Is Egypt equipped to handle its upcoming energy crisis?
Egypt's unique ability is to proclaim big, potentially nation-building megaprojects—such as the Suez Canal, the Al Dabaa nuclear plant, or its new capital city outside of Cairo—then blow the chance due to unfavorable laws, corruption, and financial difficulties. Ironically, the world and Egypt may need to be a little less ambitious this time around.
The impact that $35 billion can create is astounding.
When the year began, Egypt, a country of 105 million people and a major hub for commerce and culture worldwide, seemed to be in danger. Two years ago, interest rates had dropped to 8.25 percent; now, they are climbing to a peak of 27.25 percent. The hot currency was on its way out, depleting the foreign exchange reserves of the central bank and momentarily alleviating the nation's ongoing trade imbalance.
Things seem to be considerably healthier all of a sudden. A $35 billion transaction that includes the United Arab Emirates financing a large real estate development on the Mediterranean coast has raised spirits, as Bloomberg News reported this week. These expenditures have persuaded other contributors to contribute in recent days: Together, the World Bank and the International Monetary Fund have promised to provide $14 billion, while the European Union is contributing close to $8 billion in grants, loans, and assistance. I'll add.
All this money, meanwhile, doesn't really address the problem's underlying source. Similar to several other significant developing nations with unstable currencies, Egypt has significant energy shortages that limit its capacity for economic development. In the absence of further funding allocated towards matching the level of renewable investment with neighboring projects, it won't be long until the most recent cash flows are depleted.
With nearly 17 percent of the overall bill going toward petroleum in 2022, it has surpassed cereals as Egypt's top import category. It will take more than increasing gas prices from Mediterranean offshore resources to make it a net exporter of hydrocarbons. 5.9 billion of the 6.2 billion cubic feet of gas generated last year were used domestically, with more than half of that amount going toward the production of substantially subsidized power.
Domestic energy use is expected to absorb even more molecules due to increased demand from a growing population and harsher summer temperatures, even as output from the Zohar field, which is responsible for Egypt's gas boom, starts to drop. As.
This is decimating the one export industry on which the nation has been able to depend recently. According to Bloomberg's vessel-tracking data, Egypt's outward exports in the current quarter were just 413,906 metric tons, which is almost 93 percent less than the average for the March quarter over the previous three years, despite a worldwide rush to obtain LNG supplies. The situation has become worse as a result of the Gaza war: pipeline imports from Israel were previously used to replenish gas export terminals since domestic output was decreasing; but, because of the conflict, this has completely stopped.
All of this is reminiscent of a pattern that has plagued Pakistan for many years: a poor, populous nation whose little domestic gas supplies were quickly depleted and found to be inadequate to sustain its growth. The need for imported power rose as the economy began to expand quickly. This resulted in a balance of payments crisis and the depletion of foreign currency reserves, putting the nation once again in a state of instability.
Encouraging Egypt's renewable energy industry by offering a reliable domestic power supply might have a significant impact. It still has a remarkably untapped solar and wind potential due to its lengthy, twisting coastline and blistering desert. There is no lack of innovative ideas put up to alter this, ranging from $40 billion in possible green hydrogen projects revealed at a conference last month to 10-gigawatt wind farms and underwater electricity connections to Greece and Italy.
The implementation is the issue. In 2022, renewable energy accounted for only 11% of electricity, much less than the government's aim of 20%. Of this, wind and solar power accounted for just 4.5 percent. Less than 2 GW of the 7 GW of additional wind power that the government had committed to install by 2022 was completed.
Things are not going to get better. Only 15% of planned power generating projects between 2021 and 2025, according to the International Renewable Energy Agency, will be solar and wind-powered, compared to 62% in Morocco, 39% in Tunisia, and 36% in Algeria. It is improbable that the nation will even come close to meeting the advanced 60% objective of 60% renewable energy by 2030, given the random fines and levies levied on renewable projects.
Cairo's lack of vision for renewable energy hurts Egypt's people, who sorely need to break free from endless cycles of economic hardship in addition to the environment. When cheaper, cleaner options are available, the gas that remains in its wells is exported rather being supplied to local customers at concessional prices.Exporting Xi money is necessary to restock the treasury.
Of course, it would be naive to undervalue the challenges of significant investment in a nation situated in the midst of a volatile currency, an economy controlled by the military, and a region devastated by conflict. Raising money, however, is not the primary issue here; the $22 billion promised by the World Bank, IMF, and EU, as well as the $35 billion obtained from the UAE, are genuine funds.
The true concern is in the building of the planned nuclear facility, El Daba'a, which is close to the UAE's real estate boom on the Mediterranean coast. Nobody can predict this, but after 40 years of rejected ideas, there's no information on when or if the $30 billion Russian-built generator will really be finished. Presidents Vladimir Putin and Abdel-Fattah el-Sisi virtually jointly announced the project's commencement in January.
One of the main benefits of renewable energy is that it may expand via small-scale initiatives that cost millions of dollars instead of billions of dollars up front. Egypt's unique ability is to proclaim big, potentially nation-building megaprojects—such as the Suez Canal, the Al Dabaa nuclear plant, or its new capital city outside of Cairo—then blow the chance due to unfavorable laws, corruption, and financial difficulties. Ironically, this time around Egypt and the world may need to aim a little lower.
