Financing Energy Efficiency and Renewable Energy Projects in Egypt
| DOI | http://doi.org/10.1111/1758-5899.12217 |
| Published date | 01 November 2015 |
| Date | 01 November 2015 |
| Author | Mohamed Mansour |
Financing Energy Efficiency and Renewable
Energy Projects in Egypt
Mohamed Mansour
Climate Finance Expert
Once a net exporter of oil and gas, Egypt is now strug-
gling to meet its own energy needs as a result of
increasingly high energy consumption. The growth in
energy consumption is mainly a response to the coun-
try’s economic expansion, population growth, industriali-
zation and a change in people’s lifestyle.
1
In addition,
Egypt is not efficiently using its energy resources for eco-
nomic production as it shows the highest greenhouse
gas emissions per GDP in the Middle East and North
Africa (MENA) region (measured by million tons per
annum/$ billion) as well as the highest primary energy
consumed per GDP in the region (close to double the
world average).
2
Egypt’s current energy mix consists of 53 per cent nat-
ural gas, 41 per cent oil, 3 per cent hydroelectric, 2 per
cent coal and 1 per cent renewable energy (RE) (i.e. wind
and solar). The Egyptian Ministry of Electricity and Energy
(MoEE) along with the New & Renewable Energy Authority
(NREA) have announced in 2014 an ambitious energy sec-
tor policy which seeks to diversify energy resources,
improve energy efficiency (EE) and energy conservation
programs, and increase the share of RE in the energy mix
to 20 per cent by 2020.
3
Financing such a shift towards a greener economy
requires increased capital allocation towards clean energy
investments (both in terms of RE and EE) driven by eco-
nomically feasible projects that take into account the
country’s growing energy needs. In order to quantify the
approximate amount of financing that would be required
to meet this target, one can assume $2 million/Mega
Watts installed of RE (20 per cent of 45k MW by 2020)
equating to c.$18 billion as well as EE projects to reduce
Egypt’s energy consumption ($1.5 million/MW and 30
per cent efficiency gains on 33k MW) of c.$15 billion, for
a total required investment of c.$33 billion in today’s
prices.
The aim of this commentary is to review the opportu-
nities and challenges relating to the financing require-
ments of Egypt’s transition to a greener economy.
Although Egypt’s overall impact on global climate
change is limited, the case study of Egypt should be of
interest to policy makers in the transnational and interna-
tional arenas since climate financing options and require-
ments tend to be similar across emerging markets and
the lessons learned from one country are often highly
applicable to others.
Energy efficiency projects
Egypt’sfinal energy consumption has expanded by more
than 70 per cent in the past decade. Although Egypt’s
energy consumption per capita still remains very low at
0.89 tons of oil equivalent (toe), compared with the
world average of 1.82 toe, this energy consumption is
expected to increase rapidly as the overall energy
demand is expected to double over the coming decade.
4
As such, the government of Egypt has stated improved
EE as a high priority in its energy policy agenda and a
number of initiatives have been taken in the past five
years to study or implement EE plans. These initiatives
were funded by various donors (e.g. United Nations
Development Programme, Global Environment Facility)
and aimed at improving the technical and/or institutional
parameters.
Although EE projects are often economically and finan-
cially viable, they often have difficulty attracting debt
and equity finance from conventional sources. ‘Like in
many other developing countries, there is a general per-
ception in Egypt that energy efficiency projects are riskier
than other investments because the benefits are not
clearly tangible, implementation is rather complex, and
the project preparation time and expense is too high rel-
ative to the often small size of the project. Contrary to
other energy investments, energy efficiency cannot be
directly measured in terms of its incremental physical
output.’
5
Indeed, installation of EE devices often requires
the use of new technologies that are often less well
known to the consumers (be they in the retail or com-
mercial market) and bring about an added perception of
risk. Financing instruments, as well as energy policies,
should focus on reducing these perceived risks.
In some countries, the financial markets and compa-
nies engaged in EE are sufficiently developed to raise the
needed financing for such projects without public sup-
port. In such cases, the funding for EE projects may come
directly from the private sector (i.e. financial markets,
©2015 University of Durham and John Wiley & Sons, Ltd. Global Policy (2015) 6:4 doi: 10.1111/1758-5899.12217
Global Policy Volume 6 . Issue 4 . November 2015
522
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