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Egypt geared for energy transition

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With its abundant wind and sun, Egypt is a prime location for the development of renewable energy projects. Image credit: Simon Berger from Unsplash

Egypt geared for energy transition

Egypt’s favourable policy framework is the first step in transforming the country’s energy sector. The recent development of a state-of-the art green hydrogen project in Ain Sokhna, is proof that the country is on its way to a greener future.

By Leon Louw, owner and editor of WhyAfrica

Earlier this year, Fertiglobe, a United Arab-based nitrogen fertiliser producer and distributor, commissioned Egypt Green, the first integrated green hydrogen plant in Africa. Egypt Green is in Ain Sokhna, close to the Suez Canal Economic Zone.

The project is a breakthrough for green hydrogen production in a strategically situated region. Ain Sokhna’s proximity to the Suez Canal Economic Zone makes it possible to use renewable electricity to develop an industrial hub near global shipping lanes.

Green hydrogen, which is produced from water using renewable energy sources, has the potential to play a significant role in the decarbonisation of heavy industries and global shipping.

When fully developed Egypt Green will consist of 100MW of electrolysers, powered by 260MW of solar and wind.

The facility will deliver close to 15,000 tons (t) of green hydrogen as feedstock for the production of about 90,000t of green ammonia per year in Fertiglobe’s existing ammonia plants.

This project is a showcase of transitioning from pledges to implementation, delivering on Egypt’s promise to the world to create a regional hub for green energy and transforming the Suez Canal into a green corridor

Fertiglobe is a strategic partnership between hydrogen producer OCI, the Abu Dhabi National Oil Company (ADNOC), Norwegian renewable power producer Scatec, engineering company Orascom Construction and The Sovereign Fund of Egypt.

According to Dr Sultan Al Jaber, Minister of Industry and Advanced Technology, UAE Special Envoy for Climate Change and Chairman of Fertiglobe, the consortium will continue to leverage its knowledge and experience in hydrogen and ammonia. “We aim to make low and zero carbon fuels more available, as the world seeks a realistic pathway to a decarbonised energy system,” he says.

Terje Pilskog CEO of Scatec says there is massive demand for green hydrogen. This demand is driven by strong policy support globally, and Africa is perfectly positioned to take advantage of its low-cost renewables and strategic position,” says Pilskog.

Egypt’s policy geared for transition (Egypt geared for energy transition)

According to Pilskog Egypt’s energy transition will require policy and legislative frameworks that considers decarbonisation and at the same time addresses climate change and the commitments made under the Paris Agreement.

The country has already taken steps to address the urgent need to harness renewable power. Such efforts are expected to provide exciting opportunities for investors in the African energy sector.

According to Lamyaa Gadelhak, Baker McKenzie Cairo Partner & Co-Head of Banking and Projects, policy in Egypt is a good example of how to make the transition a reality.

“According to Egypt’s article 20 of the Investment Law No. 72 of 2017 (Investment Law)  companies that have been established to develop a strategic or national project and contributes to achieving development, or projects in partnership with the private sector and the State, the public sector or the public business sector, in the area of public utilities, infrastructure, new or renewable energy, roads, transportation or ports, may, by a cabinet decree, be granted a “single license” for the establishment, operation and management of the project, which will include a construction permit and an allocation of real estate property required for the project (License),”says Gadelhak.

Conditions to be strategic (Egypt geared for energy transition)

Gadelhak adds that such a license will be effective without the need for any further procedures and may include other additional incentives for the project provided in the Investment Law.

“The aforementioned was further developed through Cabinet Decree No. 56 of 2022, which specified a series of requirements to be met for a project to be considered a strategic and/or national project.”

In addition to meeting a set of conditions, these projects must be a development in one of the fields specified in the cabinet decree, which include, but are not limited to, green hydrogen projects, green corridor projects, renewable energy projects aimed at supplying desalination projects and green hydrogen production projects with energy, and carbon capture, utilisation, and storage (CCUS) projects.

The conditions, set out in the cabinet decree, will be subject to a yearly review in light of any changes to the State’s economic development plan.

Gadelhak explains that among the other incentives provided under the Investment Law, and which can be included in the License, Article 11 provides that companies set up before 28 October 2023 to operate in certain industry groups, could obtain a deduction from their taxable income.

“This incentive is limited to seven years from the date of commencement of the project and is not perpetual. Furthermore, the Investment Law provides that additional incentives around utility connection costs, land allocation costs and technical training may be made available to a project by a cabinet decision.

The government of Egypt recognises the production, storage and export of green hydrogen and green ammonia among the areas falling within the state’s economic development strategy.

It has passed a decree that would allow green hydrogen and green ammonia projects to benefit from a wide range of state support under the country’s existing Investment Law, including tax incentives.

“This is a key development for Egypt’s hydrogen economy and we expect that it will stimulate private investment and the development of new green hydrogen and ammonia projects in the country,” says Gadelhak.

Egypt geared for energy transition

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Egypt geared for energy transition

 

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