Egypt Close to Deals on 1GW of Solar and Wind Projects

Wind turbines, which generate renewable energy, are seen on the Zafarana Wind Farm at the desert road of Suez outside of Cairo, Egypt September 1, 2020. Picture taken September 1, 2020. (Reuters)
Wind turbines, which generate renewable energy, are seen on the Zafarana Wind Farm at the desert road of Suez outside of Cairo, Egypt September 1, 2020. Picture taken September 1, 2020. (Reuters)
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Egypt Close to Deals on 1GW of Solar and Wind Projects

Wind turbines, which generate renewable energy, are seen on the Zafarana Wind Farm at the desert road of Suez outside of Cairo, Egypt September 1, 2020. Picture taken September 1, 2020. (Reuters)
Wind turbines, which generate renewable energy, are seen on the Zafarana Wind Farm at the desert road of Suez outside of Cairo, Egypt September 1, 2020. Picture taken September 1, 2020. (Reuters)

COP27 host Egypt is close to signing final agreements to build two wind and solar projects with combined capacity of a gigawatt (GW) to boost the country's lagging renewable power development. 

High levels of solar irradiation, strong winds and expanses of desert in which to construct plants mean Egypt has vast renewable potential, industry players say. 

The government has brought forward a goal of producing 42% of its power generation from renewables to 2030 from 2035, but missed a target of 20% for this year. 

The two new projects, with a combined cost of over $1 billion, are both backed by the International Finance Corporation (IFC), which approved them at board level last week, Vivek Pathak, IFC's head of climate business, said. 

They are under negotiation and should be finalized soon, though the exact date was unclear, he said in an interview on the sidelines of COP27 in Sharm el-Sheikh. 

One is for a 500 megawatt (MW) solar plant near the southern Egyptian city of Aswan, an area already home to one of the world's largest solar parks, to be developed by Dubai-based AMEA Power, according to a disclosure on the IFC website. 

The other is a 500MW wind plant to be built by a consortium owned by AMEA Power and Japan's Sumitomo Corporation near Ras Ghareb on the Red Sea coast of the Gulf of Suez. 

In the run up to COP27 and during the summit, Egypt has announced renewable energy deals, including memoranda of understanding with Emirati firm Masdar and Egypt's Infinity for a 10GW wind plant, and with Saudi Arabia's ACWA power for another 10GW plant. 

It has also signed framework agreements for nine green hydrogen projects in the Suez Canal Economic Zone. 

Egypt has 6.8GW of installed wind, solar and hydro power, and aims to raise renewables capacity to 10GW by the end of 2023, said Ahmed Mohamed Mohina, a senior official at Egypt's electricity and renewable energy ministry. 

The country had spent $7 billion adapting its grid in the last seven years and was studying a "green corridor" of power lines to transmit renewable energy, he said. 

However, the share of non-hydro renewable power in Egypt's total energy mix was just 5% 2021, well below potential, the World Bank said in a report published this month. 

Renewable energy generation had been hampered by price distortions after Egypt doubled its installed power capacity to nearly 59GW between 2014 and 2021, creating a surplus mainly through the installation of giant gas-powered plants, the report said. 

One of the obstacles was that even after power purchasing agreements were agreed, negotiations over tariffs in Egypt could delay projects, said Chris Antonopoulos, CEO of Lekela, which operates the West Bakr wind farm on the Red Sea coast. 

"Everyone knows that the natural resources there are so great in Egypt that there is much more competition than in other places," he said, adding that wind speeds of 9-11 meters per second in the Gulf of Suez were exceptionally high. 

Earlier this year, the government introduced grid integration fees for solar plants producing more than 500KW of power. Despite pushing the limit to 1MW a few months later, some in the industry said the fees posed a major challenge to large-scale projects. 

Mohina said the fees were needed to help adapt the grid to be able to absorb more renewable power. 



China’s Economy Meets Official Growth Target, but Many Feel a Downturn

 People shop around at a market in Beijing, Thursday, Jan. 16, 2025. (AP)
People shop around at a market in Beijing, Thursday, Jan. 16, 2025. (AP)
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China’s Economy Meets Official Growth Target, but Many Feel a Downturn

 People shop around at a market in Beijing, Thursday, Jan. 16, 2025. (AP)
People shop around at a market in Beijing, Thursday, Jan. 16, 2025. (AP)

China's economy matched the government's ambitions for 5% growth last year, but in a lopsided fashion, with many people complaining of worsening living standards as Beijing struggles to transfer its industrial and export gains to consumers.

The unbalanced growth raises concerns that structural problems may deepen further in 2025, when China plans a similar growth performance by going deeper into debt to counter the impact of an expected US tariff hike, potentially as soon as Monday when Donald Trump is inaugurated as president.

China's December data showed industrial output far outpacing retail sales, and the unemployment rate ticking higher, highlighting the supply-side strength of an economy running a trillion-dollar trade surplus, but also its domestic weakness.

The export-led growth is partly underpinned by factory gate deflation which makes Chinese goods competitive on global markets, but also exposes Beijing to greater conflicts as trade gaps with rival countries widen. Within borders, falling prices have ripped into corporate profits and workers incomes.

Andrew Wang, an executive in a company providing industrial automation services for the booming electrical vehicle sector, said his revenues fell 16% last year, prompting him to cut jobs, which he expects to do again soon.

"The data China released was different from what most people felt," Wang said, comparing this year's outlook with notching up the difficulty level on a treadmill.

"We need to run faster just to stay where we are."

China's National Bureau of Statistics and the State Council Information Office, which handles media queries for the government, did not immediately respond to questions about the doubts over official data.

If the bulk of the extra stimulus Beijing has lined up for this year keeps flowing towards industrial upgrades and infrastructure, rather than households, it could exacerbate overcapacity in factories, weaken consumption, and increase deflationary pressures, analysts say.

"It seems dubious that China precisely hit its growth target for 2024 at a time when the economy continues to face tepid domestic demand, persistent deflationary pressures, and flailing property and equity markets," said Eswar Prasad, trade policy professor at Cornell University and a former China director at the International Monetary Fund.

"Looking ahead, China not only faces significant domestic challenges but also a hostile external environment."

'UNEASE'

Chinese exporters expect higher tariffs to have a much greater impact than during Trump's first term, accelerating a reshoring of production abroad and further shrinking profits, hurting jobs and private sector investment.

A trade war 2.0 would find China in a much more vulnerable position than when Trump first raised tariffs in 2018, as it still grapples with a deep property crisis and huge local government debt, among other imbalances.

So far, Beijing has pledged to prioritize domestic consumption in this year's policies, but has revealed little apart from a recently-expanded trade-in program that subsidizes purchases of cars, appliances and other goods.

China gave civil servants their first big pay bump in a decade, although the higher estimates measure the overall increase at roughly 0.1% of GDP. Financial regulators got steep wage cuts, as have many others in the private sector.

For Jiaqi Zhang, a 25-year-old investment banker in Beijing, 2024 felt like a downturn, having seen her salary trimmed for a second consecutive year, bringing the total reduction to 30%. Eight or nine of her colleagues lost their jobs, she said.

"There is a general feeling of unease in the company," said Zhang, who has cut back on buying clothes and dining out. "I'm ready to leave at any time, just that there's nowhere to go right now."

SCEPTICISM

The world's second-largest economy beat economists' 2024 forecast of 4.9% growth. Its fourth-quarter 5.4% pace was the quickest since early 2023.

"China's economy is showing signs of revival, led by industrial output and exports," said Frederic Neumann, chief Asia economist at HSBC.

But the last-minute bounce in growth may already have been flattered by front-loading of shipments to the US ahead of any new tariffs, which will inevitably lead to a pay-back, he said.

"There will be an even bigger need to apply domestic stimulus" this year, Neumann said.

China and Hong Kong shares rose slightly, but the yuan lingered near 16-month lows, under pressure from sliding Chinese bond yields and the tariff threat.

Subdued markets reflect wavering confidence in China's outlook, analysts said.

Beijing has rarely missed its growth targets. The last time was in 2022 due to the pandemic.

"Are investors around the world going to invest in China because they hit 5%? No," said Alicia Garcia-Herrero, chief economist for Asia Pacific at Natixis, who expects slower 2025 growth. "So it's becoming an irrelevant target."

Also, long-standing skepticism about the accuracy of official data has shifted into higher gear over the past month.

A bearish commentary by Gao Shanwen, a prominent Chinese economist who spoke of "dispirited youth" and estimated that GDP growth may have been overstated by 10 percentage points between 2021 and 2023, vanished from social media after going viral.

In a Dec. 31 note, Rhodium Group estimated that China's economy only grew 2.4%-2.8% in 2024, pointing to the disconnect between relatively stable official figures throughout the year and the flood of stimulus unleashed from about the mid-way mark.

This included May's blockbuster property market package, the most aggressive monetary policy easing steps since the pandemic in September and a 10 trillion yuan ($1.36 trillion) debt package for local governments in November.

"If China's actual growth is below headline rates, it suggests there is a broader problem of China's domestic demand that is contributing to global trade tensions," Rhodium partner Local Wright told Reuters.

"Overcapacity would be a far less pressing issue if China's economy was actually growing at 5% rates."