Solar energy firms are lobbying the government to adopt new financing mechanisms and tax breaks. This should help speed up the transition of industrial and residential consumers to clean energy, according to a proposal (pdf) from the Sustainable Energy Development Association (Seda) industry group. The push follows years of negotiations with the ministries of electricity and finance, culminating in recent directives from Prime Minister Mostafa Madbouly to fast-track an incentives initiative for the sector.

The stick behind the carrot. The real market driver is mandatory legislation, not just incentives. The Supreme Council of Energy’s decision to require new factories to source 25% of their consumption from renewables will create massive demand that requires a robust financing and regulatory framework, Seda Executive Director Ayman Heiba tells EnterpriseAM.

** Earlier this month in Going Green, we dove into how the Shams Misr initiative leans on concessional finance to drive a solar boom.

Why do we need a new initiative? The country has successfully attracted FDI for massive utility scale plants, but it isn't doing enough to support the end-user. The biggest challenge for factories and households is the high upfront costs. “Since 2014, the state has approved incentives for power production. Today, we need to activate incentives that target the consumer,” Heiba tells us.

A self-funding mechanism: To solve the financing bottleneck, Seda’s proposal — dubbed the Shams Misr initiative — suggests setting up an energy transition support fund. Instead of burdening the state budget, the industry suggests a self-funding model:

  • The one-piaster fix: Seda proposes a fixed levy of one piaster per kWh on all electricity bills nationwide, which would generate EGP 2-3 bn annually for the fund;
  • Crowding in green finance: A fund with a clear, reliable revenue stream would whet the appetite of international green finance institutions, allowing the state to leverage those funds for larger incentive packages;
  • Tax tradeoff: The proposal calls for VAT and real estate tax exemptions for solar components. Seda studies suggest the resulting natural gas saving — which would have been burned for power — would recover the lost tax revenue in less than two years;
  • Job creation and localization: Distributed solar (like rooftop installations on factories and homes) creates 3-5x more local jobs. Boosting demand at the consumer level would also create the scale to attract investment in localizing solar component manufacturing, Heiba tells EnterpriseAM.
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