Page 7 - AsiaElec Week 15

AsiaElec COMMENTARY AsiaElec
October 2019 announced a deal with IPP Lekela Power to build 250MW at the West Bakr wind farm.
Egypt has also signed a $25bn loan agreement with Russia for Rosatom to build 4,800MW of nuclear capacity at Dabaa.
The government is also developing 14,500MW of gas-fired capacity in conjunction with Siemens.
In other reforms, Cairo also intends to elim- inate tariff subsidies by 2022, and instead have cost-reflective tariffs. As well as reducing gov- ernment expenditure, cost-reflective tariffs aim to stimulate investment in power projects by private investors.
Falling Prices
The price of power for Egypt’s emerging renew- ables sector is a key issue for Hamrawein, which was tendered at $0.054 per kWh.
However, solar auctions over the last two years in Egypt have seen prices as low as $0.03 per kWh, the new low offered by Saudi Arabia’s ACWA Power in August 2018 for 200MW at Kom Ombo.
Cairo’s competitive auctions follow on from its earlier feed-in tariff (FiT) system, where tariffs were higher than Hamrawein’s $0.054 per kWh. Most solar projects at Benban were awarded on the FiT system, which aimed to develop 2,000MW of solar and 2,000MW of wind capac- ity. The FiT was set at $0.14 for Round 1 and $0.08 in Round 2.
However, this has proved to be expensive, and Cairo’s move to competitive tendering aimed to reduce state subsidies and take advantage of the global trend of falling solar costs.
All this means that the price of solar for Egypt is now lower than that for coal, which is now no longer an attractive investment.
Continent-wide
Across Africa, investing in coal power projects has become more risky and controversial. In Kenya, the Chinese-backed 1,050-MW Lamu cola project has lost the support of the African Development Bank (AfDB).
Indeed, the AfDB has now withdrawn com- pletely from coal, meaning that its last support was for South Africa’s Medupi project and Sene- gal’s Sendou coal plant.
Egypt’s decision comes as think-tank Carbon Tracker warned that 46% of all coal-fired power plants would be unprofitable in 2020, rising to 52% by 2030.
A key finding of its report, called Political Decisions, Economic Realities, was that govern- ments and investors building new coal might never recoup their investment because coal plants typically take 15 to 20 years to cover their costs.
The report warned that coal would be unable to provide any post coronavirus (COVID-19) stimulus.
“China and other governments may be tempted to invest in coal power to help their economies recover after the COVID-19 pan- demic, but this risks locking in high-cost coal power that will undermine global climate tar- gets,” said Matt Gray, Carbon Tracker co-head of power and utilities.
This means that for Egypt, the Hamrawein coal project would in the long term run at a loss, with the government and state-run utility EETC locked into tariffs that solar and wind projects are currently undercutting.
The decision to abandon Hamrawein seems to be a wise one for Egypt, and one that other developing economies in Africa considering coal, such as Kenya and South Africa, should follow. ™
Cairo’s move to competitive tendering aims to reduce state subsidies and take advantage of the global trend of falling solar costs
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