In the light of the energy crisis that has been crippling the activities of various sectors in Egypt, the Federation of Egyptian Industries (FEI) has presented a paper that suggests possible solutions to the country's mounting problems over the shorter and longer term. The paper, prepared by experts in the fields of petroleum and electricity, says that although there have been many studies that have addressed the energy crisis in Egypt and presented ways to solve it, the government has been reluctant to take serious steps towards reform because of “exaggerated fears” of people's reactions. The paper states that the government should take bold decisions to face the escalating energy problem. One of the most pressing issues is the country's inefficient energy subsidies programme, which eats up a fifth of government expenditure and yet hardly benefits the poor. The study slams this system, saying that limited-income individuals are benefiting from the subsidies programme by only 30 per cent, 21 per cent for butane gas cylinders and nine per cent for 80-octane gasoline. The paper suggests the gradual elimination of subsidies and their replacement by cash transfers to low-income people. It proposes a gradual increase in the prices of petroleum products through four stages, with each one ranging from six months to one year. According to the average consumption of petroleum products in 2012/13, the amounts that could be saved from hiking prices in four stages would be LE27, LE59, LE92 and LE129 billion, respectively. In order to protect low-income families from the effects of such price hikes, the study suggests that 40 per cent of the money saved should be distributed on ration cards, this amounting to LE13 billion and benefiting millions of low-income Egyptians. According to the scheme, the holder of each ration card would receive a monthly cash transfer of LE58 in the first stage, LE141 in the second, and LE230 and LE323 in the third and fourth stages, respectively. The study adds that there should be a periodic check on the database of those who qualify for ration cards in order to include all low-income families in the cash-transfer system. Besides reforming the subsides programme, the study says that there should be a national plan to substitute fuel oil (mazut), diesel and gasoline with natural gas due to the latter's cheaper price and environmental benefits. It also says that the country's power stations should all operate on natural gas instead of mazut, which is more expensive and leads to major damage to stations and the environment. Regarding the current natural gas shortages, the study recommends importing 1.4 billion cubic feet of natural gas daily to cover the shortages and meet electricity and industry demands, saying that these quantities should be reviewed after three years in the light of consumption levels and the production situation should new natural gas wells be active. Following the 25 January Revolution, natural gas production in Egypt declined primarily because foreign oil companies working in the country halted their investments due to the accumulating debts the government owed these companies. While the study calls upon the government to pay its dues to the foreign companies, it recommends amending the gas exploration deals between the government and foreign partners in a way that would be fairer to both sides. Also in the petroleum sector, the study calls for the establishment of a regulatory body to manage petroleum products and their prices in the market, in addition to establishing a supreme council for oil and gas which would be tasked with formulating the future production strategy. As for the electricity sector, the paper says that the government should work on securing the country's needs of electricity, which will amount to 75,000 megawatts (MW) by 2030. This means that some 50,000 MW should be added to Egypt's electricity capacity. While the national grid's capacity currently stands at 31,000 MW, in the hot summer months the country consumes 34,000 MW, causing electricity blackouts as a result of the need to ease pressure on the grid. The paper says that Egypt could increase its capacity through diversifying the sources of electricity production and depending more on renewable sources, such as generating energy through water, wind and solar energy. It also calls for using refuse-derived fuel (RDF) as a source of energy. Egypt's current energy mix is 95 per cent fossil fuels (petroleum products and natural gas) and only five per cent renewable energy. The study further stresses the importance of the government's being frank with the public about the electricity problem, combining this with a campaign to rationalise consumption. It also advocates a gradual rise in electricity prices across all sectors, especially households and industry which consume 74 per cent of the total electricity generated. Using coal as a source of energy in cement factories is also mentioned in the study. It says that coal should be used in factories to at least 60 per cent after taking all the needed environmental measures for using this highly polluting fuel. The study adds that power stations could also use coal to generate electricity by at least six per cent (5,000 MW). Lastly, the paper calls for the electric utility regulatory agency to be made independent of the ministry of electricity in order to ensure that decisions are binding on all parties.
