Hope and
solar power

By 2019, 37 square km of desert near the village of Benban, outside Aswan, will be covered with panels – a vast solar park made up of multiple plots allocated to different sponsors.

Together they will provide 1.8 GW of electricity. It’s part of the Egyptian government’s ambitious plan to generate 20 per cent of its energy needs from renewable sources by 2022 and at least 35 per cent by 2030.

Developments such as Benban will not only change Egypt –which, though plentifully supplied with sun, currently has almost no solar generation – but also have revolutionary potential for the rest of the world.

As the global community grapples with becoming less dependent on polluting hydrocarbons, unexpectedly big drops in the cost of producing clean energy in the past two years have made it competitive with conventional energy in more and more countries.

This makes it likelier that solar and wind power –traditionally the preserve of tiny niche producers – could soon be scaled up to industrial levels that could help save the planet from runaway climate change.

But part of the point about revolutions is that no one involved in them knows how they will end. So the notion that, at last, the moment has come for radical change in renewable energy also raises new questions – some of them unsettling – about how best to respond and be positioned advantageously for the future.

For the moment, however, excitement is the predominant emotion, as tenders around the world come in at ever lower prices, opening up startling new possibilities. At seven-and-a-half dollar cents per KW hour, a usual price now, EBRD bankers say, solar is competitive with gas-fired generation. But it can get cheaper still.

Until October 2017, the cheapest pricing on record for a solar project was for 2.42 cents per KW hour in Abu Dhabi. By mid-November, the renewables community was digesting an astonishing offer to supply power at a utility-scale Saudi solar plant for a record-breaking 1.79 cents per KW hour. By 21 November, however, this too had been superseded. An even cheaper price of 1.77 cents per KW hour had been achieved in Mexico. 

Arithmetic like this has brought investors who are aware of the accelerating development of the sector flocking to the Benban complex. Among IFIs, the EBRD will fund 16 plots on the future solar park, providing 750 MW of energy through a US$ 500 million renewable energy framework.

Other development banks are also offering large-scale funding. Experienced investors are committing too, from Norway’s Scatec Solar and Saudi Arabia’s Al Fanar and ACWA Power, to France’s EDF Energies Nouvelles and EREN Renewables, to important Egyptian companies such as El Sewedy Electric and Infinity Solar, the first to build at Benban under the first round of Egypt’s renewables programme.

The EBRD's work at Benban is supported by donors including the  European Union as well as  Australia,  Finland,  France,  Germany,  Italy,  the Netherlands,  Norway,  Sweden,  Taipei China and the  United Kingdom under the  SEMED Multi-Donor Account, and the  Green Climate Fund.

Despite the excitement, this is still a journey without maps.

The unknown terrain ahead could bring previously unimaginable rewards. But snags need to be mapped too.

Africa50’s Ebobissé talked about how the growth of solar, including off-grid production, could help supply the 600 million people in Africa who need reliable electricity and who have been promised it by 2030 through the UN Sustainable Development Goals.

But, he said, first costs need to come down, and batteries to store electricity need to be improved and become cheaper. There needs to be a better model to invest in the small businesses currently in the field to help give them the prospect of substantial growth. And governments new to the renewables field need help in negotiating complex and technically demanding energy deals with better equipped private partners.

What single improvement in the next year might bring the much deeper penetration that the industry and governments alike say they want?

Several other experts thought the biggest need was to make it easier to get money for development. Marie-Astrid de Montmarin, Area Manager, MEA, for France’s EDF Nouvelles Energies, opted for tax reform and cheaper finance: “Where are the commercial banks?” Mikkel Torud, CFO of Norway’s Scatec Solar, said: “I would say the cost of debt and the process of getting access to debt [is the biggest need]. There is still a lack of capacity.”

As the renewables market of the future takes shape, the future of the shape of the deals made is also likely to change. Feed-in tariff deals, such as the Egyptian one that gave rise to Benban, may give way to more sophisticated competitive bidding that could bring prices still lower and “open the door to creating the conditions to allow for even larger investments in the future,” said Harry Boyd-Carpenter.

With feed-in tariffs, the price (or tariff paid to the renewable energy generator) is set by the regulatory body responsible, while the quantity of renewable energy electricity generated is determined by market players. It’s the other way around with competitive auctions, in which the regulatory body defines the amount of generating capacity it wants, and the tariff is defined by competitive bidding from project developers.

Of Benban, Boyd-Carpenter says: “When, having seen this development completed, the government then runs competitive tenders, the fact that you already have 10 to 12 serious investors established in Egypt means that they’ll get a very competitive process.”

For now, Egypt’s main barrier to hitting even that first target is the need for more investment and building. Much more. The 1.8 GW Benban development represents most of the 2 GW of photovoltaic capacity that the Egyptian government offered through its current feed-in tariff system to encourage solar development.

To get to a 20 per cent proportion of renewables, Egypt will need to build more facilities – enough to produce an extra 10 GW – says Cairo-based EBRD banker Ahmed Mortada, who has been working on Benban from the start.

That’s a huge amount, Mortada acknowledges – the equivalent of five more Benbans in five years – even though Egypt already also has two operational wind farms run by the government and some hydropower from Aswan’s High Dam.

But, adds Mortada, it is achievable. “The beauty of solar is it has a short construction time – a year, or even as little as nine months.”

So there will be time for more investors paying attention to Benban’s success – once it is built – to come forward to build more, whether on a similar grand scale or more modestly.

They could still be producing in time for the deadline, says Mortada, and “doing a massive thing in the beginning is a very good story.”

The government is also interested in further developing its wind power resources, he says. Design-wise this is more demanding, because a wind turbine is harder to install than a simple solar panel. But he sees Egypt focusing more on more complex wind investments in coming years, now that its initial drive to get solar –with its simple construction needs – up and running, is paying off.