For Egypt, transitioning from fossil fuels to clean, sustainable, renewable energy goes beyond protecting the environment or keeping up with investment trends. “Green energy is about energy security,” Ossama Bishay, Orascom Construction CEO, told AmCham Egypt’s April Investment Conference. “We don’t have fossil fuel self-sufficiency,” and continuing to import is unsustainable.

“Our main energy source needs to be renewables,” stressed Beshay, noting that Egypt has the natural resources for that transition. “Our wind energy is generated from one of the most efficient locations (the Red Sea coast), and we have the clearest sun rays in the world in the south.” 

The key will be choosing business models that allow green energy investors to profit by ensuring affordable funding from abroad and reasonably priced at home.

Government vision

Egypt faces “multiple challenges to meet all [its] national energy needs,” said Sabah Meshali, deputy minister at the Ministry of Electricity and Renewable Energy, during the Investment Conference. “Most of those challenges revolve around securing fuel for our power plants.”

Overcoming those “challenges” requires shifting from fossil fuels to renewables. By 2030, 42% of Egypt’s electricity should come from renewables, up from 20% in 2022, the latest public statistic. “We already secured or are negotiating green energy agreements that would allow us to fulfill the 2030 targets,” said Meshali. 

She estimated wind power output would increase from the current 2.5 gigawatts to 12 gigawatts by 2030, solar energy would go from 2.2 gigawatts to 7 gigawatts, and there would be 3.5 gigawatts of stored electricity generated during low-consumption periods. By 2040, more than 60% of Egypt’s electricity should come from renewables, Meshali said. 

The government also wants to connect the national grid with Italy, Greece, and Saudi Arabia. “We are currently looking at supplying Italy with 3 gigawatts of clean energy and are in early talks with Greece,” Meshali said. “We should connect to Saudi Arabia’s power grid by the end of 2025.” However, there have been no reports of power-sharing negotiations or agreements.  

The third part of the government’s plan is to reduce consumption of fossil fuels. “Since October, we have saved EGP 8 billion ($160.3 million) in spending on fossil fuels,” she said 

The state also is updating and strengthening the national grid. “We have a strong one now, but we need more investment to accommodate additional supply from renewables,” said Meshali.

The problem is that “the law views the power grid as a matter of national security,” Meshali said. “Therefore, the government must own the grid. We are developing other investment options for the private sector.” 

Increasing demand

A key attraction for the private sector to invest in green energy in Egypt is that “from a cash cost perspective, [solar and wind energy] are equal to fossil fuels if you exclude the subsidy and [unnatural] price fluctuations,” among other factors, according to Bishay of Orascom Construction. 

Capitalizing on “cash-cost” parity should prove transformative for Egypt, as “there is serious and big FDI behind sustainable energy,” said Bishay. “Most of the [new] energy investors and [existing] local ones are international companies,” which means potentially big investment budgets.  

Egypt is on the right path as “almost all [renewable energy projects] are done by the private sector,” he said. “So it is not straining the government’s budget. It is the most efficient way to achieve energy security.”

Fueling more need for clean energy is the growing demand for data centers, which cloud providers and AI require. “Egypt is well located to attract [such] investors,” said Reem El-Saady, deputy head of the European Bank for Reconstruction and Development (EBRD) in Egypt. However, “it won’t be possible to invest in data centers if they aren’t green.”

Those opportunities bring risk. “Collections from the local market happen in local currency [which has been depreciating since 2022], while payment [to foreign green energy investors] is in dollars,” El-Saady said. Meshali estimates the government could pay “over $3 billion a year” to foreign investors.

Export opportunity?

Exporting sustainable energy would help balance government finances. However, not all green energy could be sold abroad, as it would annul the local energy security imperative. “Renewable energy should be used to meet local demand,” Khaled Abu Bakr, chairman of TAQA Arabia, said at the Investment Conference. “Green hydrogen is for exports.”   

“Supply is not a major challenge,” he added, “as the government has allotted locations for projects and has an incentive program for production and transportation.” The challenge will be what markets will need green hydrogen and when. 

Egypt’s primary green hydrogen market would be Europe, which is problematic. “Some are hesitant to transition, while others are eager,” Abu Bakr said. “That means energy transition timelines vary greatly, hurting short-term financing options. It is especially evident in green hydrogen.”  

Infrastructure is another issue. “Stabilizing the [power] grid to accommodate the extra generated green energy is critical. [That includes] storage options in Egypt and the receiving countries,” said Yehia Shankir, CEO of Elsewedy Energy. “Greece, for example, doesn’t currently have the proper grid technology and capabilities to accommodate green energy.”

Regulatory alignment between importers and exporters is another issue. “There needs to be a task force comprising [buyers and sellers],” Shankir said. “Their work includes coordinating national energy objectives between both nations and payment processes.” 

Green money

In Egypt, funding for environmentally friendly projects mostly happens under the Nowafy Program, a 2022 sustainability initiative under the Ministry of International Cooperation. The EBRD leads its energy pillar, coordinating with all development finance institutions (DFIs) in Egypt.

The allure of working under a government program is “it prevents duplicated efforts, and there is a higher level of coordination between the DFIs,” El-Saady noted.  

Funding also is necessary for Egypt’s power grid. However, using traditional “loans from DFIs to governments to finance their national grid is not sustainable given Egypt’s high deficits and debt levels,” El-Saady said. 

The solution the EBRD is considering is “blended finance,” where funds come from private and public (or philanthropic) sources. “It would take the shape of ‘soft loans’ [long-term, low-interest debt],” El-Saady said. “We are in the design phase with an international investment bank.”

Made in Egypt

Conference speakers agreed that local manufacturing of parts necessary for renewable and sustainable energy projects is critical to Egypt’s energy transformation.

The consensus at the conference was that the government must reduce the cost of investing in green energy. “Investors need to make money to come,” said Merette El Sayed, group chief commercial officer at Hassan Allam Holding, a developer. “Cheaper finance is at the forefront.”

Localization goes beyond hardware manufacturing, requiring the development and deployment of new technologies, like AI, in the power grid. “It is not a luxury. [AI has] a growing track record of predicting demand patterns, which is essential,” El Sayed stressed.

Shankir of Elsewedy Energy said Egypt could use a model similar to that of GCC countries, where they increase the localization percentage requirement for green energy projects over time. “Once their business cases proved profitable, massive clean energy manufacturing investments entered Gulf states,” he said. 

The government also should reduce bureaucracy and complicated paperwork. “It is time-consuming, which makes achieving Egypt’s energy transition challenging,” said Bishay. A case in point was when Orascom Construction signed an MoU for a wind farm June 2022 and did not receive a plot of land until late 2024.

Ultimately, Bishay stressed the importance of investing in local R&D to support manufacturing localization, citing costly equipment like wind turbines. “Egypt can’t access the latest [international] technologies fast enough,” he said. “R&D will help us develop our own solutions.”

This article first appeared in June’s print edition of Business Monthly.