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Stimulation of Renewable Energy Pro

Stimulation of Renewable Energy Production
The development of the alternative energy industry in Egypt, and investment therein, has become a priority for the Egyptian government. Egypt continues to suffer from power shortages, and energy consumption continues to increase. In the past year, several key legislations have been issued relating to the alternative energy industry. Presidential Decree No. 274 of 2014 designated over 8,000 feddans for the purpose of solar energy investment, the Minister of Electricity issued a decision determining feed-in tariffs for renewable energy, and Presidential Decree No. 135 of 2014 amending Law No. 102 of 1986 gave more powers to the New and Renewable Energy Authority ("NREA"), the country’s main regulator of such form of energy. More recently, another important renewable energy related legislation was issued. On 21 December 2014, Presidential Decree No. 203 of 2014 was issued for the purpose of stimulating energy production from renewable energy sources (the "Decree").[1]
Stimulating Renewable Energy
The purpose of the Decree is to set out in law the process by which energy companies can establish renewable energy projects and sell electricity generated therefrom. The different scenarios are detailed below:
  • NREA can issue an invitation to tender relating to the establishment of renewable energy stations. Renewable energy generated from these stations would be sold to the Egyptian Electricity Transmission Company ("EETC") at a price recommended by the Egyptian Electric Utility and Consumer Protection Regulatory Agency ("EEUCPRA"), commonly referred to as "EgyptERA". The price will be based upon studies conducted by NREA and approved by the Cabinet of Ministers.
  • EETC can issue an invitation to tender for investors to build, own, and operate energy stations. Renewable energy generated would be sold back to EETC in accordance with the conditions and prices agreed upon by EETC and the investor.
  • Investors can build, own, and operate energy stations out of their own initiative. Renewable energy generated would be sold to EETC or any other licensed electricity distribution company which has a purchase agreement in accordance with the feed-in tariffs. The maximum duration of a purchase agreement is 25 years. The State is responsible for determining feed-in tariffs, which will remain in place for two years or until the energy generation target is achieved, whichever comes sooner. In any case, the feed-in tariffs would remain unchanged in the purchase agreements made by investors, and any amendments made by the Cabinet of Ministers will only apply to contracts which will be made after such amendments are enacted.
  • Investors can sell electricity generated by alternative energy sources directly to consumers, provided that transmission and distribution networks are used in accordance with the price and conditions agreed upon.
As well as the scenarios explained above, the Decree also stipulates several important provisions. While investors would be allowed to build, own, and operate renewable energy stations, the land itself on which the projects are established will be held in usufruct. The investor will pay 2% of the value of the energy sold in order to maintain that right. Investors owning energy stations producing more than 500KW must establish an Egyptian company (with the project’s name), in accordance with Investment Law No. 8 of 1997. With regards to licensing, the Decree reiterates that the generating and selling of electricity generated from alternative energy sources can only be undertaken with a valid license from EgyptERA. Before the issuance of a license to operate, EgyptERA will issue a preliminary license for the preparation of the project. Announcements of issuance of licenses by EgyptERA, whether temporary or operating, will be published in the Egyptian Gazette and other publications. It is to be noted that energy projects generating less than 500KW and those established for private use will be exempt from obtaining licenses from EgyptERA. Regarding the projects themselves, it will be the responsibility of EETC and licensed transmission companies to connect the power stations with the electric grid, at the expense of the producer, to be able to transmit the generated power. In the event of a failure to transmit the energy generated, the transmission or distribution company will still be liable to pay for the electricity generated by the energy station. Based on the recommendation of the Minister of Electricity and Energy, the Cabinet will determine the expected yearly consumption of energy, and as such determine the need for alternative energy generation. These determinations will be made at least three months before the start of the financial year. The Decree requires the Cabinet to undertake several functions including  to announce the details of rules and regulations related to feed-in tariffs and the energy generation target for that year, announce the ways in which alternative energy projects should bring their affairs in order before the issuance of this new Decree, the conditions for the right of usufruct mentioned above, as well as the names of electricity producers and the mandatory fees they must pay, and the rules for the issuance of energy certificates.
Conclusion
The new Presidential Decree is part of recent efforts to stimulate and clarify the process of renewable energy production in Egypt. By setting out clearly the four main instances in which energy companies and investors can enter into the alternative energy industry and build, own, and operate energy stations, the government has helped determine the structure of a fledgling sector it seeks to empower. NREA has already announced an invitation to tender for a solar power station in Hurghada, with a total capacity of 20MW. The investment is valued at USD 50 million. The establishment of a 140MW power station in Kuraymat was also recently announced. Exempting from the licensing requirement projects generating less than 500 KW will encourage investments by environmentally-conscious individuals and entities in solar energy, thus reducing the State’s burden in a small but noticeable way. It also means that the production and importation of solar panels can ensue without fear that the administrative requirements for the use of such technology would be overly burdensome on the average consumer.   [1] Presidential Decree No. 203/2014 on Stimulation of Renewable Energy Production, Official Gazette, Issue 51, (bis) (a), 21 December 2014.
The development of the alternative energy industry in Egypt, and investment therein, has become a priority for the Egyptian government. Egypt continues to suffer from power shortages, and energy consumption continues to increase. In the past year, several key legislations have been issued relating to the alternative energy industry. Presidential Decree No. 274 of 2014 designated over 8,000 feddans for the purpose of solar energy investment, the Minister of Electricity issued a decision determining feed-in tariffs for renewable energy, and Presidential Decree No. 135 of 2014 amending Law No. 102 of 1986 gave more powers to the New and Renewable Energy Authority ("NREA"), the country’s main regulator of such form of energy. More recently, another important renewable energy related legislation was issued. On 21 December 2014, Presidential Decree No. 203 of 2014 was issued for the purpose of stimulating energy production from renewable energy sources (the "Decree").[1]
Stimulating Renewable Energy
The purpose of the Decree is to set out in law the process by which energy companies can establish renewable energy projects and sell electricity generated therefrom. The different scenarios are detailed below:
  • NREA can issue an invitation to tender relating to the establishment of renewable energy stations. Renewable energy generated from these stations would be sold to the Egyptian Electricity Transmission Company ("EETC") at a price recommended by the Egyptian Electric Utility and Consumer Protection Regulatory Agency ("EEUCPRA"), commonly referred to as "EgyptERA". The price will be based upon studies conducted by NREA and approved by the Cabinet of Ministers.
  • EETC can issue an invitation to tender for investors to build, own, and operate energy stations. Renewable energy generated would be sold back to EETC in accordance with the conditions and prices agreed upon by EETC and the investor.
  • Investors can build, own, and operate energy stations out of their own initiative. Renewable energy generated would be sold to EETC or any other licensed electricity distribution company which has a purchase agreement in accordance with the feed-in tariffs. The maximum duration of a purchase agreement is 25 years. The State is responsible for determining feed-in tariffs, which will remain in place for two years or until the energy generation target is achieved, whichever comes sooner. In any case, the feed-in tariffs would remain unchanged in the purchase agreements made by investors, and any amendments made by the Cabinet of Ministers will only apply to contracts which will be made after such amendments are enacted.
  • Investors can sell electricity generated by alternative energy sources directly to consumers, provided that transmission and distribution networks are used in accordance with the price and conditions agreed upon.
As well as the scenarios explained above, the Decree also stipulates several important provisions. While investors would be allowed to build, own, and operate renewable energy stations, the land itself on which the projects are established will be held in usufruct. The investor will pay 2% of the value of the energy sold in order to maintain that right. Investors owning energy stations producing more than 500KW must establish an Egyptian company (with the project’s name), in accordance with Investment Law No. 8 of 1997. With regards to licensing, the Decree reiterates that the generating and selling of electricity generated from alternative energy sources can only be undertaken with a valid license from EgyptERA. Before the issuance of a license to operate, EgyptERA will issue a preliminary license for the preparation of the project. Announcements of issuance of licenses by EgyptERA, whether temporary or operating, will be published in the Egyptian Gazette and other publications. It is to be noted that energy projects generating less than 500KW and those established for private use will be exempt from obtaining licenses from EgyptERA. Regarding the projects themselves, it will be the responsibility of EETC and licensed transmission companies to connect the power stations with the electric grid, at the expense of the producer, to be able to transmit the generated power. In the event of a failure to transmit the energy generated, the transmission or distribution company will still be liable to pay for the electricity generated by the energy station. Based on the recommendation of the Minister of Electricity and Energy, the Cabinet will determine the expected yearly consumption of energy, and as such determine the need for alternative energy generation. These determinations will be made at least three months before the start of the financial year. The Decree requires the Cabinet to undertake several functions including  to announce the details of rules and regulations related to feed-in tariffs and the energy generation target for that year, announce the ways in which alternative energy projects should bring their affairs in order before the issuance of this new Decree, the conditions for the right of usufruct mentioned above, as well as the names of electricity producers and the mandatory fees they must pay, and the rules for the issuance of energy certificates.
Conclusion
The new Presidential Decree is part of recent efforts to stimulate and clarify the process of renewable energy production in Egypt. By setting out clearly the four main instances in which energy companies and investors can enter into the alternative energy industry and build, own, and operate energy stations, the government has helped determine the structure of a fledgling sector it seeks to empower. NREA has already announced an invitation to tender for a solar power station in Hurghada, with a total capacity of 20MW. The investment is valued at USD 50 million. The establishment of a 140MW power station in Kuraymat was also recently announced. Exempting from the licensing requirement projects generating less than 500 KW will encourage investments by environmentally-conscious individuals and entities in solar energy, thus reducing the State’s burden in a small but noticeable way. It also means that the production and importation of solar panels can ensue without fear that the administrative requirements for the use of such technology would be overly burdensome on the average consumer.   [1] Presidential Decree No. 203/2014 on Stimulation of Renewable Energy Production, Official Gazette, Issue 51, (bis) (a), 21 December 2014.