Egyptian Wind – Private Sector Begins to Blow

Wind EnergyIn February 2008, the Egyptian Supreme Council of Energy approved an ambitious plan to produce 20% of total electricity from renewable energies by 2020, including a 12% contribution from wind energy. This translates into more than 7,200 MW of grid-connected wind farms. The plan gives enough room for private investors to play a major role in realizing this goal, and the government anticipates that about 400 MW/year will be undertaken by the private sector, while the NREA will carry out about 200 MW/year.

In April 2009 the Egyptian government held its first ever tender on a BOO basis for 250 MW.  Seventy-two companies submitted offers and in November ten companies were shortlisted. The project developer will be required to design, finance, construct, own and operate the power plant for 20 years. The power produced would be sold to the Egyptian Electricity Transmission Company.

In August 2009 the Electricity Ministry told Reuters that they will allocate 1.5 million feddans (630,000 hectares) of government land in Upper Egypt for wind farms. The land will be in the provinces of Beni Suef, Minya, and Assiut.

In November 2009 Egyptian Minister for Electricity and Energy Hassan Younes visited India to promote foreign investment into Egypt’s wind sector. He visited wind sites around Chennai and mentioned that Egypt will likely reduce import duties on renewable energy equipment from 2% to 0%.

Dr. Younes, who met Minister for New and Renewable Energy Farooq Abdullah and Minister of State for Power Bharatsinh Solanki in New Delhi, said India and Egypt would shortly sign a memorandum of understanding to encourage cooperation in renewable energy. Dr. Abdullah agreed to visit Egypt in February, and the proposed agreement is expected to be signed at that time.

Younes, accompanied by Egypt’s Ambassador to India Mohamed Higazy, visited the Centre for Wind Energy Technology at Pallikkaranai and the facilities of the wind energy technology firm Vestas India at Sholinganallur and the Sanmar Engineering Group at Karapakkam.

History of the Egyptian Wind Industry

In early 1980’s the Egyptian Ministry of Electricity & Energy formulated its national strategy for New and Renewable Sources of Energy (NRSE) as an integral part of its global energy strategy. The strategy targeted renewables to supply 5% of the country’s total primary needs by the year 2005. Priority was given to wind, solar and biomass.

The New & Renewable Energy Authority (NREA) was set up in 1986, with the establishment of testing & certification laboratories and personnel training. The practical work of NREA began with assessing renewable energy resources and investigating the choices of different technologies through studies and pilot projects, as well as introducing some of these technologies to the Egyptian market and supporting the initiatives of local industry.

Wind energy was at the top of NREA priorities due to the results of the 1991-1995 national wind resource assessment program that collected data from 65 measuring stations. The program indicated abundant wind energy potential along the western coast of the Gulf of Suez totaling 20,000 MW. The north coast of Egypt and south Sinai showed the potential for an additional 80,000 MW at East Oweinat and Gelf Ridge.

Egypt cooperated with Denmark to produce a Wind Atlas, issued in 1996, for the Gulf of Suez west coast. In 2005, a detailed wind atlas for Egypt was issued by NREA, in collaboration with the Egyptian Meteorological Authority (EMA) and RISØ National Laboratory (Denmark).

Large Scale Wind Energy Development Plans – Zafarana 545 MW

By 1997 Egypt had crossed the phase of limited experimental projects to the phase of grid connecting large scale wind farms. A presidential decree allocated an area of 80 km² on the Gulf of Suez at the Zafarana site (approximately 200 km south east of Cairo on the Red Sea) for the NREA as institutional support and governmental commitment to the wind energy program.

In 1998 the Egyptian wind program was established and Zafarana was selected as the location with an initial target of 600 MW by 2005. It was to be built in successive phases with each phase being 60 MW. NREA planned to finance 300 MW from the state budget, while the private sector, local and foreign investors were encouraged to finance the other 300 MW based on the Build, Own and Operate (BOO) system.

The government felt that wind projects would be cheaper if owned by NREA, since NREA could have longer term loans, no debt-service coverage ratio (DSCR) requirements, lower cost debt and lower IRR expectations than private developers.

In late1998 the government signed a contract with the Danish government for the first 30 MW of large scale wind projects at Zafarana. 60 MW was agreed with the Danish development agency DANIDA to be built in two phases of 30 MW each. The second 30 MW phase was contracted in December 1999.

In May 1999, 80 MW was agreed with the German Development Bank, KfW to be built in two phases. The first phase of 33 MW was contracted in 1999 and the second phase of 47 MW was contracted in 2000.

Later 85 MW was developed and financed in co-operation with Spain.

In 2003 Japan joined the Zarafana project, providing the equivalent of US$135 million in yen loans and providing logistics, construction expertise and consulting services to build 142 wind turbines. Japan’s ODA contribution alone will help save 250,000 tons in CO2 emissions each year.

In 2005 four companies qualified for the 85 MW Phase V with Vestas and Gamesa in the final four.  In 2008 the Japanese brought 55 MW online and an additional 65 MW began operations in 2009, bringing the total installed capacity to 450 MW.

The Danish expect to bring 120 MW online in 2010. All in all, Zafarana will host 545 MW of grid connected wind power, to become the largest wind farm in Africa and the Middle East.

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