Eng. Marwa Mostafa

Senior Planning Engineer

Egyptian Electric Utility and consumer Protection Regulator Agency (EgyptERA)

Sep. 2014

Workshop Program

Lifting Energy Subsidies: A Pathway to Renewables

Feed-in Tariff Design for

Wind and Solar:

Case of Egypt

Defnition of TargetsDefnition of Targets

Choice of policies / instrumentsChoice of policies / instruments

Concrete design of instrumentsConcrete design of instruments

ImplementationImplementation

Administration, monitoring, and adjustmentAdministration, monitoring, and adjustment

RE Policy Making

Defnition of TargetsDefnition of Targets An ambitious target of 20% electricity from RES by 2020,

3500 MW of solar energy by 2027

RE Policy Making

Defnition of TargetsDefnition of Targets

Choice of policies / instrumentsChoice of policies / instruments

RE Policy Making

Defnition of TargetsDefnition of Targets

Choice of policies / instrumentsChoice of policies / instruments

Concrete design of instrumentsConcrete design of instruments

Getting the prices right:

• Details on cost

• Tax levels

• Tariff levels

• Infation rates

Inappropriate instrument design either leads to failure in achieving the targets or – if the support level is too high – targets could possibly

be met at the expense of welfare losses for the whole economy.

RE Policy Making

Defnition of TargetsDefnition of Targets

Choice of policies / instrumentsChoice of policies / instruments

Concrete design of instrumentsConcrete design of instruments

ImplementationImplementation

• Institutional setup

• Design / drafting of laws and regulations

• Assignment of responsibilities

RE Policy Making

Defnition of TargetsDefnition of Targets

Choice of policies / instrumentsChoice of policies / instruments

Concrete design of instrumentsConcrete design of instruments

ImplementationImplementation

Administration, monitoring, and adjustmentAdministration, monitoring, and adjustment

• Monitoring of actual developments

• Measuring contribution to target achievement

• Re-assessing policies

• Adjustment of targets, strategies, policies and

instrument design

RE Policy Making

Defnition of TargetsDefnition of Targets

Choice of policies / instrumentsChoice of policies / instruments

RE Policy Making

In Egypt, there are four mechanisms to establish RE projects:

1. Projects built by NREA ( as a developer)

2. BOO projects by EETC through Tendering

3. Commercial Projects

4. Feed-in Tariff

In Egypt, there are four mechanisms to establish RE projects:

1. Projects built by NREA ( as a developer)

2. BOO projects by EETC through Tendering

3. Commercial Projects

4. Feed-in Tariff

Obstacles facing the existing three mechanisms:

1. Sovereign Guarantees

2. No effectives demand on RE

3. Vulnerability of Financial Structure of EETC and NREA

4. RE fund not active

In Egypt, there are four mechanisms to establish RE projects:

1. Projects built by NREA ( as a developer)

2. BOO projects by EETC through Tendering

3. Commercial Projects

4. Feed-in Tariff

WHY Feed-in Tariff:

1. Faster to achieve RE targets

2. For medium and scale projects

3. Escrow accounts instead of Sovereign guarantees

4. Less technical losses

… but still more support is needed

Defnition

• FiT is a mechanism that encourages the adoption of renewable energy sources.

• It depends on purchasing RE from its developers with an obligatory cost-based price,

maintaining a reasonable return on the investments through long term PPA’s (20-25

years).

• These long-term contracts for electricity are typically offered in a non-discriminatory

manner to all producers of electricity generated from renewable energy sources.

Feed-in Tariff

Main features

• The system ensures the economic and fnancial viability of the RE project.

• The system shall reduce the investment risk to a manageable level.

• Under a feed-in tariff regime fuctuations in revenues of wind power projects only

depend on fuctuations in generation and not on potentially volatile electricity prices..

Feed-in Tariff

Economic Tradeoff:

The system should provide a suffcient level of promotion but should also minimize the

associated economic cost.

The fnancial support provided by the tariff must be high enough to attract investors and thus

achieve the given target, on the other hand over-subsidization may help to achieve specifc

RES-E targets in due time but could impose a huge burden on some or all sectors of the

economy.

Feed-in Tariff

Design of Feed-in Tariff

Four Pillars are considered:

1. Legal Framework

2. Regulatory Framework

3. Contractual Framework

4. Tariff Calculation and Adjustment

Design of Feed-in Tariff

1. Legal Framework

A proposed law that sets commitments on parties who share various responsibilities for establishing

any RE project under any scheme; it includes (but not limited to);

•. Land allocation

•. Energy production, purchase and trade

•. Connection to Electricity networks

•. Demand creation

•. Tariff review and issuance

Design of Feed-in Tariff

2. Regulatory Framework

It includes (but not limited to):

• Projects Capacities

• Situation of projects previously built before FiT issuance

• Currency of payment

• FiT adjustment

• Regulatory period for reviewing the FiT

• Licenses

• Codes

Design of Feed-in Tariff

3. Contractual Framework

It includes:

• Power Purchase Agreements

• Connection Contracts

In Egypt will be based on the production costs.

Production Cost Based Systems Premium-Market Prices Based Systems

Feed-in-Tariff

Design of Feed-in Tariff

4. Tariff Calculation and Adjustment

FiT over Project Lifetime

Design of Feed-in Tariff

International Schemes for Wind FiT:

French Model vs. German Model

International Schemes for Wind FiT:

French Model vs. German ModelFIT

Years

Ref site

(worst site)

FIT

Years

Best site

5 15

Project life timeRef site(average site)

5 15

French Model

German Model

Design of Feed-in Tariff

Stepwise Reduction for Wind

Ref site(worst site)

FIT

Years

5 15

The Egyptian approach for FiT

Flat Rate for Solar

Ref. site

FIT

Years

25

The Egyptian approach for FiT

The Egyptian approach for FiT

Basis for FiT structure

Solar Wind

Projects Capacities • Residential

• <200k.w.(other than res.)

• 200 kW - 500 K.W

• 500 kW – 20 MW

• 20MW – 50 MW

Up to 50 MW

PPA duration 25 years 20 years

Tariff Adjustment No adjustment After 3 years

32

Support

• Soft loans for 4% interest rate

• One stop shop … coordination between different entities

• Land allocation

• Sovereign guarantees for medium size projects

Thanks For Your Attention

Marwa Mostafa Mohamed

Senior Planning Engineer

Egyptian Electric Utility and Consumer Protection Regulatory

Agency(EgyptERA)

E-mail marwa.mostafa@egyptera.org, marwa_mostafa75@yahoo.com

Website www.egyptera.org