Since July 2023, the Egyptian government has begun implementing power rationing plans; however, with the peak electricity demand in summer, the energy crisis has intensified, and power outage measures have had to become one of the important measures for the authorities to address the challenges.
Natural Gas: Amid Abundant Reservoirs, Frequently Faces Energy Scarcity
Why has Egypt, as the country with the largest population and GDP in North Africa, long been troubled by insufficient electricity supply? Before addressing this question, let's take a look at Egypt's sources of electricity.
Located at the crossroads of Africa, Asia, and Europe, Egypt is rich in natural resources. The proven natural gas reserves in Egypt amount to 22 trillion cubic meters, accounting for 1.1% of the world's total reserves, with a production-to-reserve ratio of 36.6%. According to data from the international energy think tank Ember, Egypt primarily generates electricity from fossil fuels, with natural gas accounting for 81.18% of total electricity generation, which was 220.14 TWh in 2023. According to the International Energy Agency (IEA) data (latest statistics up to 2021), Egypt ranks 23rd in the world in total electricity generation; however, its per capita electricity consumption ranks only 93rd globally, and the large population does not fully explain this sharp decline.
Since the mid-1970s, Egypt has been producing natural gas for domestic use, fully meeting its demand. In 2004, its natural gas production exceeded consumption, and surplus exports continued for nearly a decade. However, by 2014, Egypt had become a net importer of natural gas. The reasons behind this shift are numerous, primarily insufficient investment, along with government arrears to oil and gas companies, and political instability following the 2011 Egyptian revolution and the ousting of Mubarak. Since then, the country’s natural gas production has declined at an average rate of 14.5% per year, reaching about 4 billion cubic meters in 2016, which is 33.7% lower than the peak in 2009. It was not until the new discovery of the Zohr gas field, the largest gas field in the Mediterranean region, began production in 2017 that this trend started to reverse.
Source：Energy Institute
What Caused the Power Outage Crisis?
First, there is insufficient natural gas supply. Egyptian Prime Minister Madbouly stated, 'We do not have problems with electricity generation or the grid; rather, we cannot provide fuel.' The natural gas shortage has both internal and external causes. The Egyptian Ministry of Petroleum and Mineral Resources revealed in a statement last October that gas production from the Zohr gas field declined by 11% in the 2022/2023 fiscal year. At the same time, Madbouly hinted that this power outage crisis was triggered by the shutdown of the Israeli gas station.
Second, there is rapid growth in social electricity consumption. Egypt's population is rapidly increasing, now exceeding 110 million. The sustained high summer temperatures have significantly raised residential electricity usage. In Egypt, the residential sector accounts for the highest proportion of electricity consumption at 37.6%, surpassing industrial use. This structure may be difficult to understand intuitively, so let’s reference India, where residential electricity consumption is only 25.3%, highlighting Egypt's heavy electricity burden.
Third, there is a shortage of foreign currency. Egypt is the twelfth largest exporter of liquefied natural gas in the world, with total exports of $51.6 billion in 2022, where natural gas is the most exported product, accounted for about $10 billion, or one-fifth of total exports. Madbouly candidly stated, 'With economic development and population growth, our dollar resources are under significant pressure.' Due to restrictions from foreign currency demand and extraction contracts, natural gas must continue to be exported.
In July 2023, the government's official power outage plan was set at 2 hours per day. By June 2024, due to persistent high temperatures, the recently power outage plan was extended, increasing the duration to 3 hours. The power outage schedules vary by region, and while the government has released corresponding outage timetables, according to social media influencer 'Mu Mu Zijing in Egypt,' in practice, the government does not necessarily adhere to the schedules, with unpredictable time slots and irregular outage durations. This has caused significant disruption to people's lives, especially during unbearable temperatures exceeding 40 degrees.
The natural gas shortage has impacted not only residential power outages but also production, leading to numerous inconveniences. The government has temporarily reduced the natural gas supply to several large fertilizer manufacturing plants by 20% to 30%, forcing them to suspend operations. The market began to feel the effects of the fertilizer crisis in early June, with current prices skyrocketing by about 54% compared to May. Additionally, some factory owners have reported that when power is restored, the voltage is often too high, which can shock the equipment that had been offline, leading to potential damage.
Egypt's Energy Transition: Opportunities for Chinese Enterprises
Egypt has experienced multiple power outage crises, and the government is actively promoting a shift from a fossil fuel-dominated economy to one led by renewable energy. With the continuous decline in the costs of wind and solar energy, diversifying the energy structure has become a crucial strategy for Egypt's long-term energy security. The 2014 Integrated Sustainable Energy Strategy (ISES 2035) proposed that by 2035, the proportion of electricity generated from renewable sources should be increased to 42%.
In fact, Egypt is well-endowed with renewable energy resources. Located in the 'Sunbelt,' Egypt has abundant solar energy resources; the coasts of the Red Sea and the Gulf of Suez are renowned 'wind corridors,' often experiencing strong winds and possessing rich wind energy resources. Approximately 95% of Egypt's population is concentrated along the banks of the Nile and in the Delta, making the vast uninhabited areas ideal for developing large-scale renewable energy infrastructure.
Currently, China's participation in the hydrogen energy market in Egypt is limited and primarily dominated by large state-owned enterprises. The development and construction of large projects cannot be separated from the role of 'infrastructure builders'. In terms of the supply chain, leading Chinese photovoltaic companies, such as Jinko Solar, Trina Solar, JA Solar, LONGi, and CSI Solar, have already moved to seize opportunities. EqualOcean suggests that Egypt's own renewable energy industry chain is relatively weaker compared to China's, presenting an opportunity for Chinese enterprises to capitalize on the energy transition and establish an early presence.
Diesel generators are another solution to alleviate the power outage issues. According to MarkNtel's forecasts, the diesel generator market in Egypt is expected to grow at a compound annual growth rate of approximately 9.59% from 2023 to 2028. The Egyptian government repeatedly changes the power outage plans, leading to a general decline in public trust, prompting people to seek alternatives. Office buildings, shopping malls, and high-end hotels require power for elevators; the agricultural sector needs a continuous power supply to ensure stable electricity for aquaculture, preventing fish deaths; and the surge in high-end residential developments also necessitates meeting the electricity demands of these households."