Giant Solar Park in the Desert Jump Starts Egypt's Renewables Push

Electric sun cells face the sun at a solar power of the Benban plant in Aswan, Egypt, November 17, 2019. Picture taken November 17, 2019. (Reuters)
Electric sun cells face the sun at a solar power of the Benban plant in Aswan, Egypt, November 17, 2019. Picture taken November 17, 2019. (Reuters)
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Giant Solar Park in the Desert Jump Starts Egypt's Renewables Push

Electric sun cells face the sun at a solar power of the Benban plant in Aswan, Egypt, November 17, 2019. Picture taken November 17, 2019. (Reuters)
Electric sun cells face the sun at a solar power of the Benban plant in Aswan, Egypt, November 17, 2019. Picture taken November 17, 2019. (Reuters)

Near the southern Egyptian city of Aswan, a swathe of photovoltaic solar panels spreads over an area of desert so large it is clearly visible from space.

They are part of the Benban plant, one of the world’s largest solar parks following completion last month of a second phase of the estimated $2.1 billion development project.

Designed to anchor a renewable energy sector by attracting foreign and domestic private-sector developers and financial backers, the plant now provides nearly 1.5 GW to Egypt’s national grid and has brought down the price of solar energy at a time when the government is phasing out electricity subsidies.

In 2013, Egypt was suffering rolling blackouts due to power shortages at aging power stations. Three gigantic gas-powered stations with a capacity of 14.4 GW procured from Siemens in 2015 turned the deficit into a surplus.

National installed electricity capacity is now around 50 GW and Egypt aims to increase the share of electricity provided by renewables from a fraction currently to 20% by 2022 and 42% by 2035.

“They have plans to bring out renewable energy, private sector invested, across the Red Sea in wind and throughout the deserts for solar power,” said Christopher Cantelmi of the International Finance Corporation (IFC), a lead backer of Benban along with the European Bank for Reconstruction and Development.

The Benban project’s 32 plots were developed by more than 30 companies from 12 countries, including Spain’s Acciona, UAE-based Alcazar Energy, Italy’s Enerray, France’s Total Enren and EDF, China’s Chint Solar and Norway’s Scatec. Developers of the plant, around 40 km (25 miles) northwest of Aswan, are guaranteed a feed-in tariff price for 25 years.

“It really introduced a lot of them to Egypt for the very first time, to project finance and to infrastructure finance,” said Cantelmi.

A third phase at Benban could add more than 300 MW, though nothing has been decided yet, while another large-scale solar development is planned 45 km north of Aswan at Kom Ombo.

Egypt has struggled to attract foreign investment outside the oil and gas sector, despite winning praise for an IMF-backed economic reform program since 2016.

At Benban, developers visited by an IFC team last month raised the issue of a stand-off over a government demand that they collectively pay an extra 1.9 billion Egyptian pounds ($118 million) in infrastructure costs. There had also been some curtailment of supplies to the grid as they waited for new transmission lines to be added.

But operations were generally going well, and the Egyptian Electricity Transmission Company was paying on time, they said.

Brushing machines

Solar irradiation is exceptionally good at Benban and running costs are low, developers say. Upkeep is largely limited to brushing the desert dust from the panels to maximize absorption.

“You don’t need a lot of manpower round here, you only need cleaning machines ... and maintenance, which is not a big amount of people,” said Mohamed Ossama, project head for Egypt’s Taqa Arabia, which has a 50 MW plot.

Benban has brought down the price of solar energy, drawn in dozens of companies, and given Egypt’s south an economic boost, said Mohamed Orabi, professor of power electronics at Aswan University.

However, the plant needed a storage system - still a key technological challenge for solar power that surges during the daytime - in order to stabilize supplies to the grid, he said.

Last year a report from the International Renewable Energy Agency (IRENA) suggested Egypt could be more ambitious in its green energy goals and aim to supply 53% of its electricity from renewables by 2030.

But it said developers could be discouraged by complex administrative procedures, and urged Egypt to review its market framework and develop local manufacturing capacity for renewables.

“The (Benban) project showcases Egypt’s seriousness in doing renewable energy business, especially when most countries in the region have been stalling on this front, with the exception of Jordan and Morocco,” said Jessica Obeid, an energy expert at Chatham House.

“In the next stages, political and policy stability are important, reduction of the complex bureaucratic measures and clear assignments of institutions’ mandates and facilitation of the process will be much needed.”



IMF Forecasts 4% Rebound for MENA Region Next Year

Jihad Azour, the Fund’s director for the Middle East and Central Asia department, at the launch of an IMF Regional Economic Outlook (IMF/File)
Jihad Azour, the Fund’s director for the Middle East and Central Asia department, at the launch of an IMF Regional Economic Outlook (IMF/File)
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IMF Forecasts 4% Rebound for MENA Region Next Year

Jihad Azour, the Fund’s director for the Middle East and Central Asia department, at the launch of an IMF Regional Economic Outlook (IMF/File)
Jihad Azour, the Fund’s director for the Middle East and Central Asia department, at the launch of an IMF Regional Economic Outlook (IMF/File)

The International Monetary Fund (IMF) forecasted on Thursday that growth in the Middle East and North Africa region is expected to rebound to 4% next year, but will hinge on a phase out of oil production cuts and headwinds subsiding, including from conflicts.
The IMF also stated that any discussions to further increase the overall program size in Egypt are premature.
At the launch of the IMF’s latest Regional Economic Outlook, Jihad Azour, the Fund’s director for the Middle East and Central Asia department, told reporters in Dubai that “the economic outlook is fraught with risks.
“Hence, our 2025 forecasts come with important caveats,” he said.
Growth in the region will remain “sluggish” at 2.1% in 2024, lower than earlier projections as geopolitical and macroeconomic factors weigh.
For 2024, growth is projected at 2.1%, a downgrade revision of 0.6% from the April WEO forecast, and this is largely due to the impact of the conflict and the prolonged OPEC+ production cuts.
To the extent that these gradually abate, the IMF anticipates stronger growth of 4% in 2025. However, uncertainty about when these factors will ease is still very high, Azour said.
Meanwhile, the economic growth of MENA oil-exporting countries is expected to increase from 2.3% in 2024 to 4% in 2025, if the voluntary oil output cuts end.
The IMF has estimated that growth among GCC members will reach 8.1% this year, accelerating to 2.4% next year compared to 4.2% and 9.4% in its previous forecast in April. Inflation rates are projected to average 8.1% this year and 9.1% next year.
In MENA emerging markets, growth is also expected to accelerate from 2.4% this year to 3.8% in 2025, assuming a decline in the intensity of conflicts.
Similarly, improved growth in low-income countries (LICs) depends, to a large extent, on the easing of conflict in Sudan, according to Azour.
He explained that the Fund’s forecasts were prepared in mid-September and therefore do not reflect the impact of recent developments in the region.
“We are closely monitoring the situation and assessing the potential economic impacts. Overall, the impact will depend on the severity of any potential escalation,” Azour said.
He noted that the conflict could impact the region through multiple channels.
“Beyond the impact on output, other key channels of transmissions could include tourism, trade, potential refugee and migration flows, oil and gas market volatility, financial markets and social unrest,” Azour added.
He also warned that concern is also high about the possibility of prolonged conflict in Sudan, increased geoeconomic fragmentation, volatility in commodity prices, especially for the oil exporting countries, high debt and financing needs for emerging markets and recurrent climate shocks.
Egypt
Azour said the IMF’s $8 billion program for Egypt is making progress, stating that any discussions to further increase the overall program size are premature.
Asked whether he was confident Egypt would meet its program targets, Azour said that economic conditions in Egypt were expected to improve and that it was too early to discuss any changes to its size.
“The program is moving in the right direction and is gradually achieving its targets, both in terms of growth recovery and gradual decline in inflation, and a normal functioning of the foreign exchange market,” Azour said.
“Building buffers or strengthening the buffers of Egypt is the first line of defense that could help the Egyptian economy withstand any additional external shock,” he said.
Azour also said that Egypt was expected to save almost $800 million over the next six years on the back of recent reforms of the IMF's charges and surcharges policy, which would provide additional support.
The IMF's Egypt team is scheduled to travel to Cairo in November to prepare for the third review of the program. Managing Director Kristalina Georgieva also plans to visit to reaffirm the fund's support for Egypt.