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18 February 2016

Egypt: energy subsidies to be reduced by 50%

On Wednesday, the Electricity and Renewable Energy Ministry released a statement stating that energy subsidies will be reduced by 50% by 2020, and are expected to be pulled by 2025.

The ministry has drafted a long-term plan to ensure a reliable electrical supply until 2035, which will attract investments of around $135.3 billion, the Egypt Independent reported.

The statement added that this plan will provide 51,000MW of power in total.

Energy subsidies: electricity tariff

In 2015, ESI reported that in efforts to reduce subsidies and bring tariffs to cost-reflective levels, the Egyptian government started increasing electricity tariffs in July 2014, by between 10% and 15%.

This was in accordance with a five-year plan to remove government subsidies of electricity. The government plans to reduce the total subsidy for electricity to $2.65 billion (ZAR36 billion) in the next fiscal year, this from the current $3.59 billion (ZAR48 billion).

At the time, Mohamed Shaker, Egypt's minister of electricity and renewable energy, said that the average cost price to produce one kilowatt of electricity is $0.06, while the average sale price now is $0.02.

Diversifying the energy mix

A study carried out by the global consultant SOFRECO, identified Egypt's energy needs for different purposes in the coming years, the ministry acknowledged in the statement.

The strategy aims to boost the country’s generation capacity, which is to commence in 2019 through coal-fired power stations, as well as through nuclear power stations, according to the statement.

The Energy Independent reported: “In a related context, the Electric Utility and Consumer Protection Regulatory Agency announced Monday evening that the electricity generated through hydroelectric stations stands at 7.5% of the total electricity Egypt generates.”

The ministry’s statement added that 58.8% of Egyptian power stations are dependent on natural gas, and 32.5% are reliant on diesel fuel.

Driving wind power

Wind farms and solar energy make up to 1.1% of the total electricity generated in Egypt, according to the statement.

In November 2015, one of the largest wind farms in Africa, with 100 turbines and a total capacity of 200MW, was inaugurated in Egypt’s Gulf of El-Zayt.

The project, which cost $359 million, is financed by the EU, KfW and European Investment Bank.

The EU contributed $32 million to the project, and the European Investment Bank invested $53 million – whilst the project’s main donor KfW, the German Development Bank, invested $203 million.

The wind farm project has the capacity to generate up to 800GW per year, which is sufficient to supply around 500,000 people with electricity. The development also contributes to preventing 400,000 tonnes of carbon dioxide emissions per year.

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