The Energy Market

in Egypt
Tri-Ocean Carbon & Renewables

Short Paper Series (Paper #4)

Written by Maggie Riad
Reviewed by Ahmed Zahran
October 2009
The aim of the short paper is to provide concise and relevant info about
the electricity market in Egypt; and thus to provide a more transparent
and fair background for project assessment and evaluation.

The paper should help familiarize the private sector and foreign
investors with the national electricity structure, the market supply and
demand and the existing electricity market model.

Please feel free to send us your comments and feedback.

A social notion to knowledge is most welcome.

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Table of Contents

Introduction ........................................................................................................................ 4
Energy Sector Overview .................................................................................................. 4

BOOT Projects ................................................................................................................. 4

Public-Private Partnerships (PPP) and Public-Private Finance (PPF) ............................ 5

Demand & Supply............................................................................................................... 5

Market Model..................................................................................................................... 5

Current Market Status..................................................................................................... 6

Egyptian Electricity Transmission Company.................................................................... 6

Egyptian Electricity Holding Company ............................................................................ 7

Proposed Power Sector Restructure ................................................................................8
Timeline of Sector Restructure ........................................................................................ 9
Conclusion .......................................................................................................................... 9
Footnotes .......................................................................................................................... 10
Appendix ........................................................................................................................... 13

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I. INTRODUCTION

A. Energy Sector Overview

Even though Egypt is not as rich in energy resources as many of its neighbors are,
Egypt still counts as one with significant resources of its own, enough to make the
country a net energy exporter 1.
Egypt had installed generating capacity of 17.06 GW as of 2004, with plans to
add 4.5 GW of additional generating capacity by 2007 and 8.38 GW by 2012 2. Most of
Egypt's electric generating capacity is thermal (natural gas) accounting to 75% with some
percentage going to petroleum products (around 14%) and the remaining 11%
hydroelectric coming mostly from the Aswan High Dam 3.
The energy sector in Egypt especially the electricity sub-sector has been
developing and growing quite fast 4. Electric power supply has been recording consistent
high annual growth rate of 6-7% as a result of growing electricity demand in some
sectors such as industry, agriculture and tourism. Egypt's electricity consumption is
expected to grow tremendously during the next 10 years due to Egypt's increasing
population and expanding economy 5.
In order to meet the demand for electricity, the government promoted build-own-
operate-transfer (BOOT) contracts in the late 1990s to encourage foreign entities to invest
in the energy sector in Egypt developing electric capacity 6. BOOT projects have the
advantage of funding large-scale public infrastructure plants without affecting the
government’s financial accounts. Such projects provide the private developers with a
win-win scenario as they are able to recover the high costs of construction through
ownership and operation of the plants for a long fixed period (not less than 20 years)
before giving it back to the government 7.

B. BOOT Projects
The first BOOT project began operation in 2001 and it was a gas-fired steam
power plant with two 325 MW generating units, located at Sidi Kerir on the Gulf of Suez.
The BOOT contract was granted to the U.S. based InterGen (joint venture between
Bechtel Enterprises and Shell Generating Ltd.) along with two local partners (Kato
Investment and First Arabian Development and Investment). Electricity from the plant is
priced at 14-15 Piasters per kWh and is supplied by EGAS 8.
The second BOOT power project was granted to Electricite de France (EDF), for
establishing two gas-fired plants to be located near Suez and Port Said. Both plants have
an installed capacity of a total of 1300 MW costing around $900 million. The price for
power from the EDF plants will be 18 Piasters per kWh. Both plants began commercial
operation in 2003 9.
In April 2007, Egypt’s Orascom Construction Industries was awarded a contract
to build a 700 MW power station, al Tebbin power plant, outside Cairo that is expected to
start operation in 2012. Moreover, in July the same year, General Electric and its Italian
partner Techint Cimi Montubi were approved to build two gas turbine generators at the
new 750 MW al Kureimat III combined cycle power plant south of Cairo 10, 11.

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 C. PPP & PPF
The government is also eager to develop public-private partnerships (PPP) and
public-private finance (PPF) initiatives as part of its ambitious plan of augmenting its
current installed capacity via public & private sector efforts as well as via renewable
energy projects such as biomass, solar and wind power 12.

II. DEMAND & SUPPLY

Egypt has witnessed growth in energy demand attributed to demographic trends,

increased industrial production as well as rising penetration of consumer products such as
electric and electronic home devices 5. In 2008, Egypt has reached a peak demand of
21,500 MW and it is expected to reach 54,200 MW by the year 2027 13.
Moving to the installed electric capacity, it reached around 22,025 MW in 2008,
compared to 20,593 MW in 2005. The power generation mix consisted of 87% of power
relying on oil and gas, 12% on hydro and 1% from wind and other renewable resources
14
. In the period 2002-07, a total of 4,500 MW was added to existing capacity, and a
further 8,650 MW is due to be added by 2012, principally from 11 new thermal plants
and expansions 15. The government is working on promoting green energy aiming to
achieve a target of 3% of its electricity production needs from renewable sources by 2010
with further increase in renewable energy production to reach 20% by 2020 16.

Consumption Forecasts: Although energy consumption in Egypt is low by regional

standards, total energy consumption is expected to go up over the coming 2 years, at
around 7.7% annually, slightly faster than the average increase in GDP growth 17.
Positive economic growth will increase industrial output and energy-intensive gas and oil
extraction and will eventually increase Egypt's energy consumption over the forecast
period.

III. MARKET MODEL

The electricity market is organized under a single buyer market model, where the
government is responsible for the electricity supply to the large customer - and consumer
base leaving a minor role for the private sector to play. The electricity is sold at a
regulated price solely determined by the government.

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 The single buyer market model is quite constrained as all economic decisions and
pricing pertaining to electricity are being decided upon by the government with limited
access to private entities 18. Moreover, there is limited room for growth and development
of the electricity market given the existing central planning approach to energy, lack of
incentives provided to the private sector especially in the renewable energy field and
existing unbalanced energy subsidies 19.
Recognizing the current energy market weaknesses, the government is planning
the implementation of energy reforms promoting renewable energy and energy efficiency
moving towards a liberal energy market 20.

A. Current Market Status

Egypt has untied its previously vertically integrated electricity sector into 16
electricity companies, including six generation companies, one transmission company
and nine distribution companies 21.

B. EETC
The state-owned company, the Egyptian Electricity Transmission Company
(EETC) is the only company licensed for electricity transmission in Egypt where it owns
and operates the transmission network.
EETC purchases electrical energy from the 6 generation companies, the three
BOOT thermal power plants in addition to any imported energy sources. After the
purchase, EETC sells the electrical energy to the nine distribution companies, 81 large
consumers that are directly connected to the high - and extra high voltage networks, in
addition to 7 private distribution companies that account for less than 1% of the market.
The distribution companies in turn sell electrical energy to around 24 million consumers
on both the medium and the low voltage grid 22.

Figure 1: Power Sector Structure

Source: EETC presentation “Legal and Regulatory Framework” 2009

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 As for export, EETC exchanges energy with neighboring countries such as Libya,
Jordan, Lebanon, Syria and Turkey via the present international gridconnected system.
The interconnection has brought about the opportunity for countries’ individual markets
to share electricity and has helped stabilize the individual grids serving both technically
and economically 23.
In addition, Egypt was chosen in 2002 as the host country for the international
coordination and control centre. The purpose of the control centre is to distribute the
electricity through an integrated Mediterranean power grid plan. The plan includes the
countries that have a gridconnected system with Egypt in addition to Iraq, Turkey,
Tunisia, Algeria and Morocco 24.
EETC is overall accountable for the countrywide transmission of electricity. The
company also guarantees that the generated power reaches the regional and local
distributors through its national load distribution centers and regional control hubs 25.

C. EEHC
All electricity companies remain state-owned under the Egyptian Electricity
Holding Company (EEHC). EEHC owns around 90% of the total installed generation
capacity that is about 22.6 GW (BOO Prequalification presentation). Apart from the 6
generation companies owned by EEHC, there are three private BOOT projects
contributing 9% of the installed generation capacity and 1% is attributed to the present
wind farms and small isolated units 26. Figure 2 indicates the generation and distribution
companies under the Egyptian Electricity Holding Company EEHC.

Figure 2: Generation and Distribution Companies

Source 27a: Transitional Market Plan Assessment of the Transmission System Operations Draft by
KANTOR Management Consultants

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Figure 3 illustrates the relations, number and type of entities existing in the current
Egyptian market scenario coordinating the different electricity activities

Figure 3: The different players involved in the electricity market in Egypt on

demand and supply side

Source 27b: Presentation on the current status of the electricity market players in role and number
done by the Egyptian Electric Utility and Consumer Protection Regulatory Agency (EEUCPRA)

D. Proposed Power Sector Restructure

The objective of the restructure is to ultimately establish a fully competitive
electricity market, where electricity generation, transmission and distribution activities
are fully uncoupled (Kantor). The proposed market will adopt bilateral contracts with a
balancing and settlement mechanism that enables the Egyptian electricity market to
engage with the regional interconnected network and as well as with the European Grid
eventually. A detailed market transition plan points out two submarkets working in
parallel, namely the regulated market and a liberal competitive market. The plan is to
gradually integrate both submarkets to end up with one fully competitive energy market
28
.
In the bilateral market model, market participants enter freely into contracts, and
submit production schedules with their contract positions ahead of time, which enables
consumers to conclude direct bilateral contracts with generation companies on a free
competition basis. The transmission company receives transmission fees from the users to
cover the costs associated with the electricity transmission and transfer based on voltage
level, Mw and MWh components 29.

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 E. Timeline of the Sector Restructure
Phase 1 (January 2010-2013): In this phase all eligible EHV and HV customers
have a choice of suppliers. Eligible customers have at least 20MW demand capacity and
they represent 30% of the market volume. They are free to decide between free price
negotiation with generation companies based on the competitive market structure or
remain in the regulated market model subject to regulated prices 30. Moreover, the
balancing service will be provided by the transmission system operator at regulated prices
that reflect costs (based on system marginal price determined by the unit commitment run
on day ahead).
Phase 2 (2014-2020): The new features introduced in this phase are the following:
All medium voltage (MV) customers will be added to the eligible customer status; thus
introducing 20% more to a free competitive market. Non-eligible customers will purchase
electricity from the transmission company at the regulated tariff 31. Moreover, privately
owned companies are allowed into the competitive balancing system.
Figure 3:
The Proposed
Power Sector
Restructure

Source: Transitional
Market Plan
Assessment of the
Transmission System
Operations

IV. CONCLUSION

The electricity industry in Egypt is about to witness a paradigm shift toward unbundling
its vertically integrated and mostly state owned structure into a more decentralized and
incentive based composition, taking into consideration the current market needs and
opportunities 32. The foreseen restructuring framework for the industry outlined in the
paper considers a fully competitive scenario where electricity generation, transmission
and distribution activities are fully uncoupled. The proposed market will adopt bilateral
contracts with a balancing and settlement mechanism that enables the Egyptian electricity
market to engage with the regional interconnected network and as well as with the
European Grid eventually. The plan is to integrate and gradually converge the existing
regulated market towards the foreseen competitive market to end up with one fully
competitive energy market.

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V. FOOTNOTES
1
“Egypt: Energy and Electricity Forecast (Market Profile)”. Economist Intelligence Unit
posted on ABQ Zawya. July 2008. Online: http://www.zawya.com/marketing.
cfm?zp&p=/story.cfm/sid EIU20080901211 238796?cc
2
MBendi Information Services. “Electrical Power in Egypt Overview”.
http://www.mbendi. com/indy/powr/af/eg/p0005.htm 08/10/2009
3
Egypt Electricity. Energy Information Administration. Official Energy Statistics from
the U.S. Government. http://www.eia.doe.gov/emeu/cabs/Egypt/Electricity.html
08/10/2009
4,5
“Egypt: Review of Bank Group Assistance to Electricity Sector”. The African
Development Bank Group. June 2005. Online: http://www.afdb.org/fileadmin/uploads
/afdb/Documents /Evaluation-Reports/00434436-EN-EGYPT-BGA-ELECTRICY.PDF
6
“Egypt: Energy and Electricity Forecast (Market Profile)”. Economist Intelligence Unit
posted on ABQ Zawya. July 2008. Online: http://www.zawya.com/marketing.
cfm?zp&p=/story.cfm/sid EIU20080901211 238796?cc
7,8,9
MBendi Information Services. “Electrical Power in Egypt Overview”.
http://www.mbendi. com/indy/powr/af/eg/p0005.htm 08/10/2009
10
ARE/MEE/EEA Arab Republic of Egypt, Ministry of Electricity and Energy, Egyptian
Electricity Holding Company (EEHC), Annual Reports of Electric Statistics, 2005/2006
11,12
ARE/MEE/EEA Arab Republic of Egypt, Ministry of Electricity and Energy,
Egyptian Electricity Holding Company (EEHC), Annual Reports of Electric Statistics,
2006/2007
13 “
Electricity Regulatory Agency Consulting Services - Egypt”. International Resources
Group (IRG) - Final Report. United States Agency for International Development
(USAID) May 2005. Online: http://pdf.usaid.gov/pdf_docs/PDACF298.pdf
14
Egypt State Information Service. SIS Publication. Online: http://www.sis.gov.eg
/En/Pub/yearbook /book2007/ 110105000000000010.htm
15
Legal and Regulatory Framework – Egypt. Ministry of Electricity & Energy -
Prequalification Document for the BOO Wind Power Project 250MW at Gulf of Suez.
July 2009. Online: http://www.eetcom.com/pdfs/2__Legal%20and%20 Regulatory%20
Framework.pdf
16
Legal and Regulatory Framework – Egypt Era 2009tion. Online:
http://www.sis.gov.eg/En/Pub/yearbook /book2007/ 110105000000000010.htm

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10
17, 19 “
Egypt: Energy and Electricity Forecast”. Economist Intelligence Unit. July 2008.
Zawya. Online:http://www.zawya.com/printstory.cfm?storyid=EIU2008090121123
8515&l=000000 080724
18, 22
Memorandum of Understanding on Strategic Partnership on Energy between the
European Union and the Arab Republic of Egypt. Online: http://ec.europa.eu/external_
relations/egypt/docs/mou_energy_eu-egypt _en.pdf
21, 26
H. Elsalmawy, H. Waheed, M. Abdel-Rahman, and H. Saleh. “The Egyptian
Electricity Market in Transition”. The Egyptian Electricity Utility and Consumer
Protection Regulatory Agency. Online: http://www.auptde.org/newsite/UploadFiles/
Activity paperfile/339.ppt
23, 24 “
Egypt: Review of Bank Group Assistance to Electricity Sector”. African
Development Bank Group. June 2005. Online: http://www.afdb.org/fileadmin/uploads
/afdb/Documents /Evaluation-Reports/00434436-EN-EGYPT-BGA-ELECTRICY.PDF
21, 22
Inception Report. The Institutional Capacity Building of The Egyptian Electric
Utility and Consumer Protection Regulatory Authority (EEUCPRA) Contract no.
143297/2007. Submitted by KANTOR Management Consultants. Online:
http://www.egyptera.com/en/pdf/INCEPTION %20REPORT_final%20 draft.pdf
23, 24, 25 “
Energy-policy Framework Conditions for Electricity Markets and Renewable
Energies 23 Country Analyses”. Chapter Egypt. Division Environment and Infrastructure
TERNA Wind Energy Program. September 2007. Online: http://www.jcee-
eg.net/download.asp?path=library/en-windenergy-egypt-study-2007.pdf.
26
Elsobki, Mohamed Salah. “An Optimal Based IRP/DSM Formulation for Electric
Utilities in Transition to a Liberalized Electricity Market”. Electricity Distribution. 2009
20th International Conference and Exhibition on Volume, Issue 8-11 June 2009 Page(s):1
-4
27a
“Transitional Market Plan Assessment of the Transmission System Operations Draft”.
KANTOR - Framework Contract. The Institutional Capacity Building of The Egyptian
Electric Utility and Consumer Protection Regulatory Authority (EEUCPRA) Online:
http://www.egyptera.com/en/pdf/Transitional%20Egyptian%20Electricity%20Market
%20and%20TSO_JYB_Draft.pdf
27b
El Sobki, Mohamed Salah. “The Regulatory Body for organizing the electricity
market and protecting the Consumer”. The Egyptian Electric Utility and Consumer
Protection Regulatory Agency (EEUCPRA). Presentation given as part of the
international conference “Sensing the future in energy systems: towards a sustainable
energy future in Egypt - Current and Future Changes” December 2003.
http://www.egyptera.com/en/ppt/ Regbody_files/frame.htm

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11
28, 29, 30, 31
Inception Report. The Institutional Capacity Building of The Egyptian Electric
Utility and Consumer Protection Regulatory Authority (EEUCPRA) Contract no.
143297/2007. KANTOR Management Consultants. Online: http://www.egyptera.com
/en/pdf/INCEPTION% 20REPORT_final%20 draft.pdf
32
Shaaban, M. “Restructuring of the Egyptian Electricity Industry”
Electric Utility Deregulation, Restructuring and Power Technologies, 2004. (DRPT
2004). Proceedings of the 2004 IEEE International Conference on
Volume 1, Issue , 5-8 April 2004 Page(s): 49 - 53 Vol.1

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VI. APPENDIX

Table 1: Electricity Grid data

Electricity in Egypt
Egyptian Electricity Grid Data
The current Electricity market structure in Egypt is formed of a power pool
market structure where the transmission company is playing the role of t single
buyer and seller, it purchases all the generated energy from the generation
companies and sell it.

Egyptian Electricity Grid Data

Description 2007/2008 2006/2007 Variance%

• Peak load
19738 18500 6.7

• Total power Generated

125129 115407 8.4

o Hydro MVA
15510 12925 20

o Thermal MVA
95782 88862 7.8

• Power generated from Wind (Zafarana)2

831 616 34.9

• Power Purchased from (IPP’s)

14 32.2 (56.3)

• Power generated from Private Sector (BOOT)

12642 12625 0.1

• Power generated from Isolated Plants

350 347 0.9
• Net Exported Power GWh
563 347 61.3
• Power Sent from connected power plants
107808 98475 9.5
• Total fuel consumption
23562 22286 5.7
• Production Companies
20969 19689 6.5
o H.F.O
4561 4246 7.4

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o N.G
16300 15389 5.9
o L.F.O
108 54 100
• Fuel consumption (Private sector BOOT)
2593 2597 (0.2)
• Production company fuel consumption rate
218.9 221.6 (1.2)

• Fuel consumption rate (Include Private Sector

BOOT) 217.3 219.6 (1)

• Thermal efficiency (Without Private Sector

BOOT) 40 39.8 0.5

o N.G ratio to total fuel

79.3 80.3 (1.2)
o N.G ratio from power plants connected to gas
grid 82 83.8 (2.1)

• Total Installed Capacity MW

22583 21944 2.9
o Hydro
2842 2783 2.1

o Thermal
17389 16889 2.9
o Wind
3.5 225 25.6
o Private Sector
2.47 2047 -

• Transmission Lines & Cables

o 500 kV
2479 2262 9.6
o 400 kV
33 33 -

o 220 kV
14912 14315 4.2
o 132 kV
2429 2476 (1.5)
o 66 kV
16986 16695 1.7
o 33 kV
2713 2724 (0.4)

• Transformers Capacities

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 o 500 kV
7765 7765 -
o 220 kV
28850 27060 6.6
o 132 kV
3427 3541 (3.2)

o 66 kV
35223 33904 3.9

o 33 kV
1769 1784 (0.8)

Source: The Electric Utility and Consumer Protection Regulatory Agency

http://www.egyptera.com/en/electricity_current.htm

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Map 1: The National Electricity Grid of Egypt in the Beginning of 2004

Source: The Electric Utility and Consumer Protection Regulatory Agency

http://www.egyptera.com/en/electricity_egymap.htm

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