Chairman and Managing Director,Siemens
Q: Is Siemens Egypt's commitment to solar energy 100% and is that the way forward right now?
El-Mahdi: I would not restrict it to solar. I think we need to talk about the bigger picture -- which is energy efficiency and renewable energy together. In that context, we have a broad and comprehensive eco-friendly portfolio, covering fossil and renewable energies as well as energy efficiency. We are in a revolutionary phase and therefore it is time to embark upon a green revolution in Egypt because that would help the development of Egypt. We have governmental budgetary restraints here in Egypt, but efficiency and renewable energy would also render a lot of potential. Worldwide, Siemens has really marked that years ago -- that we are proceeding with green technologies. A large proportion of our portfolio is already addressing green technologies, efficiency and renewable energy, so this is a perfect fit from a portfolio competency point of view of what we can offer and what is currently an area that has big challenges but also enormous potential. So, yes, Siemens is fully committed.
Q: Long term, all the environmentalists are saying alternative energy is going to have to be what we all do in the future. What are some of the specific plans that Siemens has in store for the short and medium term?
El-Mahdi: Before we come to what we can do, it's about the enablers to be able to address specific challenges we have seen worldwide. To be able to tackle energy efficiency and renewables, energy tariffs are fundamental. As long as energy tariffs are at an extremely low level (and below real cost), you can neither drive people to accept energy efficiency nor are you going to be competitive to be able to sell any product in that area.
The same is true from a renewable energy vantage point -- if renewable energy has to compete with fossil energy, which is subsidized, then there is no way. If we look at the US, Canada, Germany and India, all have started by either giving tax breaks or establishing a feed-in tariff, which gives incentive to jump-start renewable energy. This then allows renewables to compete with traditional and established energy. In Egypt, the challenge is we have very low energy tariffs traditionally. We have the attitude that what is free of charge or what is cheap is unimportant. It's an awareness issue, even if it's cheap, the resources are not unlimited. Driving it from a cost perspective is the easiest way. If it's hitting your pocket, you are much more sensitive then if it's free of charge.
What we did so far is try to address energy efficiency measures. We've been talking with financial institutions because if the tariffs are low then we need to find a way of how to finance such projects and make it more attractive to the end users or to the different industries.
On the renewable energy side, we are working heavily with the government, with the Regional Center for Renewable Energy and Energy Efficiency (RCREEE) to raise the awareness of the potential of renewable energy and help governments and organizations tackle the right initiatives. With regards to wind energy, we are almost competitive and on a cost-basis, wind energy can almost compete with traditional energies, but we have other challenges -- how to connect wind farms to the grid and make sure that the land lease agreements are workable and that tip heights for wind turbines are accepted.
There are two different types of solar power: photovoltaic (PV) and concentrated solar power (CSP). PV is the generation of electricity from light and CSP is generating electricity from the sun's heat. These solar technologies are not yet competitive, but improving every year. In some rare occasions, they can be competitive in off-grid scenarios. In the mainstream, it's not yet competitive. So unless an incentive is given to start up projects, reduce costs or bring engineering and components' prices down, we will not get to a point where it is competitive soon. This is an area which needs to be worked on between the government and private sector in order to overcome these entry hurdles.
Siemens is heavily supporting the awareness for energy efficiency. We talk to industries and banks, go to schools, we have given our employees and sales force the tools to talk to key customers about energy efficiency and we see some acceptance from an orientation point of view. When energy tariffs increase and [energy efficiency] becomes more realistic then I think people would start saving energy.
In renewables, we are participating in wind tenders. We are also eyeing one or two new projects in the CSP side. We see some potential in PV, but, again, small-scale projects.
Q: Do you think people are starting to prescribe to these initiatives, that they're finally realizing we need to take care of our planet before it's too late?
El-Mahdi: I think given the state of where the Egyptian population is currently and our challenges with global warming and carbon dioxide abatement issues, we haven't really gotten the attention of the broad public. On the one hand, our local challenges are the public budget deficit and the need for higher revenues, so we should seek exporting more oil and gas instead of consuming it here inefficiently.
The economic perspective would be the higher driving force and as a by-product it would give us a carbon dioxide reduction abatement. There is definitely a challenge and if we concentrate on that and explain it to the general public, that this is public money going to support the education and health industries, the public would accept it more. This is completely different from the way we would enter the market in Europe or in Canada, for instance.
The government has a very clear vision to have renewables account for 20% by 2020, which is a challenge per se. It is not a target which we can say is easily achievable.
Currently, in Egypt, we have installed a base of approximately 600 MW of renewable energy, excluding the Aswan High Dam -- that alone would render a 10% order of magnitude. If we put that aside, we have around 600 MW of generating capacity out of 24,000-25,000 MW or demand, so it's a very small fraction. I think the challenge is how to grow our small plant, which we have here in Egypt, so that the target is achievable by 2020.
Egypt also has a very strong wind potential in the Gulf of Suez as well as other areas of the country. Egypt is one of the key countries in the solar belt for PV or CSP potential. In PV we're number one and in CSP we're number four worldwide, so I think we have a huge potential. European countries have much less solar and renewable potential and so our target of 20% is not enough given the potential which we have.
We also have land issues pertaining to how to obtain land and under what conditions. The other issue is electricity grid connections. Normally, areas of high potential for wind or solar power are not traditional sites for big power plants or strong grid connectivity.
That's a challenge also in a lot of other countries. If you take Denmark or Germany as an example, you have the renewable energy production in the north and you have the demand in the south, so you have install new infrastructure to be able to transport the energy from its supply to the demand. In Egypt, we need to address how the network needs to be expanded and strengthened. Siemens has a portfolio in power transmission and smart grids -- the High Voltage Direct Current Transmission System (HVDC), which is low loss and can transport energy over very long distances. [An alternative to AC technology, HVDC connects grids of different frequencies.]
In talking about energy efficiency and renewable energy, cooperation between countries will be important. For instance, Saudi Arabia has a peak energy demand that leans toward the midday window, and Egypt has a peak demand more toward the sundown period. Normally, a government has to build up its generation capacity for the peak hour demand even if the country only needs such capacity for two hours per day. Cooperation between countries to exchange energy to shave off this peak demand is also an energy efficiency measure.
Egypt and the Ministry of Electricity is working on an HVDC link with Saudi Arabia to get power when they don't need it and give them power when we don't need it. The driving force behind this is to reduce investments to build new power plants. The driving force behind a country like Egypt, given its scenario, is the economic perspective -- how we can save and spare money and put it toward education, health care and other industries.
© Business Today Egypt 2012
