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October 13, 2022

Egypt emerges as unlikely green energy powerhouse

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The country has clinched $100bn in green hydrogen pledges ahead of COP27 in Sharm el-Sheikh.

Egypt has attracted more than $100bn of investments in green hydrogen, according to estimates by research company Rystad Energy, as the country leverages its green potential ahead of hosting 2022’s UN climate change conference, COP27. 

Some 70 per cent of these investments are linked to projects unveiled since May this year, with a swathe of new foreign investors clinching deals with the Egyptian government, including India-based Acme Group, UAE-based Alcazar Energy and Australian mining giant Fortescue’s green energy arm, Fortescue Future Industries. 

“Egypt is on the way to becoming a global powerhouse in the green energy value chain,” FFI executive chairman Andrew Forrest said in a statement in September.

Data analysis

In a research note, Rystad outlines that since May, nine projects have been announced in Egypt with a combined annual hydrogen production capacity of 2.1 megatonnes, pushing the nation’s total planned hydrogen production to 3.6Mt – second only to Australia with its 9.23Mt.

Most of this $100bn investment comes from foreign companies, with more than 53 per cent of investments pledged by Middle Eastern ($28.6bn) and European ($24.4bn) companies, and more than 21 per cent from Indian companies. FFI is expected to be the biggest single investor, with committed investments of roughly $20bn. 

“We expect to see an increase in foreign investment once Egypt further showcases its strategies and policies at the coming COP27 event,” the report adds. 

Between January and July, foreign direct investment monitor fDi Markets tracked 89 projects into Egypt worth a record $86.9bn – the highest investment figure into Egypt of any full year and the highest capital expenditure figure recorded so far this year.

Green hydrogen powerhouse?

Until now, many of Egypt’s announced green hydrogen investments have flown into the Suez Canal Special Economic Zone, which also held follow-up meetings in recent weeks with companies that have existing memoranda of understanding to develop green hydrogen projects in Egypt – namely, Norwegian Scatec, Danish Maersk and German Siemens, according to the Rystad report. 

Jack Kennedy, associate director and head of the Middle East and North Africa desk at S&P Global Market Intelligence, says there is “a strategic aspect to Egypt’s positioning”. 

He explains that green hydrogen has a strong future as a transition energy fuel in the Mediterranean as “EU countries come to terms with the likelihood that more stringent emission reduction regulation has an impact on traditional heavy industries and, as such, are willing to fund hydrogen production facilities in Egypt for import”.

The EU, which plans to import 10Mt of hydrogen in 2030 from outside the bloc, issued a joint statement with Egypt in June on their shared commitment to the green transition.

Running ahead of reality?

However, Benedict Craven, principal economist and country risk manager for Middle East and Africa at the Economist Intelligence Unit, says: “Egypt’s ambitions are running well ahead of reality.” It would take a lot of work for Egypt to be able to export green energy to the likes of Europe, he adds, and there needs to be more renewable energy in Egypt’s energy mix to power green hydrogen facilities. 

Currently, Egypt’s production of green hydrogen stands at zero, while renewable energy sources account for 11 per cent of the country’s total electricity matrix. However, the country has world-class solar energy and wind energy resources, and the government wants to increase the supply of green power to 42 per cent of total supply by 2035. 

In 2021, Rania al-Mashat, the country’s minister of international cooperation, wrote: “Egypt’s government is on a mission not only to ‘think green’ but also ‘act green’ in all policies and projects to help preserve the environment and bring sustainable energy to the country’s population.” 

All eyes will be on Egypt in November, as it hosts COP27 in the seaside resort town of Sharm el-Sheikh. 

“The wider framing of COP27 is almost certainly going to be used by the Egyptian government as an opportunity to present relative political stability in Egypt under the rule of president Abdel Fattah al-Sisi, and a chance to publicise major infrastructure projects,” adds S&P’s Kennedy.

This article first appeared in fDi Intelligence.

Photo credit: Bloomberg

A service from the Financial Times