Power Purchase Agreement in Egypt

Power Purchase Agreement in Egypt: A Step Towards Sustainable Growth

Egypt has been experiencing a significant increase in its electricity demand in recent years, with an annual growth rate of 7.2%. The government has recognized the need to invest in renewable energy sources to address this growing demand while also reducing the country`s dependence on fossil fuels. One way to achieve this is through Power Purchase Agreements (PPAs).

A Power Purchase Agreement is a contract between a renewable energy generator and a purchaser, typically a utility or commercial entity, outlining the terms of the purchase and sale of electricity. The agreement guarantees a long-term buyer for the renewable energy generated and provides the generator with revenue certainty, making it easier to secure financing for the project.

Egypt has already made significant progress in developing renewable energy projects, with the government setting a target of 20% of the country`s electricity to be generated from renewable sources by 2022. The Ministry of Electricity and Renewable Energy has launched a feed-in tariff program to incentivize private investments in renewable energy projects, and through this, many projects have been connected to the grid.

However, the fixed tariff rates under this program have been subject to change, leading to uncertainty for investors. PPAs offer a more stable alternative to the feed-in tariff program, as the price of electricity is negotiated between the generator and the purchaser, providing more price certainty for both parties.

Furthermore, PPAs can be structured to include more than just the purchase and sale of electricity. They can include additional clauses such as a commitment to invest in local communities, job creation, and environmental protection, making the project more sustainable and contributing to the achievement of the United Nations Sustainable Development Goals.

One such example is the 250 MW West Bakr Wind project in the Gulf of Suez, which signed a PPA with the Egyptian Electricity Transmission Co. and the New and Renewable Energy Authority in 2019. The PPA included a commitment to create job opportunities for the local community and support local suppliers, contributing to the growth of the local economy.

In conclusion, Power Purchase Agreements offer a promising solution to Egypt`s need for increased renewable energy generation, providing revenue certainty for generators and price certainty for purchasers. By structuring PPAs to include additional sustainable development clauses, the country can not only achieve its renewable energy targets but also contribute to the United Nations Sustainable Development Goals and support local communities.