20 June 2013 – A lack of funds to purchase fuel for power stations in Egypt has often been blamed for the current power shortage in the country. However, that is not the only factor causing the problem. Ahramonline reports that the liquidity problem is only an added reason — the roots of the crisis were already there. Over the past two years, annual consumption of power has exceeded expectations, increasing by more than 10% while official figures forecast a rise of 8%. This increase has been accompanied by a slowdown in construction of new power plants due to political instability.
"Production capacities totalling 2,800 MW, almost 10% of Egypt’s total production capacity, were not delivered due to suspension of work because of social tensions," Aktham Aboul-Ela, spokesman for the Egyptian ministry of electricity, says.
After the revolution, work was suspended in all power plants under construction — sometimes by locals demanding jobs, sometimes by employees working in onsite construction.
Mohab Hallouda, senior energy specialist for the MENA region at the World Bank, underlines other reasons that contributed to aggravating the crisis, including heat waves experienced by Egypt recently with temperatures exceeding 40ºC, and the lack of maintenance in the central power grid. "Production capacity can drop up to 15% due to the heat. Added to this, actual production has been affected by a lack of renovation and maintenance," Hallouda says.
Actual power production in Egypt has fallen to 19,000 MW at some points, while the country has capacity that should exceed 26,000 MW.
The political instability that followed the revolution was not only reflected in social unrest but also government performance. The electricity crisis revealed a lack of coordination between different departments. Overwhelmed by criticism, the minister of electricity blamed the minister of petroleum for natural gas and diesel fuel shortages.
The minister of petroleum, for his part, blamed the ministry of electricity and other governmental bodies for a liquidity shortage, alleging they do not pay their debts to his ministry. He revealed that the debt of state bodies to his ministry had reached US$1.28 billion. A big part of that debt is owed by the ministry of electricity.
Currently, power outages are being felt in every part of the country. Despite the risks the energy crisis poses to the economy, no radical solution is expected in the short term. The government announced a five year plan to produce an additional 13,200 MW. To build power plants with this capacity, investment of US$12.85 billion will be needed according to official figures.
However, building new power plants will not be enough. The government needs to improve gas supplies, calm social tensions, encourage people to rationalise consumption, and finally reduce subsidies to solve the financial liquidity problem, according to experts.