New factories need to bring their own clean power or risk falling down the queue

As electricity demand surges and we head into the hotter months, the government has quietly begun screening new factories — not just by what they produce, but by how they plan to power their operations. Access to industrial licenses is now increasingly tied to whether a project can shoulder part of its own electricity load and do it using renewables.

The shift surfaced in a late-January meeting, where two points that amount to a new industrial filter were indicated. First, the Industry Ministry gives “preferential consideration” to new and renewable energy use when it assesses applications to establish new factories to ease pressure on the grid, according to comments from then-industry minister Kamel El Wazir. Second, the Supreme Energy Council requires large, energy-intensive facilities to source “a significant share” of their energy needs from solar as part of the approval process.

The state’s preferential treatment for investors planning to use renewable energy has made its way into the newscycle, and not just in the industrial sector. The government plans to offer up 62 hospital investment projects to the private sector, prioritizing those that use clean energy, EnterpriseAM reported exclusively yesterday.

Renewables will be mandatory for licensing new industrial facilities, while remaining optional for existing plants. The first sectors in line are the metal industries, particularly steel, a government official tells EnterpriseAM. Several players have already started moving in this direction, such as EgyptAlum through its solar project with Scatec.

But this is not tied to a subsidy or a tax break — it’s a condition for getting a project off the ground quickly. Show up with a credible clean-power plan and you move on. Show up planning to dump the whole load onto the grid and you risk falling down the queue.

Driving the move is the fact that when gas supply tightens, industry tends to be the shock absorber. Fertilizer and chemical plants have previously faced reduced gas supplies and were temporarily shut down due to natgas supply pressure. This summer, the government is committed to having no blackouts despite an expected demand rise of 6-7% in the hotter months of the year.

The move is also about exports, as carbon requirements on traded goods — particularly the EU’s Carbon Border Adjustment Mechanism (CBAM) — tighten and access to global markets is increasingly dependent on emission profiles, our source tells us.

Industrialists who will get off lightly will mostly be big, well-financed manufacturers, especially exporters, who can treat renewables as a financeable input. For smaller entrants whose margins already swing with fuel policy volatility, it may be a tough hurdle. Much depends on whether the government’s definition of a “significant share” stays vague or hardens into clear thresholds that turn clean power into a fixed cost of entry — and a predictable box in the industrial licensing checklist.

Industry players expect the policy to accelerate solar deployment. Factories that switch to solar have cut electricity bills by 25-50% across sectors, though savings are smaller for heavy users, Cairo Solar’s Managing Director Hatem Tawfik tells us. Around 50% of the net-metering capacity target is already deployed across factories, as the government works toward 1 GW of installed capacity by 2030.

Small- and medium-scale solar plants also carry minimal foreign currency burden, Tawfik has previously told us. A 10 MW solar installation costs some USD 1.5 mn, compared to roughly USD 11 mn for the same capacity under conventional power arrangements. With upfront costs recovered within two to two-and-a-half years — driven by savings from reduced gas subsidies — the economics are doing as much work as the climate argument.

The move is also expected to give a boost to local solar component manufacturing, reinforcing a shift already underway in Egypt’s solar market. Historically, the sector leaned on imports for core components, but new hubs — backed by Chinese partners and Suez Canal Economic Zone incentives — show that vertical integration is taking place in the country.