Could Shams Masr help solve our energy challenges?

Shams Misr initiative leans on concessional finance to drive a solar boom: Egypt could accelerate solar adoption and achieve immediate fiscal savings if the state backs initiatives to deploy distributed solar systems across homes, factories, commercial sites, farms, and off-grid areas. This is the premise of the Shams Misr initiative put forward by the Sustainable Energy Development Association (SEDA), an industry group, which is planning a lobbying push to put the idea on the radars of cabinet and other government agencies amid a recent surge in fuel import costs.

The initiative focuses on lowering upfront costs and stimulating demand through a package of direct incentives. It calls for concessional financing at 0% interest for solar energy adopters, and aims to raise the internal rate of return for end users from 20% to 38% by exempting components and EPC contracts from customs duties and VAT for five years. The initiative targets installing up to 5 GW over five years, potentially saving the state coffers around USD 500 mn annually in gas subsidies used for power generation.

How is the saving calculated? The calculation of natural gas savings under Shams Misr is based on converting solar generation capacity into equivalent thermal units and monetary value. The model assumes that every 1 MW of installed solar capacity saves around 10k MMBtu of gas annually. This benchmark is used to compare solar generation with conventional alternatives, particularly diesel-powered generators in off-grid areas. Based on an assumed LNG price of USD 15 per MMBtu, each 1 MW installed translates into annual savings of roughly USD 150k.

Sustainable financing included: The initiative also proposes establishing a dedicated fund under the name Shams Misr to finance solar expansion, funded through a levy of one piaster per kWh on electricity bills, generating around EGP 3 bn annually. Additional funding would come from penalties on high-emission, non-compliant activities. The mechanism is designed to secure stable domestic financing while unlocking access to international green finance and accelerating solar deployment to reduce the reliance on imported fuel and strengthen energy security.

Growing momentum: Calls to accelerate distributed solar adoption have gained traction on social media following the US-Israeli-Iran war and the resulting spike in global and local energy prices. Bn’aire Naguib Sawiris called for installing solar systems across residential compounds to enable self-sufficiency, while Hatem Tawfik, managing director of Cairo Solar and a SEDA board member, renewed calls for the government to adopt the Shams Misr initiative in a video posted online, highlighting its improving economic viability (watch, runtime: 3:31).

Financing, not demand, is the bottleneck: “We need a dedicated concessional financing initiative for solar. These are capital-intensive investments, and homeowners or factories are not expected to deploy cash today and recover it over six or seven years,” Tawfik told EnterpriseAM, adding that “loan installments under the proposed model would be equivalent to the electricity savings, meaning cash flows remain unaffected.” This would also enable companies to export to markets requiring clean energy compliance. Once loans are repaid over around five years, users fully benefit from solar savings.

The economics are already compelling: Installing 1 GW of solar capacity under concessional financing would require around USD 150 mn, which could be recovered within a year, Tawfik told us. According to the proposal, households with monthly electricity bills of around EGP 2k could fully offset this cost by installing solar panels at approximately EGP 150k, implying a clear payback period, especially when supported by concessional financing.

Costs have risen, but remain attractive: Solar module prices have increased from around 9 cents to 16 cents following changes in Chinese export subsidies, but remain well below historical levels of around 59 cents in 2014, Tawfik said. Installation costs currently stand at around EGP 18 to 19k per kW for residential users, compared to roughly EGP 14k for industrial users, reflecting a typical 20 to 25% cost differential due to inverter requirements. Additional measures such as scrapping the 14% VAT and reducing customs duties, 2% on panels and 5% on components, would further enhance project economics, he said.

Every kilowatt matters for the state: The government currently bears at least EGP 4 per kWh in electricity costs, meaning distributed solar expansion delivers direct fiscal savings regardless of who installs the systems, Tawfik explained.

A regulatory framework exists, but momentum has stalled: The government allows up to 1 GW under the net metering scheme through 2030, providing a foundation for rollout.

“That was phase one, enabling installations. The next step is scaling financing, but discussions with policymakers have yet to translate into implementation,” Tawfik said.

Technical constraints? Technical challenges are limiting rapid expansion of distributed solar, primarily related to the grid’s capacity to absorb excess generation, a government source told EnterpriseAM. Peak generation periods often exceed consumption, requiring surplus power to be fed into the grid, which necessitates grid connectivity for all systems. Unregulated capacity additions could strain transformers, shorten their lifespan, and increase maintenance costs beyond achieved savings.

Two pathways to solve the issue: The government is studying mapping grid capacity and load distribution across new and planned areas. The other pathway could be mandating battery storage for all renewable energy projects to stabilize supply, though this is still under review in light of evolving fuel use patterns and grid needs, the source said.