Egypt’s power supply surplus is expected to remain high over a 10-year forecast period, attributable to rapid growth in net electricity generation from the boost in investment, Fitch Solutions indicates.

According to Fitch Solutions, Egypt’s economic recovery saw rapid and sizeable growth in new power capacity under the el-Sisi’s government, and after the Arab spring. Between January 2018 and December 2019, total power capacity rose by nearly 14GW.

Furthermore, this injected 25TWh of new electricity supply into the power grid and total electricity demand grew by only 21 TWh over that timeframe to bring about a significant surplus of electricity.

“Egypt’s power supply surplus will remain high over our 10-year forecast period as rapid generation growth outpaces underlying demand trends.”

In order to support ongoing power sector growth and capitalise on its rising excess generation, we expect Egypt to prioritise investment into new cross-border transmission interconnections with the aim of becoming a regional electricity hub.

According to Fitch Solutions, two major power interconnection plans would reinforce the outlook including Egypt-Saudi interconnector and EuroAfrica interconnector.

“The country will prioritize investment into new cross-border transmission interconnections, aiming to become a regional electricity supply hub.”

Accordingly, proposals to expand Egypt’s interconnections with the East African Power Pool (EAPP) and COMELEC (Maghreb Electricity Committee) region both offer significant future export potential for Egypt, Fitch Solutions indicated. Nonetheless, expectations are that Egypt-Saudi and EuroAfrica interconnectors to take priority over the near to medium term.

Green hydrogen to present risks to electricity supply

More so, by expanding its electricity trading capacity, Egypt will be able to avoid mandatory power-downs such as those seen in late 2018. That said, Fitch Solutions expect Egypt’s overall electricity exports to rise steadily through our forecast period to 2030.

Regarding the positive outlook of Egypt’s power sector, Fitch Solutions indicates that green hydrogen presents upside risk to long-term electricity demand.

Considering the risks of green hydrogen, Egyptian Minister of Electricity and Renewable Energy Mohamed Shaker announced plans for the government to invest US$ 4billion into the construction of a green hydrogen production plant.

As a consequence, this will use renewable electricity to power electrolysers. While the plans were not discussed in further detail, the government’s commitment to establish a large-scale green hydrogen project highlights its long-term commitment to energy transition.

“We highlight that its vast solar and wind power potential, robust economic growth, close proximity to and easy access to global trade routes all make Egypt ideally suited to become a major market for global green hydrogen production.

“While we are not yet factoring this demand into our forecasts, given the early stage of the country’s green hydrogen plans, we highlight robust upside risk to our power consumption and renewables growth forecasts over the medium-to-long term.”
Fitch Solutions

Added to that, a significant rise in renewables-specific electricity demand would have a sizeable impact on solar and wind power investment in the country. This would present further upside risk to the long-term renewables capacity growth outlook.