7 ELECTRICITY SECTOR DEVELOPMENTS IN EGYPT …
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the Egyptian government alternatively began to introduce private sector
participation in the power sector via a single-buyer model. Raising electric
rates was perceived as politically unachievable at the time, which created
a funding gap due to Egypt’s inability to meet lender terms, leading to
Egypt’s introduction of the independent power producer model with a
single-buyer. 26 The reasoning for the external push toward competition
and cost-reflective tariffs in Egypt was related to a shift in donor policy
and is outlined in a 1993 World Bank policy paper. 27
In the first iteration of this arrangement independent power producers
(IPPs) built, owned, and operated power plants under long-term power
purchase agreements (PPAs) with the EEA, the vertically-integrated,
government-owned monopoly offtaker. IPPs won long-term contracts
through competitive bidding to sell power to the EEA, with the generation assets transferred to the EEA upon contract expiration. The mechanism is known as a build, own operate and transfer (BOOT) agreement.
Additional measures including tax incentives, full profit repatriation and
protection against nationalization were employed to encourage investment. 28 This third stage of power sector development, in one form or
another, has largely continued through the present, yet began to include
renewable support policies in 2014.
The fourth stage of Egypt’s power sector development further liberalizes the market per the Electricity Law 87 of 2015. The law provides
the foundational legal framework for a competitive power sector in Egypt,
fundamentally changing the sector’s structure. The law, which allows for
an eight-year transition period toward a competitive market, introduces
increased wholesale and retail competition into the market, as well as
enhanced regulatory oversight and an independent market operator. 29 As
such, the initiative should ultimately facilitate augmented opportunities
for renewable energy investment in the future and will be discussed in
greater detail later in this chapter.
Recent Generation Capacity Additions
While peak demand has increased by more than one-third in the last
10 years, installed generation capacity has more than doubled from about
32 GW in 2014 to approximately 56 GW in 2019. This is partially the
result of 14.4 GW of new gas-fired combined cycle generation capacity
coming online in 2018. The three 4.8 GW plants, which became operational and grid connected in just 27 months after the project began,
195
the Egyptian government alternatively began to introduce private sector
participation in the power sector via a single-buyer model. Raising electric
rates was perceived as politically unachievable at the time, which created
a funding gap due to Egypt’s inability to meet lender terms, leading to
Egypt’s introduction of the independent power producer model with a
single-buyer. 26 The reasoning for the external push toward competition
and cost-reflective tariffs in Egypt was related to a shift in donor policy
and is outlined in a 1993 World Bank policy paper. 27
In the first iteration of this arrangement independent power producers
(IPPs) built, owned, and operated power plants under long-term power
purchase agreements (PPAs) with the EEA, the vertically-integrated,
government-owned monopoly offtaker. IPPs won long-term contracts
through competitive bidding to sell power to the EEA, with the generation assets transferred to the EEA upon contract expiration. The mechanism is known as a build, own operate and transfer (BOOT) agreement.
Additional measures including tax incentives, full profit repatriation and
protection against nationalization were employed to encourage investment. 28 This third stage of power sector development, in one form or
another, has largely continued through the present, yet began to include
renewable support policies in 2014.
The fourth stage of Egypt’s power sector development further liberalizes the market per the Electricity Law 87 of 2015. The law provides
the foundational legal framework for a competitive power sector in Egypt,
fundamentally changing the sector’s structure. The law, which allows for
an eight-year transition period toward a competitive market, introduces
increased wholesale and retail competition into the market, as well as
enhanced regulatory oversight and an independent market operator. 29 As
such, the initiative should ultimately facilitate augmented opportunities
for renewable energy investment in the future and will be discussed in
greater detail later in this chapter.
Recent Generation Capacity Additions
While peak demand has increased by more than one-third in the last
10 years, installed generation capacity has more than doubled from about
32 GW in 2014 to approximately 56 GW in 2019. This is partially the
result of 14.4 GW of new gas-fired combined cycle generation capacity
coming online in 2018. The three 4.8 GW plants, which became operational and grid connected in just 27 months after the project began,