Egypt has industrial solar targets but no decree or rulebook to enforce them

The government has set concrete renewable energy targets for industry, but it hasn’t laid the groundwork to enforce them yet. Energy intensive factories like fertilizers and steel are set at 25%, while other industrial facilities are set at 15%, but no decree, regulation, or Supreme Energy Council decision has been published so far to make the change happen, an Industry Ministry official tells Enterprise. The government is now building out the financing mechanisms, documentation requirements, and technical support that manufacturers will need to comply with its solar measures, the official says.

“There’s a difference between a number existing and a number being enforceable,” Carboun Institute’s Executive Director Karim Elgendy tells EnterpriseAM. An indicative target without a clear framework for how a factory actually procures and verifies its share is hard for an investor or lender to price with confidence, he adds.

The shift toward new renewable energy targets started back in January, when comments from then-Industry Minister Kamel El Wazir indicated that the Industry Ministry now gives “preferential consideration” to new and renewable energy use when it assesses applications to establish new factories to ease pressure on the grid. Additionally, the Supreme Energy Council now requires large, energy-intensive facilities to source “a significant share” of their energy needs from solar as part of the approval process. The push to require new factories to incorporate solar power forms part of a broader strategy to increase the share of renewable energy in industry, reduce production costs, improve manufacturing efficiency, and strengthen the competitiveness of Egyptian exports.

The plan has raised questions about how it will work in practice. Since El Wazir’s January announcement, no publicly available decree or regulation has been released. That leaves important questions unanswered on which projects are covered, how compliance will be assessed, and whether the requirements are legally binding.

The cost squeeze is compounding the problem. Industrial demand for renewable energy projects has slowed despite the government’s push, because higher costs have made new installations less attractive, a source at a renewable energy company tells us. The cost of building solar projects has risen to around EGP 20 mn per MW, up from EGP 14.5 mn, driven by the stronger USD and higher import costs for panels and other equipment due to the regional escalations and maritime volatility, the source says. Higher upfront investment has lengthened payback periods, dragging demand further.

Egypt is taking a different route from the Gulf. “The Gulf led with cheap supply and let demand follow. Egypt, with the gas crunch putting industry first in line for power cuts, is leading with a license condition instead. But right now it’s a filter rather than a market,” Elgendy says. The UAE and Saudi Arabia built the model around a single state buyer running competitive auctions, which drove solar tariffs to record lows. “Industry then bought into cheap, clean power because it made sense, not because anyone required it to,” he adds.

The government is working on the financing side. Officials are discussing technical support and concessional financing with local and international development partners and Egyptian banks to help manufacturers finance solar installations, the government official notes. The ministry is also studying amendments to the Finance Ministry-backed 15% subsidized lending initiative for industry to allow financing for solar plants, the official adds.

Another potential solution: Electricity-bill savings for factories which have adopted solar have grown, our source at the renewable energy company tells us. The source proposes establishing a dedicated fund that would recycle part of those savings into concessional loans for factories that haven’t yet installed solar capacity.

What to watch: Elgendy flags two signals. First, “whether these targets end up in a decree or executive regulation, or stay as negotiated sector targets,” he says. Second, “whether procurement catches up: a working wheeling regime and a bankable certificate scheme matter more here than the percentage itself.” Our government source says that the ministry’s near-term focus is on familiarizing industrial companies with the renewable energy plans and the required documentation, while finalizing financing arrangements with development institutions and financing initiatives through the Federation of Egyptian Industries.

OUR TAKE- Egypt has the numbers: 25% at energy-intensive factories, 15% everywhere else. But it doesn’t have the rulebook: no decree, no regulation, no verification scheme. Solar got pricier too: EGP 20 mn per MW, up from EGP 14.5 mn. Payback periods are stretching just as factories are asked to hit an unenforceable target. A wheeling regime, a certificate scheme, or the financing talks with banks and the Federation of Egyptian Industries could close that gap. Until something does, every industrial solar announcement is directional, not binding.