COP27 to boost Egypt’s green energy ambitions 

To:

Al-Monitor Pro Members

From:

Marc Español 

Freelance journalist covering Egypt and Sudan 

Date:

Nov. 10, 2022

Bottom Line:

Building on a privileged geographic position, Egypt has been pushing for years to develop its clean energy industry to meet its ambitious sustainable development goals and become a regional energy hub. However, the country has struggled mainly due to a lack of funds. In this context, COP27 presents an unprecedented opportunity to secure international funding and turn some of the many projects in the pipeline into binding agreements.

Background Facts:
  • Natural conditions such as a warm climate, abundant sunshine, consistent high wind speeds along its coastlines, and a large amount of available land give Egypt a significant competitive edge for generating renewable energy
  • The Egyptian government, hand in hand with the private sector, has made strides to develop the renewables industry in order to meet its sustainable development goals and turn the country into a regional hub for energy trade. 
  • Egypt’s Vision 2030 was developed in 2016 in line with the UN Sustainable Development Goals (SDGs) and outlines the government’s long-term political, economic and social development targets. On the energy front, it sets out that, by then, 12% of the country’s primary energy will be accounted for by renewables, and that these will account for 32.5% of electricity production. 
  • The Integrated Sustainable Energy Strategy to 2035, published by the Ministry of Electricity and Renewables a year earlier, states that renewables should have provided 20% of electricity generated by 2022 and rise to 42% by 2035
  • These plans go in parallel with Egypt’s increased production and export of natural gas, which Cairo and other developing nations consider a key transitional fuel. The country’s production increased from 42.6bcm in 2015 to 67.8bcm last year, while in the same period it went from exporting nothing to 9bcm. 
  • Between 2016/17 and 2020/21, energy generated from renewables increased in Egypt by more than 250%, largely driven by the boom in solar and wind energies. 
  • However, Egypt has a long way to go to reach its target of renewables accounting for up to 42% of the total energy generated in 2035. Last year, their share in the electricity energy mix stood at around 12% including hydro, far short of the 20% target for 2022. The share of wind and solar energy combined stood at just 5%
  • In the run-up to COP27, Egypt has also pushed for the development of a green hydrogen industry concentrated in the strategic Suez Canal Economic Zone. 
  • The main obstacles that hinder the expansion of these industries are a sustained and strong increase in local energy consumption and a lack of financial resources that makes Egypt highly dependent on foreign investment and international funds. 
  • In this context, Egyptian authorities see COP27 as a golden opportunity to showcase its potential and attract funds and investors. 
  • Last July, Egypt launched the Nexus on Water, Food & Energy (NWFE) program, which has become the government’s flagship initiative for mobilizing climate finance and private investments directed to accelerate the national climate agenda. 
  • Leading the program is International Cooperation Minister Rania Al-Mashat, who has shown great ability in the past to secure substantial credit lines. At COP27, her Ministry aims to close blended finance for green projects worth $15 billion, and some international financial institutions have already shown their support. 
  • In the weeks and months leading up to the summit, the Egyptian government, and especially the Ministry of Electricity, also held talks and signed memorandums of understanding (MOUs) on renewable energy projects worth several billion dollars
  • Many of these preliminary agreements were signed with Saudi firms, which have recently shown great appetite for green investments. Saudi Arabia will also host two major forums in Sharm El Sheikh parallel to COP27
  • In the months leading to the COP27 event, Egypt had also signed over 10 MOUs with firms that have shown interest in its potential as a green hydrogen hub. Combined, these amount to more than $60 billion and include leading companies and firms such as Maersk, Siemens, Scatec and the Qatar Investment Authority (QIA). 
  • To attract additional interest, Egypt accelerated the development of one green hydrogen plant in the Suez Canal Economic Zone ahead of the summit. Earlier this year, the Sovereign Fund of Egypt signed an agreement with Norway’s Scatec and UAE-based Fertiglobe to establish a green hydrogen plant in Ain Sokhna, and in August the government already awarded them plots in solar and wind farms. 
  • The country will also unveil during COP27 the National Hydrogen Strategy that it has drafted with the European Bank for Reconstruction and Development (EBRD). This step is key to attract investors
Alternative Scenarios:

Scenario 1: COP27 produces mixed results 

Egypt is not alone in this race and regional competition with other countries such as Morocco is strong, including to attract investments. Other states with far more financial resources such as Saudi Arabia, Oman and the UAE also have big ambitions of their own. 

Although Egypt will unveil at COP27 regulatory developments and concrete agreements and funds for the renewable energy and green hydrogen industries that have been months in the making, their scope and reception among investors remains to be seen. The country could well make notable advances in some files while more moderate ones in others. 

Scenario 2: Egypt fails to build on COP27 momentum 

As is the case with natural gas, Cairo is prone to project high ambitions for the future that do not always consider its limitations. Most announcements made in the run-up to COP27 are non-binding agreements, so Egypt enters COP27 with half the work still to be done. 

This scenario would seriously undermine its chances of achieving its renewable energy production targets, given that the country already lags behind, and it would also represent a serious blow to its ambitions of becoming a green energy hub. Officials know this is a long-distance race that does not end with COP27. But they have placed high hopes in it. 

Conclusion - Most Likely Scenario:

Egypt has the basic ingredients to expand its green energy production in order to become at least a key player in the regional clean energy architecture and advance its sustainable development goals. Although the country suffers from a chronic funding shortfall to achieve these objectives on its own, Cairo has been working for months to secure major funding lines with international financial institutions as well as to line up a large number of green projects — far more than it is even capable of absorbing. These efforts build on several years of work that have revolutionized Egypt’s energy landscape, putting the nation on the doorstep of COP27 in a strong enough position to significantly boost its green ambitions, albeit without necessarily reaching its often-inflated announcements. 

Contributor Background:

Marc Español has been reporting on Egypt since 2017, with a focus on the economy and the human rights situation in the country. He has been a contributor to Al-Monitor since 2018 and his work has appeared in other publications such as El País and the think tanks Fundación Alternativas and the European Institute of the Mediterranean (IEMed). 

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