1. E gypt E ra Electricity Market Reform and Their Relation with the Development of Renewable Energy Market in Egypt

2. E gypt E ra Status and Challenges of Electricity sector in Egypt îEgypt has successfully managed to secure electricity supply to 99.3 % of its population îThe electrical peak demand increased by an average of 7% over the last decade, it increased more than 10% in the year 2005/2006 and continued to do so in the year 2006/2007. îThe peak demand has reached 19,300 MW in 2007. îTo meet the increase in demand an average annual expansion in generation and transmission as well as distribution of 2000 MW is needed over the next 20 years. îThe potential of adding more hydro-generation is limited. îIn 2006/2007 Installed renewable sources (mainly wind) represents only 1.1% of the installed capacity and generated energy from these sources represents only 0.3% of the electrical energy generated. îElectricity purchased from self generation and cogeneration units in industry in 2006/2007 represents only 0.07% of the total electrical energy generated. îElectricity tariff does not reflect the cost of service, furthermore fuel cost subsidy is offered. îBoth whole sale and end users tariffs are based on cross subsidy scheme,

3. E gypt E ra Evolution of Demand and Installed Capacities over the Next 20 years

4. E gypt E ra Reform of the Electricity Sector îElectricity market based on competition and private sector participation has been developed and in the process of conistiutional approval. The market mechanisms include bilateral contracts, balancing, ancillary services and spot markets. îThis market is different from the single buyer captive market which is currently in place. For the establishment of this market several legal and regulatory actions have been taken over the last period.

5. E gypt E ra New Electricity Law îNew electricity law has been prepared and sent to the parliament. The law is paving the way regarding establishment of the electricity market. The law is concerned about: îEstablishment of an electricity market which is based on free competition and transparency. îOwnership unbundling of the transmission system and establishment of the transmission system operator. îThird party access îStrengthen the regulatory authority. îAdopt end user subsidy and not industry subside for low income and lifeline customers. îSupport power generation from renewable sources through the adoption of several mechanisms such as competitive bids and feed-in tariff. îSupport distributed generation, cogeneration and power generation from secondary energies. îSupport energy efficiency and demand side management through several measures including; DSM bids, mandatory energy officers and energy directory for facilities with contracting load above 500 kW, voluntary EE and RET programs by the distribution companies and support L&S and phasing out programs for inefficient equipment.

6. E gypt E ra îSupply Diversification îThe governmnet has declared a program which targets building several nuclear power plants. îNew law for the atomic agencies is under preparation, which includes separation of the nuclear safety from the atomic energy agency and establishment a fully independant agency for nuclear safety. îSupport to renewable energy where a target of 20% of generated energy in the year 2020 will come from renewable sources (including hydropower). îOther renewable sources are also considered including solar thermal (140 MW plant where 20% of the capacity is provided by solar energy is already under implementation) îSupport distributed, cogeneration and generation from secondary sources through adopting TPA, feed-in tariff as well as take or pay contracts. îStudies for the reinforcement of international connections and work to add other regional connections including Mediterranean ring interconnection with the Saudi Arabia and establishment of east Africa power pool as well as the Nile basin pool to have an access to the large hydropower available in these regions. îDemand Control îReestablishment of the supreme council of energy in Oct. 2006 îA energy efficiency strategy in under development Security of Supply

7. E gypt E ra 27.5 1.1 12.9 4.3 54.2 Diversification of the Generation Capacity

8. E gypt E ra Environment and Greenhouse Gases Reduction î90% of the thermal power generation which currently represents 87% of the total generated energy is from Natural gas. îThe share of high efficiency combined cycle power plants has increased to 27.5% in the year 2005/2006. îMost of the added new thermal capacity (2007-2012) will come from combined cycle power plants which will rise the share of these plant to 32% of the pool. îSupport to power generation from renewable and Nuclear sources (governmental programs are already in place). îEnergy efficiency and demand side management

9. E gypt E ra Energy Tariff Reform îIn preparation to the free energy market a plan has been set to lift the energy subsidy to the energy intensive industries over three years. îThe energy intensive industries have been defined as those industries which consume above 50 MWh per year electrical energy or more than 60 MMm3 of N.G. per year. îFive year plan is in place to reduce subsidy to the residential sector and medium and small industries.

10. E gypt E ra Present Status of Electricity Market 6

11. E gypt E ra The Proposed Electricity Market Structure

12. E gypt E ra Egypt Adopted Plan for Renewable Energies and Energy Efficiency îThe Supreme Council of Energy in Egypt has adopted a resolution, this resolution requests: î to have 20% of the electricity Installed capacity from renewable energies not including the existing large hydropower by the year 2020. îProvide state support to RE îThe law is targeting to Integrate Renewables into the electricity market reform plan.

13. E gypt E ra Policies For RE Supplementary Polices Financial Soft Loans Governmental Purchases Taxes and Customs Incentives Related to Production Related to Consumption Contractual Power Purchase Agreements TPA with Privilege in Dispatching Main Polices Quantitative Polices Quota (RPS) Green Certificates Competitive Bids Pricing Polices Feed in Tariff Added Premium Polices Adopted Internationally to Support Renewable Energy

14. E gypt E ra Proposed Policies for Supporting Renewable Energies Adopted by The New Electricity Law îIn addition to the market reform which guarantee third party access, power generation from renewable sources will enjoy priority in dispatching whenever they are available. îThe proposed polices consists of two phases îPhase 1: Competitive Bids îAccording to this approach the grid will issue tenders requesting supplying power from renewable energies resources This will be done within the scope of the following criteria: îControl the increase in RE capacities with reference to the capacity of transmission system and capacity of the market to absorb. îIncrease local manufacturing îIncrease private investment îAchieving the lowest possible prices. îProvide the investors with guarantees through long term power purchase agreements

15. E gypt E ra îPhase 2 îIncrease the chances to the market forces through the implementation of feed-in-tariff taking into consideration the prices achieved in phase 1 Measures Adopted for Renewable Energies in the New Electricity Law (Contd.)

16. E gypt E ra Renewable Energy Fund îEstablishment of RE fund: îThe fund will cover the deficit between the RE cost and market prices îThe main sources of finance of the fund will come the subsidy currently given to the to the fossil fuels used in power generation.

17. E gypt E ra Renewable energy Balancing energy from conventional P.P based on economic prices (by agency) Renewable Energy Addition al balanced energy Paymen t Whole sale Customer payment based on proposed prices (by agency) and approved (by government) Customers (Distribution companies) Renewable energy produced by NAREA based on proposed prices (by Agency) and approved (by government) Renewable energy produced by investors based on competitive bids prices Renewable energy produced by investors with pre – announced feed-in tariff. Subsidy = (Renewable energy purchased price from producers + cost of balancing energy + transmission cost) – (payment by the customers + any additional fees to be added to the eligible customers Renewable energy Payment Subsid y Renewable Energy Development Fund Subsidy Renewable energy Cash flow (payment)

18. E gypt E ra