Three years since EnterpriseAM last examined Egypt’s geothermal potential, where do we stand? In short, Egypt still has no geothermal power plants in operation. Efforts since then signal an interest in tapping the heat beneath our feet, even as longstanding challenges — from resource limitations to policy gaps — continue to challenge the way forward.

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Although no actual full-scale projects were launched, Egypt laid the groundwork for geothermal development through capacity building. A key effort has been the Geothermal Energy Capacity Building in Egypt project launched in late 2020 with EU support. It aimed to establish Egypt’s first geothermal engineering graduate diploma and an educational pilot plant by 2024. The final seminar was concluded in July 2024, but nothing has been publicized since then.

Officials also renewed efforts to assess Egypt’s best geothermal sites. In February 2024, the South Valley Petroleum Holding company — more often known by its acronym, GANOPE — inked an MoU with Schlumberger to identify prime locations and conduct feasibility studies for geothermal power generation. It represents the first significant government-led study of geothermal potential since an initial MoU in 2016.

REMEMBER- Egypt simply may not have abundant high-temperature geothermal reservoirs. Research indicates the “majority of geothermal resources in Egypt can be categorized as medium-to-low temperature potentials,” insufficient for large-scale power generation. The best prospects are in tectonic areas in the east of the country, like the Red Sea’s western shore and gulfs of Suez and Aqaba, and may also be discovered in some areas of Delta and Western Desert, National Research Institute of Astronomy and Geophysics Director Abdel Zaher told EnterpriseAM.

These initiatives mark tangible if modest steps forward. However, still no drilling has occurred yet, and any pilot plant remains on the drawing board, an informed source told EnterpriseAM.

But why hasn’t geothermal energy made more significant progress in Egypt? Egypt’s renewable energy plans and policies have largely bypassed geothermal energy so far. Investing in geothermal energy requires some encouragement and assistance, in the form of legislation and regulations that give facilities and incentives to geothermal energy investors, Abdel Zaher told us. There are no dedicated incentives, tariff schemes, tenders, and land allocation to increase the financial viability of geothermal projects, nor a clear framework for licensing and development. In contrast to rolled out feed-in tariffs for solar and wind over the past decade, even if a viable geothermal site were confirmed, an investor would have no guaranteed buyer or price for the electricity.

SOUND SMART- A feed-in tariff is a policy tool designed to attract investments in renewable energy by guaranteeing producers a fixed price for the electricity they supply to the grid, which is often above the market rate and for long contracts. The mechanism helps ensure price stability and predictable returns for investors. By setting a clear purchase rate for the clean power, the tariffs then help offset high upfront costs and de-risk projects, making renewables more attractive to private players.

Geothermal power tends to have a higher levelized cost, which likely exceeds Egypt’s current electricity prices. Pricing issues are therefore significant — a tariff that reflects geothermal’s true cost would be needed to entice developers, Abdel Zaher told EnterpriseAM. For perspective, Turkey’s government offered USD 0.105 per kWh as a purchase price for geothermal power to kick-start its sector. Kenya likewise set feed-in tariffs around USD 0.085 per kWh for geothermal with 20-year power purchase agreements. Until Egypt establishes a supportive regulatory framework with favorable pricing and the sharing of risk, geothermal will struggle to attract financing.

We may need a full, detailed exploration at a promising site to establish a proof-of-concept, to show investors at least one success story locally. Even a small fully operational power plant that feeds into the grid would be a landmark, demonstrating that geothermal can work here.

In countries that succeeded with geothermal, governments often shouldered the early risk. Without that early backing, geothermal remained untapped, not for lack of potential, but because no one was willing to take the financial risk into the unknown.

In our region, Turkey’s rapid geothermal boom was driven by policy support that mitigated risk, pushing the country to being the world’s fourth largest producer of geothermal energy. The government offered one of the world’s highest feed-in tariffs — USD 0.105/kWh — assuring premium returns that drew investors. Even after the tariff expired in 2020, Turkey maintained a lower-rate support scheme. To address the high risk of exploration, the General Directorate of Mineral Research and Exploration conducted early-stage drilling, confirming viable resources before auctioning the fields. This minimized uncertainty and encouraged developers to focus on production rather than costly, speculative drilling.

Beyond policy, Turkey leveraged financing tools to lower investment barriers. The World Bank invested USD 550 mn, setting up a risk sharing mechanism to cover part of the costs of failed wells. This model gave investors confidence to expand exploration. Turkey also deployed binary cycle power plants to harness moderate-temperature resources — which was cited by Abdel Zaher as promising for the Egyptian case — while incentives for local manufacturing helped build a domestic geothermal industry.

In our continent, Kenya leads Africa in geothermal development, leveraging its position along the East African Rift, with a capacity of 900 MW-1 GW, which supplies around 40% of its electricity mix. The government role was key, taking on the riskiest phases of development, by creating the Geothermal Development Company in 2008 to handle high-risk exploration and drilling, shouldering upfront costs that private developers typically avoid. Kenya’s main power generator (KenGen) had been investing in geothermal since the 1980s, with the first African plant at Olkaria. A crucial policy move was the introduction of feed-in tariffs in 2010, guaranteeing developers a rate of USD 0.085/kWh. Public-private partnerships further drove expansion — with the Menengai geothermal project, which adopted a steam-supply PPP model.

Your top green economy stories for the week:

  • Egypt has allocated EGP 99.9 bn for renewable energy projects in the current fiscal year, Planning Minister Rania Al Mashat said. The funds are being used to carry out 48 different projects.
  • The IMF has approved our request for USD 1.3 bn in climate funds under the Resilience and Sustainability Facility, in its fourth review of Egypt’s USD 8 bn loan program. The financing is set to be disbursed in tranches rather than as a lump sum.
  • Scatec inked a 25-year PPA with EgyptAlum for its 1.1 GW solar plant and 200 MWh battery energy storage system in Naga Hammadi. The project comes at a cost of USD 650 mn and is set to break ground in the next 12 months after reaching financial close.
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