Norwegian renewable energy company Scatec ASA has signed a landmark 25-year Power Purchase Agreement (PPA) with Egypt Aluminium (EgyptAlum) to develop a 1.1 GW solar photovoltaic (PV) power plant co-located with a 100 MW/200 MWh Battery Energy Storage System (BESS). This project marks a significant step towards decarbonizing Egypt’s industrial sector and supporting the country’s ambitious renewable energy targets.
Decarbonizing Egypt’s Aluminium Production
EgyptAlum, the country’s largest aluminium producer and industrial electricity consumer, exports approximately 60% of its production to Europe. The new solar and BESS project will be instrumental in helping EgyptAlum reduce its carbon emissions and meet the European Union’s Carbon Border Adjustment Mechanism (CBAM) requirements, which are set to be introduced in 2026. CBAM is a carbon tariff on carbon-intensive products imported into the EU, designed to encourage cleaner industrial production.
Significance of the PPA
The USD-denominated PPA is backed by a sovereign guarantee, providing financial security for the project. It is also the first utility-scale PPA in Egypt with an industrial offtaker, paving the way for similar agreements in the future. Scatec aims to achieve financial closure and commence construction within the next 12 months.
Project Details and Financing
The estimated total capital expenditure for the solar PV + BESS project is approximately $650 million. The project will be financed through approximately 80% non-recourse project debt and the remaining 20% by equity from Scatec and partners.
Scatec’s Role
Scatec currently owns 100% of the project but intends to reduce its long-term economic interest by inviting additional equity partners. The company will serve as the designated Engineering, Procurement, and Construction (EPC) service provider, with an EPC share of approximately 90% of the total capital expenditure. Scatec will also be the asset manager (AM) and operations and maintenance (O&M) service provider for the project.
Egypt’s Renewable Energy Ambitions
This project aligns with Egypt’s ambitious goals to increase the share of renewable energy in its power generation mix. The country aims to generate 42% of its electricity from renewable sources by 2030 and has a longer-term target of 60% by 2040.
Key Renewable Energy Projects in Egypt
Egypt is undertaking several large-scale renewable energy projects to achieve its targets, including:
- Benban Solar Park: One of the world’s largest solar installations, with a current capacity of 1.8 GW and plans for further expansion.
- Gabal El Zeit wind farm: A 580 MW wind farm supplying power to the national grid.
- Green Hydrogen Projects: Egypt is positioning itself as a hub for green hydrogen production, with several projects underway, including a partnership between Siemens and Scatec to develop a facility capable of producing one million tons annually by 2035.
- Masdar Consortium Projects: In partnership with Infinity Power and Hassan Allam Utilities, developing a 10 GW onshore wind farm and expanding solar capacity at Benban and Dakhla Oasis.
Government Support and Incentives
The Egyptian government is committed to supporting renewable energy projects and has implemented a comprehensive incentive framework, including tax benefits, exemptions from customs duties, and favorable feed-in tariffs.
Overcoming Challenges and Achieving Energy Security
Egypt faces challenges such as declining domestic gas production and rising electricity consumption. By increasing its reliance on renewable energy, the country aims to achieve energy self-sufficiency, reduce its dependence on fossil fuels, and become a leader in clean energy exports.
International Collaboration
Egypt is actively pursuing international collaborations and agreements to advance its renewable energy sector, attracting significant investment in solar and wind power. The country is also working on electricity interconnection projects with Saudi Arabia, Sudan, Jordan, Greece, and Italy to increase electricity exports.
Mazghouny & Co.’s Role
Mazghouny & Co., an Egyptian law firm, advised Scatec on the PPA with EgyptAlum. Their legal support included engaging in discussions with government stakeholders, leading to the enactment of legislation authorizing the Egyptian Ministry of Finance to issue a sovereign guarantee for EgyptAlum’s obligations under the PPA.
Future Prospects
The Scatec-EgyptAlum project is a significant milestone in Egypt’s transition to a sustainable energy future. By leveraging its abundant solar and wind resources, Egypt can reduce its carbon emissions, meet its climate goals, and drive economic growth through renewable energy development.
