Egypt has become an attractive hub for green data centers as more investors want to take advantage of the country’s strategic location at the crossroads of data links between Africa, Asia, and Europe, and having access to a plethora of renewable energy sources to power their projects. Nonetheless, there is more to be done to attract more investments to the sector.

Egypt is already a growth engine for the sector across the region: Egypt was among the countries that helped push expectations that Africa’s data center market size will grow at a compound annual growth rate of 12% between 2019 and 2025 to surpass USD 3 bn by 2025.

But the Mideast and Africa still have much catching up to do: The Middle East has 175data centers and Africa has 102 data centers, both are way behind Western Europe which hosts 1,694 centers and North America which hosts 2,793, according to the Data Center Map. Egypt alone has 14 data centers.

Remember: A consortium including Swicorp Infra Capital (SIC), Income Egypt, and RecordDigital Asset Venture announced in January that it will build, own, and operate a green data center in Egypt, under an MoU inked with the CIT Ministry. The data center will be powered by some 200 MWs of solar and wind energy and will export digital services to customers abroad.

What are green data centers? Green data centers are facilities that use energy-efficient technologies to host servers for data storage, management, and dissemination. They have a lower carbon footprint than traditional data centers, as they rely on renewable energy sources and green tech.

Energy-intensive operations: Global data centers’ electricity usage is expected to exceed 1k TWh by 2026, that’s more than double 2022’s consumption, according to the International Energy Agency (IEA) estimates (pdf) in January. An ICT Ministry source told us that data centers gobble up lots of energy to operate servers and cooling equipment, relying on robust power sources in addition to emergency electricity sources to avoid technical problems. The shift towards using renewables is expected to boost the efficiency of data centers, given the large number of renewable energy projects taking place in Egypt.

Where we stand: The Madbouly government wants renewables to make up 42% of the country’s energy mix by 2030. TC Energy Corp — the largest natural gas pipeline operator in North America — said in a recent earnings call that the increase in energy-hungry data centers will lead to a rise in demand for natural gas. Egypt has been facing shortage in natural gas production, which is driving a shift towards sustainability in several investment areas.

Egypt boasts a large number of renewable energy projects, totaling some 6.2k as of 2022, according to official data. Moreover, 14 submarine cables are currently passing through the country.

How does Egypt strive to be a hub for data centers? The government is providing fiber optic cable paths across borders to serve the secure passage of international data through Egypt, in addition to offering advanced services such as cloud computing and other communication services. Egypt is processing a huge amount of government and banking data and electronic payment systems, and a large segment of smartphone users, according to our sources.

A lot of room for wind projects: Egypt is home to some 173k sqm areas that are suitable for potential wind farm projects with a total capacity of up to 350k MW, equivalent to 10 times the current maximum load of the national power grid, Romany Hakeem, chairman of Beneshty Solar and vice chairman of Sustainable Energy Development Association (SEDA) told Enterprise.

What are the obstacles standing in the way of data center investments? While Egypt’s ICT sector has remained attractive to foreign investors, the lack of executive regulations to the Personal Data Protection Act poses an obstacle to further investments in the sector, Deputy Head of the IT division at the Federation of Egyptian Industries and CEO of Linatel Telecommunications Hamdy El Leithy told Enterprise. The act, which regulates and protects personal data, was issued three years ago.

But that should be solved soon, as a government source told us that the law’s executive regulations will be issued soon, as it is one of the requirements for investment in the sector.

The transition to renewable energy would lead to a significant reduction in the subsidies bill, as electricity is supplied using subsidized natural gas. Therefore, increasing projects that rely on renewable energy will lower the energy bill and enhance Egypt’s export capacity for natural gas, Hekeem told us.

EGP float = cheaper solar panels + more investments: Hakeem said that the stability of the EGP exchange rate and the availability of the greenback have reduced the cost of solar power, whereby it would cost EGP 20k to produce a KW, down from EGP 35k. This has led to a decrease in the payback periods, Hakeem said. On the other hand, there is an increase in the cost of electricity, especially for energy-intensive sectors, he added.

The sector needs more incentives: The sector is lacking sufficient incentives, Hakeem said. He believes that renewable energy investors should be included in the new hydrogen incentives, as green hydrogen projects rely mainly on renewable energy. Additionally, direct support for the industry is needed to support the localization of solar panels manufacturing, which are mainly imported from abroad.

Your top green economy stories for the week:

  • Danone Egypt is partnering with Shift EV to transform half of its distribution fleet to run on electric power using electrofitting technology, the dairy company’s general manager Hesham Radwan announced. Danone aims to slash carbon emissions by some 6k metric tons and push down operating costs by 70% by 2030, Radwan said.
  • An unnamed UK company is looking to invest in the country’s green hydrogen sector, with projects soon to be announced, British Ambassador Gareth Bayley said last week.
  • A trial run of ten electric taxis will kick off in the new capital tomorrow, to be followed by the project’s first phase that will see 145 electric taxis take to the streets. (Masrawy)
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