When the project was prepared in 2009, Electricity demand was growing quite rapidly in Egypt, having increased 7.5 percent a year between FY2003-08. The rapid growth of electricity demand as well as demand for other forms of energy was resulting in a sharp increase in carbon dioxide emissions which were growing at a rate of 7 percent per year since 2000 and were expected to continue to grow at the same rate. As a result, Egypt was ranked as one of the 11 fastest growing greenhouse gas (GHG) emitters. Emissions of carbon dioxide had reached 168 million tons per year by 2007.
The Government took a number of steps to scaling-up renewable energy development, including enactment of new laws and regulations, to assist private wind developers including: a) a special policy for access to land, b) zero customs duties on wind equipment, c) use of the build, own operate (BOO) model for developers, d) power purchase agreements, and e) support with obtaining needed environmental, social and defense clearances.
The project design focused on strategic and transformative role of creating an enabling environment for private sector. The project provided support to the Government’s strategy by addressing some of the key barriers for private sector entry into wind power development.
The support provided under the project includes (a) technical assistance required to undertake upstream preparatory activities including initial wind measurements, prequalification of developers and subsequently advisory services that enabled preparation of robust bidding and contract documents, selection of the developer, and technical operations support with regard to renewable energy integration to the national grid; (b) mitigating of the off-taker risk associated with the power evacuation by financing associated transmission line infrastructure required to evacuate the wind power generated to the national grid; and (c) blended financing (IBRD and Clean Technology Fund [CTF]) to lower the cost of financing.
Egypt has excellent solar resources with electricity generating potential estimated at 73,656 terawatt-hours (TWh), while wind capacity is also quite good with an estimate of 7,200 MW commercially available in the Gulf of Suez Area. As a result of these factors, one of the key pillars of the Government of Egypt’s Energy Strategy is greater reliance on renewable energy sources.
- The Project strengthened the capacity of EETC to develop, negotiate, and operate private RE projects. The Project contributed to increasing private sector participation in wind and solar projects. Furthermore, investments in the transmission infrastructure provided an ‘enabling environment’ by putting in place the requisite infrastructure to evacuate wind power. By the Project Closing date of June 30, 2019, the following key results were achieved: Financial Closure on a private 250 MW wind power plant.
- Projected GHG emission reductions from 750 MW of new wind capacity (target 0.82 million metric tons (MT) of CO2 equivalent reduction including 0.38 million tons from existing government owned plants).
- Direct Project Beneficiaries (target 1,466,422 persons of which 49 percent are women).
- Increase in transmission infrastructure capacity to evacuate 3,000 MW of wind power (GWh equivalent).
Bank Group Contribution
International Bank for Reconstruction and Development financing provided US$70 million of which US$57.8 million were disbursed.
The Clean Technology Fund provided US$ 149.75 million loan (US$ 124.1 million disbursed) and US$0.25 million grant. The European Investment Bank (EIB) provided US$70 million (fully disbursed) and Germany’s Kreditanstalt für Wiederaufbau provided US$ 0.7 million (fully disbursed), in addition to US$450 million contributed by the Government of Egypt (US$380 million disbursed).
The contractual framework that was developed has created interest in the Egyptian wind industry. In addition to the first privately owned 250 MW wind power plant that attained full commercial operations in November 2019, a second 250 MW private Project is under construction, and several proposals with a total capacity of about 1,250 MW, with an equivalent capital investment of about US$1.9billion, have been submitted for consideration.
“All the workshops in the entire neighborhood need a good supply of electricity, or else we will close our doors and let our workers go home,” said Mohsen, the owner of a carpentry workshop in Old Cairo’s Gamaleya neighborhood, which is famous for carpentry.
“Like many Egyptian houses, we cannot live without electricity,” said Samiha, the mother of four children. “Last year’s school exams took place in summer. Thankfully, we had electricity and my children were able to study. No electricity, no educated kids.”