Egypt is a sun belt country, yet small-scale solar plant uptake in homes remains low: Egypt receives 2-3k kilowatts per sqm of direct solar radiation annually, making solar energy a potentially abundant energy source for the country. Integrated grid-connected, small-scale solar systems could save Egyptian households on their electricity bills and ease pressure on the national grid, yet the high cost of implementation and barriers to financing plans are preventing many from turning to the sun’s rays.

A hefty investment: The cost for a solar panel system is a big-ticket, upfront cost, currently ranging from EGP 150k to EGP 300k depending on the size of the system, according to industry insiders. A solar system has a lifespan of over 25 years and an expected payback period of four to six years.

And the EGP float sent prices skywards: The cost of solar panel imports has risen in recent months on the back of a weaker EGP, former head of the Sustainable Energy Division Adel Bishara told Enterprise. The government should consider measures such as waiving customs duties or reducing the costs of inspection and installation processes to incentivize households to install solar systems, Bishara suggested.

Rate hikes have also added more pressure: With the latest 600 bps interest rate hike, the cost of lending has gone up significantly, creating a situation where more people are opting to pay for systems outright, Yaseen Abdel Ghaffar, founder and managing director of SolarizEgypt, told Enterprise. With yields reaching as high as 30% on certificates of deposit, solar systems have become “a harder investment model to sell,” he added.

Initiatives to lower interest rates for solar projects? The residential sector has received substantial support from the government in terms of legislation to help prompt the installation of solar plants in households, but “a reduced interest rate specifically for solar panels would result in a lot of savings for the government and lower the barrier to entry [for customers],” thinks Abdel Ghaffar. With a reduced rate, a household that pays EGP 2-3k for electricity each month could install a solar system and pay a similar, if not lower, number, to own the system over five years — a measure that would also boost the scalability of solar panel installations — Abdel Ghaffar estimates.

The gov’t can reap the benefits too: “If you do the calculation in terms of the reduction of interest rates versus the amount of natural gas that would be readily available for export in USD, it would alleviate the FX issue and provide a higher return for the government from a resource allocation standpoint,” Abdel Ghaffar added.

Solar will become a more realistic option as subsidies are phased out: The more the government unwinds electricity subsidies, the more electricity prices will go up, driving more consumers to look for solar power alternatives, Abdel Ghaffar said.

Urban planning also presents a challenge: Heavily cramped neighborhoods lack access to sunlight, and satellite dishes take up a lot of rooftop space, making it nearly impossible to install solar stations for individual apartments and shops, KarmSolar CEO Ahmed Zahran previously told Enterprise.

Solar panels are not for everyone: Solar plants must be installed on privately-owned sites or where the household has rights to the site for at least 25 years.

Small-scale solar plants would be conducive to Egypt’s renewables targets: Egypt is eyeing generating 42% of its electricity via renewable sources by 2030, to which solar-generated energy is expected to contribute around 5% of the energy mix. More domestic solar plants would result in fewer households reliant on the national grid for energy, and also small-scale plants — up to 10 MW — cost less to connect to the grid and are less vulnerable to weather conditions.

The gov’t has already given support to small-scale solar projects: In a bid to remove some of the market barriers to implementing solar systems, the Electric Utility and Consumer Protection Regulatory Agency (Egyptera) scrapped integration fees for solar plants that produce less than 10 MW of energy per year in 2023, while the fee for larger production projects has been set at EGP 0.30 per KW, a source from the Renewable Energy Authority told Enterprise. Imported solar panels have their customs duties reduced by 5% as per the government’s latest tariff amendments, and the Electricity Ministry has begun establishing partnerships with banks and financial institutions to finance system setups.

Going digital: The Electricity Ministry launched a website last month to streamline the installation of solar panels for households and companies and connect them to the national power grid. The website offers guidance on the installation of PV cells, the costs involved, the necessary capacity, and the required documents, in addition to listing qualified installation companies. You can learn more about the platform in a previous Going Green here.

Could solar plants mean the end for our blackout woes? In reality, probably not, says Abdel Ghaffar. A typical grid-connected solar system is designed to be cost saving, but it is not set up to work as a fully off-grid system, Abdel Ghaffar told us. While a special inverter and a small battery could sustain a solar system during power outages, the cost of installation, equipment, and maintenance would skew the model towards a higher end product, he said, adding that Egypt’s power cuts are expected to be a temporary issue that wouldn’t last more than a year or two, while solar systems are built to be a long-term investment.

Your top green economy stories for the week:

  • Gov’t wants to cultivate rice that consumes less water: The Madbouly government wants to further expand the cultivation of varieties of rice that consume 20% less water than normal seeds. (Statement)
  • Green hydrogen fish farming: Triple M Construction has inked an agreement with the Norwegian Embassy and the International Fish Center to launch Egypt’s first green-hydrogen powered fish farming project. (Al Mal)
Tags: