPT 4 6 DECEMBER 2016 CAIRO INTERNATIONAL CONVENTION CENTRE, EGYPT If interested in knowing more about opportunities and exhibiting at Solar-Tec 2016, please contact: info@solartecegypt.com FEATURED PARTICIPANTS AT SOLAR-TEC 2016* * Partial list 15