Egypt will host the COP27 shindig come November. The country has made clear it is working on bolstering domestic energy production – with a particular focus on clean energy.
Egypt has said COP27 will be the destination to put forward Africa’s perspective.
“COP27 is definitely an influencing factor. It offers a chance for Egypt to establish itself as a leader in this space – but also in providing a window for African voices. This is an Africa COP, it’s not just Egypt,” said British International Investment (BII) coverage director in Cairo, Sherine Shohdy.
“This discussion around COP is helping speed up mobilisation and build momentum. There’s going to be a lot of discussion around the national climate change strategy and Vision 2030.”
Bracewell Dubai senior counsel Ade Mosuro said COP27 would aim to build on the outcomes of Glasgow. The Cairo meeting “is expected to focus on establishing legally binding commitments for developed countries to reduce greenhouse gas emissions and priority issues in developing countries, such as agricultural adaptation strategies to climate change”.
Mosuro noted that COP27 would give the Egyptian government an “opportunity to sell Egypt as a perfect market for the development and investment in renewable energy technologies and projects”.
Green options
One area likely to be of high interest is that of green hydrogen. The technology is set to play a key role in meeting future energy demand, in part because of its ability to function as an energy storage vector. In short, it can capture the energy generated from Egypt’s abundant solar and wind resources and allow these to be consumed in different locations.
“Green hydrogen, as of today, is primarily focused around the port of Ain Sokhna, in the Suez Canal Zone, with support from the Suez Canal Economic Zone and the Sovereign Fund of Egypt,” said BII’s Shohdy. “Proximity to the port gives options around exports. Hydrogen plans in Egypt are currently predominantly more on export plans.”
Mosuro described Egypt as a “buoyant location” for renewable energy projects over the last five years. The Bracewell counsel put the country’s green hydrogen pipeline at 11.62 GW, in the top five globally.
“The government seeks to capitalise on the investment momentum ahead of COP27 by establishing the Suez Canal Economic Zone as a regional green energy hub,” he said. “We understand that companies have inked US$10 billion worth of preliminary agreements for green ammonia and hydrogen projects in Ain Sokhna in the past three months alone — and it is expected that more activity will follow.”
Hydrogen plans, of course, build on the presence of local generation.
BII invested $97mn in the 1.8 GW Benban solar park, the largest in Africa. “Wind power projects are concentrated around Ras Ghareb and solar around Aswan,” said Shohdy.
Renewable energy producers are taking steps to add hydrogen capacity to their local assets. Shohdy cited interest from Globeleq, Actis and Scatec as underscoring such expansion.
Big-ticket business
Some notable deals have been struck on green hydrogen, demonstrating some of the potential foreign investors see in the country.
Australia’s Fortescue Future Industries (FFI) signed a memorandum of understanding (MoU) to develop a green hydrogen plan with 9.2 GW of capacity in September.
Speaking after a meeting with Egyptian President Abdel Fattah El-Sisi, FFI founder and executive chairman Andrew Forrest hailed the country’s plans.
“Egypt is on the way to becoming a global powerhouse in the green energy value chain and will be ready to show the world that at COP27,” Forrest said. The country has “excellent wind and solar resources”, which will be able to produce “large scale green electricity, green hydrogen and green ammonia”.
FFI also spoke of the local benefits to such an investment. The Australian company’s work would help reduce emissions but also deliver “social, environmental and economic benefits to the region”.
Maersk also expressed an interest in hydrogen in an MoU, signed in March. The shipping company is focused on new opportunities for green marine fuels.
Follow up discussions in September saw talk of a $15 billion investment, with the aim of creating a regional hub for green ship refuelling.
International interest
The European Union has a particular interest in securing new supplies of energy, given the ongoing conflict in Ukraine. While there has been discussion for years about finding an alternative to Russian gas, progress is only now coming.
The REPowerEU plan, published in May, set the target of 20 million tonnes of green hydrogen by 2030, of which half would be imported.
“Egypt is also close to markets like the European Union and the Middle East – regions set to see a huge hydrogen demand in the coming years,” said Mosuro. “More importantly, political will expressed through favourable government and regulatory policies are significant motivators for investors.”
The Bracewell counsel went on to note the focus on hydrogen projects in the Suez zone, describing this as a logistics hub to connect Europe, Africa and Asia.
“The need to move away from fossil fuels to greener alternatives means investors are prepared to put money down to get in on the ground floor,” he said.
BII’s Shohdy said there was a “very diversified base of interest” in Egypt. “The Egyptian market is so big it can accommodate a wide range of different players.”
Challenging times ahead of Egypt COP27
While Egypt’s natural characteristics position the country well for continued investment in renewable energy, and therefore low carbon hydrogen, there are still challenges.
“There are the typical challenges of any emerging market, around bureaucracy for instance. Most players find a way to manage these challenges and adapt. Our role as a DFI is to support private players and allow them to grow,” said Shohdy.
Egypt has had some ups and downs in the recent past. The Arab Spring revolution just over 10 years ago alarmed many investors, tying in with some major financial woes that saw Egypt running up receivables to oil companies into the billions of dollars.
It has mostly paid these off, although there have been some warning signs of late. Capricorn Energy flagged some problems in this regard in its most recent set of results, for instance.
Shohdy acknowledged some difficulties. The Russia-Ukraine conflict has pushed up wheat prices and had an impact on local tourism, she said.
“There are some questions around foreign currency availability. However, population growth and economic activity give solid fundamentals, with proven resilience and a demonstrated capacity to absorb these shocks and rebuild.”
Mosuro said it was natural for investors to feel uneasy in the face of economic issues. “However, Egypt seems intent on strengthening its economy through the implementation of monetary and fiscal policies. The Egyptian government and the new Central Bank governor are taking steps to curb inflation, increase local production and exports, reduce reliance on imports, and bolster both foreign investment and foreign exchange reserves.”
Evidence of the Egyptian squeeze can be seen in the government’s decision to ration electricity in August. The move was intended to reduce local gas consumption, allowing more supplies to be exported to Europe for hard currency.
Shohdy went on to highlight the various Egyptian opportunities. It is not just the country’s wind and sun that should be considered as resources, she said. The Egyptian population “is definitely an advantage. There’s a young labour force that is relatively cheap when compared with other countries.”
The combination of local resources and its location in the world provide opportunities. “Being able to build locally is really important – and Egypt has what it takes,” the BII director said. “Our role is to support that, through local knowledge and resources, creating new opportunities – and having an impact.”
It is clear that COP27 will provide a swathe of clean energy opportunities as Egypt continues to sign agreements with potential investors.
At the same time, though, it will be a markedly different affair to COP26 in Glasgow. Where oil and gas was markedly excluded from discussions in Glasgow, there will be a more robust interest in Cairo.
While the opportunities of renewable energy will take centre stage, any discussion around African demand will also flag natural gas as a transition fuel and the continent’s minimal historic role in emissions. Green hydrogen may serve as the export fuel of the future, but in the near term Egypt – and its neighbours – will continue to fight for the role of methane.