EgyptERA’s clarified grid integration fee underscores intent to deliver green industrial growth
New regulations introduced by the Electricity Utility and Consumer Protection Regulatory Agency (EgyptERA), will help Egyptian businesses benefit from affordable access to clean, reliable energy.
It also marks a key step in the maturation of Egypt’s distributed generation sector.
The new regulation waives a standing grid integration fee for self-consumption distributed generation projects up to 10MWp capacity. This regulatory progress — ushered in soon after COP27 proceedings hosted in Sharm El Sheikh — further underscores the Egyptian government’s intent to deliver green industrial growth.
What this reform means in action
The new rule introduced by EgyptERA’s Board of Directors on January 3rd, 2023, intends to “stimulate various sectors of the economy to consume renewable energy” while ensuring the “effective operation of grid-connected systems intended for self-consumption purposes”.¹ EgyptERA’s opening of Egypt’s distributed generation sector to further growth in industrial renewable energy consumption is significant.
In action, this will strengthen the economic viability of industrial renewable energy projects such as the first phase of CrossBoundary Energy’s flagship project in Egypt — a 3.2MWp of captive solar PV in the Special Economic Zone (SCZone) for IVL Dhunseri Polyester Company (IVL), a leading polyester manufacturing company. The introduction of renewable energy to help power the factory’s operations and contributes to IVL’s bold sustainability commitments; once operational, the rooftop solar PV system will supply IVL with 5.1 GWh of clean electricity each year. The project will provide behind-the-meter power, whereby generation will be at the point of consumption and for self-consumption purposes by a sole customer.
Our investment comes at the end of a five-year push by the Government of Egypt towards producing 20% of electricity by renewable sources. However, renewable energy deployment has not been able to keep pace with increases in energy demand. Egypt also maintains one of the most energy-intensive industrial sectors in the MENA region, with energy consumption per unit of output in Egypt’s industries estimated to be up to 50% higher than the international average.
Building on a regulatory foundation
EgyptERA’s Circular 3 of 2023 follows previous decrees — Circular Number 2 of 2020 and Circular Number 3 of 2023 — which together introduced new integration fees and determined a specific pricing scheme.
The new rules proscribed that all solar PV projects tied to the medium voltage network (1kV to 33kV) would need to pay to the Egyptian Electricity Transmission Company (EETC) a grid integration fee of 0.257 Egyptian pounds per kWh. For projects connected to the high or extra high voltage network, the integration fee would be increased to 0.326 EGP/kWh and 0.329 EGP/kWh, respectively.
This “merger fee” was intended to cover the cost of balancing the intermittent injection of solar power from net metered systems into the network. The grid integration fee, according to the Authorities, would also help “settle the subsidy cost incurred by the distribution companies”.
An unintentional regulatory consequence
Pressures of subsidized grid power, devaluation of the Egyptian pound, and the application of the grid integration fee have a significant impact on the viability of industrial solar projects. Their combined impact would likely suppress the growth of economic activity in Egypt’s distributed generation sector and reduce industrial renewable energy uptake.
Egyptian PV installers and other enterprises share this sentiment, as reported by Daily News Egypt.
While developing its project for IVL, CrossBoundary Energy joined the Egyptian private sector to discuss this standing grid integration fee with EgyptERA. During an open-book discussion with the EgyptERA team in November 2022, CrossBoundary Energy commended the regulator on devising technical mechanisms that ensure efficiency of network management.
Given the reduced grid impact of captive PV systems that do not export to the national grid network, industry consensus is that self-consumption projects for grid-connected businesses be exempt from payment of a grid integration fee.
The new regulations in detail
In response to the engagement of the sector, EgyptERA, in its new Circular, narrowed the grid integration fee’s application and clarified procedures for connecting photovoltaic solar power plants.
New renewable energy projects between 500kWp and 10MWp capacity — and not yet in operation — are exempted from the grid integration fee, provided the installation is located within property limits of the commercial and industrial energy consumer (the “subscriber”).
In addition, new thresholds have been established, such that the maximum power allowed for the solar PV system is now 30MWp, and the installed capacity should not exceed the maximum consumption of the subscriber during the fiscal year proceeding commercial operation.
Developers of systems above 500kWp and below 30MWp must also now submit a technical file to the network operator (EETC or distribution company) and pay an assessment fee in exchange for review of the file and the undertaking of network measurements. The network operator is also obliged to issue approval of the file within a set timeline.
To ensure that the new regulations do not slow the speed of project deployment, it will be important that project developers plan ahead to integrate the new requirements into their development timelines. EgyptERA also has a continued role to play in enforcing timely application review and network assessments from the network operator.
Lastly, further sensitization of these regulations should be prioritized to ensure early, and continued, public-private sector understanding and cooperation. This will ensure the government is well placed to introduce further changes that make way for opening of the distributed generation market in Egypt.
Progressive renewable energy policies continue to succeed in Egypt, and CrossBoundary Energy congratulates the Government of Egypt and the EgyptERA team for strengthening the national industrial renewable energy sector through this new regulation.
 Circular №3 of 2023, EgyptERA, Section 2 (Objectives)
About the Author
Chief Regulatory Officer, CrossBoundary Energy
Tessa Lee leads CrossBoundary Energy’s Regulatory Affairs team, based in Nairobi. She holds a Master of Social Science from the London School of Economics (UK) and a Bachelor of Arts from Brown University (USA) and was raised in South Africa. Before joining CrossBoundary, Tessa advised various African governments on renewable energy policy and off-grid market development with the Tony Blair Institute and the Africa Governance Initiative. More recently, Tessa led government partnerships and engagement at Bboxx, a next-generation utility operating across Africa.