The energy sector in Egypt is in need of major revamping in order for the nation to keep itself powered
Egypt's energy sector -- specifically its electricity, oil and natural gas subsectors -- is a large and growing part of the national economy. The nation is challenged by the growth in its population coupled with the growth in its demand for energy, especially from the energy-intensive manufacturing and tourism sectors, which collectively comprise 20-25% of GDP.
Egypt stands to benefit greatly from a strategy based on increased and efficient output of clean energy from various renewable and non-renewable sources and based on energy efficiency and demand rationalization.
In 2011, Egypt produced 147 terawatt hours (TWh) of electricity, 131 TWh of which were consumed and 16 TWh were lost in transmission and distribution. The bulk -- 75% -- of electricity is generated by natural-gas-fueled stations, while diesel-fueled stations supply 14%, the Aswan High Dam 10% and wind and solar power 1%.
Egypt has the resources and economic growth-driving activities to develop viable new communities in the northwest, the Red Sea coastline, Sinai and west of the Nile Valley. These would provide good livelihoods, help relieve the crowded Nile Valley, conserve the fresh Nile water and the scarce, highly fertile and productive Nile Valley agricultural land.
Energy from nonrenewables
Egypt ranked the second-largest natural gas producer in Africa after Algeria, and 15th worldwide in 2011, with 2.2 trillion cubic feet (Tcf) produced and 1.8 Tcf used domestically. Proven reserves totaled 78 Tcf in 2012, mostly off the Mediterranean coast and more natural gas and oil discoveries continue across Egypt's unexplored areas.
The decision to export gas and intensively use oil fuel domestically ten years ago has proven detrimental to Egypt. Liquefied natural gas, which is very high in processing and transportation costs, is exported worldwide on inflexible multi-year contracts, terms and prices.
Gas was exported to Israel below market prices until 2012, with more exported via pipelines to Jordan, Syria and Lebanon.
Rising domestic demand for natural gas deserves priority and exports need to be phased out. Gas is cleaner, cheaper and more efficient than Egypt's shortage-prone oil fuel imports. Mazut is especially polluting and unsuitable for Egypt's hot summers because it evaporates at temperatures over 34 degrees celsius, cutting electricity generation efficiency by 20-30%. Along with additional gas output from newly discovered offshore fields, more gas should replace oil fuels in electricity generation, industry (including petrochemicals), transport and home usage.
This, paired with energy the efficiency measures outlined below, would provide the significant, gas-related advantages above and provide gas infrastructure-related business opportunities.
The oil sector could use some change as well. Oil output reached 260 million barrels in 2010, while proven reserves stood at 4.4 billion barrels in 2011, mostly in the northwest and Gulf of Suez area.
Domestic use of oil was erroneously allowed to jump from 205 million barrels to 275 million barrels from 2003-2010, leaving Egypt now importing gasoline, diesel, mazut and butane.
To restore all-round self-sufficiency, the nation needs more and improved technology-led oil output from existing fields including the newest field near El Sallum, to expand the use of natural gas and to adopt an energy conservation framework.
The oil-rich black sands (shale oil) of the Red Sea's Safaga-Qusseir area contains about 4.5 billion extractable barrels of oil, with another 1.2 billion in the Western Desert's Abu Tartur plateau that have yet to be tapped. Yet another alternative to crude oil is jojoba biodiesel oil.
Egypt's government is reviving plans to build a nuclear power plant at El-Dabaa on the northwest coast to be operable by 2020. The rampant power cuts last summer indicate an imminent power shortage and a growing future crisis that nuclear power can solve in the long-term for electricity security.
Opponents dispute this conclusion and warn of the potential hazards of burying nuclear waste in a groundwater-rich area, adding that the effects of a nuclear spill or contamination of nearby agriculture and tourism would be grave.
The incoming prevailing wind would quickly blow that damage onto Egypt's population, with risk of serious harm, rendering nuclear power unsafe.
Accordingly, opponents argue that Egypt can do without nuclear power. Midsummer power cuts stem mainly from coinciding mazut evaporation and peak air conditioning use, which reflects past, correctable policy mistakes.
Some electricity can be imported in the near term, but with successful investments in cleaner and safer energy production coupled with demand control, Egypt can increasingly meet its electricity needs and generate sizable surpluses for future, high-profit exports.
More large, well-resourced, public and private industrial firms can also be encouraged to produce their own electricity, plus surpluses for sale to the national power grid at market prices. Egypt's power grid is connected to eight Arab countries, Europe and in 2015 it will be connected to Saudi Arabia.
Links to Sudan, South Sudan and Ethiopia are currently under study with future electricity export potential for the three countries' large and fast-growing, under-supplied populations.
Energy from renewables
Hydroelectric power has been steady and reliable for four decades, but now Egypt needs a new, fair water-sharing agreement with Nile Basin countries for its own water and hydroelectric security.
As important would be to greatly conserve water through the wider use of modern agricultural irrigation methods and equipment.
Solar power is ideal for Egypt's business, economic and development future. Experts calculate that the angle and intensity of sunlight, especially in Upper Egypt, can lead to very high, pollution-free output. Large, labor-intensive solar stations can be built in open spaces near the Nile Valley, and connected to the power grid.
Remote areas can run on large, independent solar plants, plus small solar generators (photovoltaic cells) for homes, groundwater pumps and irrigation systems, thereby saving abundant diesel fuel and benefiting country-wide population mobility and new community development.
Egypt's government built a combined solar-thermal energy plant at Kuraymat near Beni Suef, with a capacity of 140 megawatts (MW) -- the first in Africa and the Middle East and the fourth worldwide.
Started in 2011, the plant is part of German-led Desertec's mega-project to build several renewable-energy plants across Arab countries and export electricity surpluses to Europe. For Egypt, this partnership provides clean energy, funding and transferable technology, which can be later employed in the upcoming 100 MW solar-thermal plant in Kom Ombo near Aswan, and the first 20 MW solar power plant in Hurghada.
However, much more solar power investments are needed through Build-Operate-Transfer (BOT) partnerships with private international firms. The government would save on building costs and pay market electricity prices to the producers for several years, before acquiring free ownership and reaping the long-lasting benefits of the efficient and productive stations with free sunlight fuel.
Egyptian firms increasingly produce solar power equipment, and the country's white desert sands are perfect for making photovoltaic cells and panels, computer chips, optic fibers for internet network cables and glass for labor-intensive consumer electronics. These products are in wide and rising domestic and global demand.
Plentiful wind-powered electricity can be produced in areas such as Sinai, a Beni Suef-Assuit corridor, Kharga Oasis and the Red Sea coastline, where two stations at Hurghada and near Zaafarana had a combined capacity of 550 MW in 2012. The national wind power capacity target is 7,200 MW in 2020. A BOT approach here would boost Red Sea business, economic and population growth.
Recycling urban and rural organic waste can yield substantial renewable energy, estimated at 500 MW from Cairo's urban waste alone. Egypt has already received offers from qualified international firms, but organizing, regulating and integrating the informal waste recycling and management activities pose challenges which can be solved using pragmatic government vision, directives and financial incentives to those involved.
The use of biofuels as renewable energy has been growing worldwide. The use of crops such as corn to ethanol fuel has been criticized for crowding out much-needed food growing.
Egypt has an opportunity produce biofuels form the high-yielding fruit of the jojoba semi-desert tree. Grown in Palestine and Israel, the tree can live 100 years.
Perfectly for Egypt, the tree suits the sandy soils and mild climate of the Sinai and west of El-Dabaa and is irrigable by rain and seawater. Jojoba diesel oil can fuel mining-used and other high-intensity electricity generators in remote areas and is hence an ideal complement for solar power there.
Managing energy demand
Egypt can do better in conserving its energy and controlling and recovering costs. Several ministries and public-sector firms pay their electricity bills late. Recipients of costly electricity and fuel subsidies still include factories, businesses, touristic and entertainment venues and owners of luxury homes, cars and yachts.
Along with practices such as wasteful store and daytime street lighting, late work, store and entertainment venue hours, this led to over-consumption and eventually to rising electricity bills for all. Homes consume an elevated 40% of total electricity used.
Rationalizing energy demand is no less important than boosting production. Late bill payment must no longer be allowed while economic efficiency and social justice necessitate the phasing out of fuel and electricity subsidies to all but lower-income consumers. Subsidy removal measures are indeed under consideration.
Laws, technical assistance and financial incentives are needed to implement the use of energy efficiency technologies and practices, especially in power generation, industry, transport and tourism.
Improved and enforced building codes for energy conservation and weather insulation in new construction permits for homes, offices and factories would also conserve energy. These new technologies promise good domestic business.
Work, stores and entertainment venues can start and end at earlier timings to reduce electricity used at night. Education and media campaigns can teach and promote the conservation of electricity and fuel and build public support and awareness for this prudent approach. Finally, an effective, state-led family planning program can slow the growth in population and, hence, demand.
National policy is pivotal to Egypt's energy sector and needs integration and coordination between the Supreme Energy Council and the responsible ministries. Public awareness about renewable energy is necessary and the sector would benefit from an independent energy advisory board, a fully independent renewable energy authority and specialized energy study institutes.
Egypt's energy sector can fulfill its potential and help achieve Egypt's economic goals given the application of best-practices and public backing.
© Business Today Egypt 2013
