“You can use a bicycle to go to work, but you can't do without the Internet,” commented Amina Ghanem, director of the Egyptian National Competitiveness Council, when she was trying to make a point about how important electricity was to productivity this week. Ghanem was addressing the Egypt Energy and Economy Conference held in Cairo this week that brought together experts and officials in the field. Organised by Al-Mal-GTM, the aim of the Conference was to look into ways of dealing with the country's energy shortages. “Germany is celebrating 40 years with no power outages,” former minister of petroleum Osama Kamal said, but “Egypt is witnessing unprecedented power cuts.” Kamal outlined the nature of the problem by saying that while Egypt's consumption of electricity ranged from around 22,000 megawatts (MW) per day during the winter, that figure rose to around 27,000 MW in the summer. While the installed capacity of Egypt's electricity grid could produce up to 27,000 MW per day, that capacity dropped by 10 per cent as soon as the temperature increased above 30 degrees Celsius, he added. Moreover the technology used does not allow Egypt to produce electricity efficiently. The grid's efficiency ranges from around 25 per cent to 40 per cent, Kamal said, which not only means lower production but also higher consumption of fuel to produce energy. The former minister lamented the country's dependence on power stations using fossils fuels to generate power, saying that these fuels were a non-renewable source of energy. With fossil fuels becoming scarcer by the day, new power stations should depend on alternative energy sources, he said. Some 90 per cent of Egypt's power is currently produced by fossil-fuel operated power stations, and only around 11 per cent is from renewable sources, most of it from hydroelectric plants. Only around one per cent of the country's electricity is produced from wind energy, though Egypt plans to produce 20 per cent of its energy through renewable energy sources by 2020. Kamal said that although solar energy seemed an obvious way of producing energy given the country's climate, at present solar energy is more costly to produce than other energy sources. One unit of traditionally produced energy costs LE0.13, he said, compared to the LE0.65 per unit for solar-produced energy. The former minister said that the prices of existing energy sources were distorted by subsidies, however. If these were removed, the cost of solar energy would fall. Kamal described the current efforts to procure the financing needed, whether through borrowing or using much-needed hard currency, to buy the fuel to keep the country's power stations running. Such efforts were like a person “burning himself to light the room he is in,” he said, and they were not sustainable. Tamer Abu Bakr, head of the energy committee at the Federation of Egyptian Industries, reiterated the need to remove energy subsidies, saying that these would reach an estimated LE125 billion in the 2012/13 budget. Some LE70 billion had originally been earmarked for fuel subsidies, he said, but the failure to implement steps towards lifting the subsidies had meant that this target had been missed. Energy subsidies last year stood at LE115 billion. Ghanem said that fuel subsidies affected the right of future generations to resources. There was a need for thorough-going reform, she said, since if this was not carried out subsidies would be reintroduced to meet economic pressures. Ghanem said that it was important that information was disclosed so that people were more aware of how the subsidies were being spent and what they were being spent on. Money freed up as a result of the rationalisation of subsidies should be spent on improving basic services, she said, such as healthcare, education and transportation, as well as alternative sources of energy. She also said that there should be one authority in charge of energy. Instead of the current system of ministries of electricity and petroleum, all the country's energy needs should come under one umbrella. Wael Ziada, head of research at the investment house EFG-Hermes, said that the current subsidy system prevented the usage of alternatives and was very costly to the government. He warned that the subsidies system must be dealt with urgently, especially in the light of the country's dwindling hard currency reserves. Egypt's reserves of hard currency stood at $14.4 billion at the end of April. Part of that figure is earmarked for debt and debt interest repayments, part of it is in gold, and only a remaining smaller sum can be used to pay for imports. Ziada said that steps would have to be taken quickly to encourage investment in alternative energy sources. He warned that any delay would mean a growing inability by the banks to finance such projects, because the banks' portfolios were increasingly being directed towards lending to the government through the purchase of treasury bills. In order for this investment to materialise, Mohamed Al-Sobki, head of the Energy Research Centre, said, there would be a need to modify the current legislation in order to encourage the greater use of renewable energy. Al-Sobki said that the current pricing system for energy, whether petroleum products, electricity or gas, did not encourage rational consumption. It was not only potential investors that needed encouragement, since consumers needed it too, he added. According to Salah Arafa, a professor of physics at the American University in Cairo and a veteran proponent of solar energy sources, consumers needed to be provided with financing in order to enable them to use renewable energy. Training should be provided for technicians to provide maintenance for alternative energy systems and for the infrastructure needs that these will create, he said.
