A shortage of energy poses a real threat to the future of the industrial sector, Mona El-Fiqi reports The extreme heat of this summer has led to an unprecedented increase in power consumption, which has revealed a real shortage in energy supply. The problem is evident all around the country as large parts of Egypt's towns and cities, including Cairo, have been experiencing daily power outages during June, July and August. The problem is more serious when it comes to the industrial sector. For example, the Misr For Aluminium Company in Nagaa Hammadi recently witnessed huge losses and damage to production lines due to constant power outages. Investors blamed the government for not taking action at the appropriate time, particularly when the issue is so serious. "The power shortage did not come suddenly; it was clear during the past few years that there was going to be an energy shortage," said Ihab El-Messeri, an investor in the textiles sector. El-Messeri explained that during the past 10 years, the Ministry of Electricity set forward plans for future electricity needs. Accordingly, the government determined how many power stations would be needed. But the ministry does not do this anymore, for financial reasons. The result was more demand than supply. "The solution to this problem is to build more power stations to meet the needs of the industrial and housing sectors," El-Messeri said. Nonetheless, the government should adopt a temporary solution, such as importing electricity, to save the situation in the short term, according to El-Messeri. Experts assert the government's responsibility for providing the needed power to factories to maintain reasonable growth rates. Mokhtar El-Sherif, an economic expert, said that if the government aims to achieve an economic growth rate of six per cent, the growth rate of power generation should be eight per cent, which is not the case in Egypt. El-Sherif blamed the government for a lack of planning. He added that it is time for the industrial sector to avoid producing products that use high amounts of energy and to concentrate on manufacturing products that are environmentally friendly, have competitive advantage, and need less energy. These products would then be exported to bring back high returns. Moreover, El-Sherif said that rationalising energy consumption and diversifying resources is essential. "With the expected depletion of natural gas reserves within the next 57 years, Egypt should turn to renewable energy sources such as wind, solar power and bio-fuel," El-Sherif added. As for the government, a new policy framework was approved in 2008 to foster an investor friendly climate and encourage foreign and local investor involvement. The government expects the renewable sector to produce 20 per cent of total power generation by 2020 of which 12 per cent will be generated by wind energy. El-Sherif explained that the problem with renewable energy is that it is very expensive. "That's why we are late in this sector, but Egypt has foreign partners who will help to provide technical and financial assistance." To meet increasing energy consumption the government announced this week the establishment of Egypt's nuclear power planet. This is considered a long-term solution since it will take eight to 10 years to build. In short term, the government took some measures, such as dimming street lights on main roads by 50 per cent, raising electricity prices during peak hours, and encouraging reduced consumption. In an attempt to reduce consumption in the industrial sector, particularly in peak hours, the government recently decided to raise electricity prices paid by factories in peak hours. The government also started to permit factories to produce their own energy, as when the High Council for Energy announced last week its approval of 12 cement factories but on condition that they provide their own energy. Mohamed Sayed Hanafi, manager of the Chamber of Metal Industries at the Federation of Egyptian Industries, said that this concept appeared in 2007, but factories that obtained these licences have not started operating since then. Hanafi is not in favour of this system "because it will cost an investor too much money, not less than LE250 million, to establish a power station to produce 400 million cubic metres [of metals] annually." Hanafi explained that factories that are currently being established have no problems, since they previously obtained licences stating the approval of the Ministry of Petroleum and Energy to provide the needed energy when they start to operate. In the future there is no need to establish new energy intensive factories for metals since existing factories can meet market needs, he said. Commenting on the energy shortage, Hanafi said that it is very serious and threatens all sectors. He suggested that importing energy to meet local needs is a must, but it is important to use energy efficiently to produce high quality and competitive products and to be able to add value to the economy. Ali Moussa, an investor and president of the Egyptian French Business Council said that the shortage of energy is an unpleasant surprise for newly established projects that started operating during the past five years. "These investors are not prepared for this problem since at that time energy was one of the attractive elements to do business in Egypt," Moussa said. "The choice of using renewable and nuclear energy is good but it will take time and the country is facing a crisis. To overcome the issue we are in need of taking action as soon as possible," he added. Moussa does not favour the decision that factories might be forced to provide their own energy since 95 per cent of the total number of industrial firms are small and medium, for which it will be difficult to provide energy by themselves. The establishment of giant companies that would be able to import, store and sell energy at international prices to small and medium projects is preferable. To overcome the problem, experts recommended permitting the private sector to import gas, "but the private sector, which can easily join the power generating sector, needs a clear policy to regulate the process and the time element is important since while every day passes, our energy resources are reduced," Moussa explained.
