Energy efficiency improvements

EGY97G31

Abundant energy resources and low prices spur increases in consumption. In Egypt lower costs for households, businesses and electric utilities, better use of foreign exchange, and improved air quality are helping to inspire a change in attitude.

 
  • Executing agency: UN/DESA Division for Sustainable Development
  • Senior advisor: Mr. Yehia Abu-Alam
  • Start date: 1 October 1998
  • Total budget: USD 1,707,575

Background

Egypt is well-endowed with energy resources in the form of oil, natural gas, and hydro power. The resources are available for meeting expanding energy requirements as the economy grows and changes with movement towards deregulation, restructuring, and privatization. Unfortunately, the abundance of resources and the historically low energy prices have contributed to an over-utilization of resources in relationship to other economic indicators. Primary energy consumption increased by 30% from 1983/84 to 1992/93, a compounded yearly growth of about 3.3%, exceeding the compounded population growth of 2.8%. Primary energy use per capita in 1992 was about 586 kg oil equivalent, which is 50% greater than for other countries at similar states of economic development.1

There is a clear opportunity to reduce per capita consumption of energy resources, and in the process, achieve benefits to the global environment through improved utilization (or end-use) efficiency, by reducing losses, developing renewable resources, and applying more modern techniques of cogeneration, all of which imply a beneficial reduction in the emission of greenhouse gases. In particular, there is abundant biomass from agricultural waste which is largely unexploited, yet which represents an additional fuel resource with direct benefit to greenhouse gas (GHG) reduction to the extent that it replaces fossil resources.

Perhaps most important in motivating a new attitude toward energy efficiency has been the approach of energy prices toward actual market value. In the case of electricity, USAID currently estimates that the average tariff for electricity sales across all consuming sectors has reached 80% of the long run marginal cost (LRMC). EEA has a different estimate, claiming that the average price has already exceeded the LRMC. In any event, progress toward the LRMC is substantial and now at levels which encourage energy efficiency and offer the potential of good payback on investments in small power systems based on cogeneration.

The combined objective of end-use efficiency and load management is commonly referred to as demand-side management (DSM). This can provide many benefits to Egypt, including lower energy bills for households and businesses, lower operating and capital costs for the electric utilities, better use of foreign exchange, and improved air quality. Over the next decade, DSM offers the potential to save at least 15% of the electrical energy consumption through economically viable investments.

Barriers to be Overcome

Barriers to achieving the energy efficiency potential involve both market-related issues and institutional issues. The market barriers prevent consumers from buying energy efficient products and services; the institutional barriers prevent energy institutions from promoting energy efficiency.

Five primary market barriers have been identified in Egypt:

1) low consumer awareness of the benefits of specific energy efficiency technologies and practices;

2) little apparent consumer interest in buying these technologies or adopting these practices;

3) reluctance to commit capital to energy efficiency projects offering 2-3 year payback periods;

4) risk aversion towards investing in new technologies; and

5) inadequate maturity of the market infrastructure, manifested primarily in poor availability of efficient equipment and tradespeople to support the installation and maintenance of such equipment.2

Five institutional barriers have also been identified:

1) lack of explicit national policy for energy efficiency at end-use level;

2) an incomplete transition to cost-based electric tariffs for most residential and some industrial customers; sector;

3) dilution of institutional oversight for energy utilization;

4) poor availability of credit in the Egyptian economy; and

5) lack of application of modern management skills in public sector enterprises.

The GEF project presents an opportunity for organizations to work cooperatively in accomplishing many of the policy objectives for energy efficiency, and to begin removing barriers to its successful implementation. The strategy for doing so assigns responsibilities for the various project components described below:

Component 1

The objective to reduce transmission losses will be addressed through intensive efforts by EEA staff to acquire the information, knowledge, skills and experience to reduce network losses. The focus of work activities will be to conduct network loss measurements, assess the dynamic response of thermal generation units, and make adjustments in network control and operations procedures. This objective will be achieved through national in-service training, selected use of international expert consultants, and the acquisition and operation of specialized computer control software.

This project component is designed to remove barriers to implementation of energy efficiency, and to stimulate a market for energy efficiency investments and related undertakings, such as incubating and supporting energy services businesses. The component strategy addresses policies, capability development, awareness-building, and government regulation to tap more of the economic potential for end-use efficiency, and the associated reduction of GHGs, than is currently being achieved in the country today.

Component 3

The strategy for this component is to develop the capability within EEA headquarters, the regional zones, and ultimately the EDCs to identify the technical and financial requirements for EEA to interconnect cogeneration units to the UPS, or to facilitate the exchange of cogenerated power between other parties, to the extent permitted by law. This capability will be deployed in three ways. The first is the creation of a defined organizational unit where parties interested in cogeneration can obtain essential information for making design or financial decisions surrounding potential cogeneration facilities. The second is to actively promote cogeneration as a resource when its price, quality, and availability are favorable when compared to alternative resource options called upon by the UPS. The third is to extend the cogeneration knowledge of an initial core group in EEA headquarters to staff in EEA zones and the EDCs.