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2.2.2 Tools and Measures in Favor of Renewable Energy (RE)

Existing incentive measures and policies for RE development at national level (ENE_C06) - The formulation during 2005 of the Egyptian Designated National Authority (DNA) that

regulates CDM activities in Egypt can also be viewed as a tool in that direction.

- We can view the ministerial decree No. 104 for year 1987 of the Egyptian Minister of Housing, Reconstruction and New Communities mentioned in 2.1.2 as one of the effective tools to promote and foster the use of solar water heaters in buildings, though later has become abandoned starting of year 1993 due to reasons mentioned in 2.1.2.

- In June 2004 an agreement was signed between the Ministry of Petroleum and the Ministry of Electricity and Energy to establish the “Renewable Energy Fund” financed from the difference between the international prices of the natural gas saved (hence exported) due to use of wind plants for grid – connected electricity generation, and the local subsidized price of natural gas. This difference will be splitted equally between the two ministries where the Ministry of Electricity and Energy share will have a maximum of 2 Egyptian Piasters (0.35 US cents) and will be allocated to support electricity generation by the electricity sector from RE. In view of the vast current increase in oil and natural gas prices a revision of this limit might be discussed. However, such issue shows that Egyptian authorities concerned conceive renewable energy sustainable development advantages.

- Power Purchase Agreements (PPAs) between NREA and EETC can also be seen as an incentive tool as follows:

PPAs are signed separately for each wind power plant project after acquiring approval of Regulatory Agency for connection to the grid. As a support for renewable energy, EETC bears all expenses of overhead transmission lines and substations extensions above and including 22KV, needed to connect wind power plants to the grid of 220 KV.

Tariffs concluded in the PPAs between NREA and EETC were affected by various wind power plants financing schemes and commissioning date.

• By examining table (2.1), which shows the development of wind energy projects for grid – connected electricity generation and financing conditions for each project, we can notice the following issues:

• The PPA tariff was 7 piaster/kWh (1.22 US cents) for Zafarana (1) being fully financed through a grant and 10 piaster/kWh (1.8 US cents) for the rest of wind power plants until 1/7/2005 when the tariff has become 12 piaster/kWh (2.11 US cents) for all wind plants except Zafarana (1) until 1/7/2006 when it has become also 12 piaster/kWh that turned to be the common tariff for all wind plants till now.

• In the context of heavily subsidized energy prices particularly for the natural gas used to produce more than 90% of total electricity generation from thermal plants, where the average purchase price or tariff paid by EETC to the generation companies for thermal-generated kWh is in the order of 10 piaster/kWh, 12 piaster is considered as an implied incentive for renewable energy.

Training, Information Dissemination and Awareness Raising Programs

A Renewable Energy Testing and Certification Center has been established within NREA premises mainly in Cairo while the Wind Technology and Testing Center (RETCC) is located in Hurghada.

The RETCC was originally started through support of a grant from the EU and the Italian government to establish a set of specialized RE and energy efficiency testing and certification laboratories in addition to supporting general purpose laboratories that were completed in 1994. The wind center in Hurghada was supported through a grant by DANIDA. Later some of these laboratories were updated in phases. The RETCC facilities are being used to support various general and specialized training and information dissemination programs to different levels of interested audience and professionals not only on the national level but also the regional one.

Training curricula includes summer training programs for university students, from Egypt as well as other training programs for engineers and technicians from the Arab Countries mainly and sometimes from Africa.

The RETCC facilities are being used to organize seminars and workshops aiming at awareness raising and information dissemination about the feasibility of RE and RUE also.

Investments and expenditures in RE (ENE- C08)

The following table (2.1) shows the development of existing grid-connected wind power plants projects installed capacity from 2000 to 2006 along with corresponding investment. It should be noted that foreign financing facilities play a key role in implementing the wind power projects plan in view of the so far higher cost of produced wind KWh compared to the one produced from thermal power stations. Consequently, Egypt maintains close cooperation links with developed countries willing to support wind power projects' development through soft financial loans conditions.

Three European countries have been very much interested to support Egypt wind energy program;

Germany, Denmark, and Spain.

Financing Support through CDM

In January 2007 the CDM projects portfolio included more than 40 projects of which 29 have been already accepted and/or approved by the Egyptian DNA expected to produce more than 6 million

CERs annually. The approved and/or accepted 29 projects include 19 projects in the energy sector out of them 4 are in wind electricity generation contributing to produce about 0.82 M CERs (Certified Emission Reductions). Energy projects also include 3 hydropower projects and the rest are mainly fuel switching projects. Note that accepted projects are those acquired the letter of no objection only from the Egyptian DNA to proceed with projects CDM qualification process while approved projects have acquired letter of approval of the DNA to present the project for registration (either registered or not). It should be noted that CDM revenues from selling CERs in RE and wind projects contributed to a limited extent in narrowing the gap between wind generated kWh cost and the conventionally generated kWh unlike, e.g. N2O abatement projects. In the general practice in Egypt, CERs revenues cannot solely close the gap between the cost of wind-generated kWh and that of conventional.

49 Table (2.1): Evolution of Wind Power Plants Projects together with its investment schemes at ZafaranaOrder andName of Plant Wind Power Plant Capacity andCooperating Entity Investment cost and its Currency ForeignFinancing andCurrency Conditions of Loan Commissioning Date Repayment Period Local Works in LE Imported Equipment and its Currency Grant LoanInterest Rate % Total Period Grace Period

Zafarana (1) 30 MW phase(1) of cooperation withDANIDA 9 Million 203 Danish Krone203DK - - Dec. 2000 Zafarana (2) 33 MW phase(1) of cooperation withkfw 22 Million 50 Million D. Mark15 M DM 35DM 0.7540 years10 yearsMarch 2001

Zafarana (3) 30 MW phase(2) of cooperation withDANIDA 10.6 Million 183.6 DK31.6DK 152DK 0 10 years 0.5 years Dec. 2003 Zafarana (4) 47 MW phase (2 &3) of cooperation with kfw 33.8 Million 36.6 Million Euro 10M Euro 26.6M Euro 0.7540 years10 yearsJune 2004

Zafarana (5) 85 MW in cooperation withSpain 107Million 58 M Euro including- soft loan 35 M Euro – 60%- Commercial loan 23 M Euro– 40% - 58 M Euro0.3 4.11 31 years

9 years 10 years

0.5 year Dec. 2006

Note that for the local investment it is always supported by NREA through loans from the Egyptian National Investment Bank (NIB) with commonfinancing conditions for loans in Egyptian Pounds (L.E) of 13% annual interest rate and 10 years repayment period including 2 years of grace period1 US$= 5.7 LE and 1 € = 7.5 LE