• Type General news
  • Date 31 December 2020

Integrated Electricity Markets Within the GCC, the Middle East and North Africa Support Electricity Sector Liberalization

The King Abdullah Petroleum Studies and Research Center (KAPSARC) published a recent study to shed light on the opportunities and challenges in the electricity trade between Egypt and Saudi Arabia, in addition to the stages of electricity sector liberalization in Egypt and the developments it has witnessed with the aim of making Egypt an energy hub.

The study, conducted by the center’s researchers (Shahid Hasan, Turki Alaqeel and Hafez El-Salmawy), falls under the scope of the research project initiated recently by KAPSARC to seek to develop solutions and recommendations that can facilitate the establishment of a well-functioning integrated electricity market in the Gulf Cooperation Council (GCC) and the Middle East and North Africa (MENA) region.

The study, “Electricity Sector Liberalization in Egypt: Features, Challenges and Opportunities for Market Integration,” published by KAPSARC in October 2020, reviewed five steps implemented by Egypt to improve its electricity markets efficiency. Egypt and Saudi Arabia are developing a 3 gigawatt (GW) interconnection between the two countries. It employs 500 kilovolt (KV) high-voltage direct current bipolar transmission technology to connect one substation in Egypt with two substations in Saudi Arabia (in Medina and Tabuk) through overhead lines and a submarine cable across the Gulf of Aqaba. When completed, it will provide opportunities to trade electricity with other GCC member states through Saudi Arabia.

Furthermore, Egypt, Cyprus, and Greece signed an initial agreement in 2019 to develop the 2 GW Euro-Africa Interconnector, to connect their grids through the Greek island of Crete. Egypt announced this year a joint plan with Sudan to increase their existing 70 megawatt (MW) interconnection to 300 MW in the second phase of the linkage by 2021. Egypt has also joined the MedRing (Mediterranean Electricity Ring) interconnection project, which aims to link the grids of most of the countries bordering the Mediterranean Sea, thereby also connecting the grids of North African countries to Europe through the existing Morocco-Spain interconnection. This is in addition to seeking to establish the Pan-Arab Regional Electricity Market (PAEM) supported by the World Bank.

The study indicated that the Integrated Sustainable Energy Strategy (ISES) 2035 in Egypt seeks to reduce 18% of overall energy demand by 2035 through enhanced energy efficiency, focusing on three main sectors: buildings, industry, and transportation. The combined savings are expected to be 20 million tonnes of oil equivalent by 2035. To achieve this, the strategy requires electricity utilities to increase their operational efficiency through upgrades to existing generation and transmission infrastructure and adopting new technologies.

KAPSARC’s study expects Egypt to achieve the transition from the current market structure to a more liberalized and competitive market over the next eight years, to work on expanding the scope of private sector participation, and to restructure the electricity industry to improve efficiency and enable competition.

The paper identified five directions for the sustainable energy strategy, which included enhancing energy supply security, ensuring the financial sustainability of electricity companies, improving institutional and corporate governance, improving energy and resource efficiency, and strengthening competitive markets and regulations.

KAPSARC’s paper called for the implementation of four recommendations to address the challenges of the electricity sector in Egypt, namely ensuring energy security, including increased deployment of renewable energy technologies, designing a more competitive market, and working on expanding grid interconnections, electricity trade, subsidies, and energy prices reform.

The study indicated that Egypt is one of the most populous countries in the MENA region and the Arab world, with a population of 100 million. Its electricity demand has risen at an average rate of around 6% per year over the last decade, with peak demand climbing from 17.3 GW in 2005/2006 to 31.4 GW in 2018/2019.

It is noteworthy that KAPSARC is a global non-profit center that conducts independent research in the field of energy economics, policies and technologies of various types, and related environmental studies. The center works on finding solutions for the most effective and productive use of energy to enable economic and social progress locally, regionally and globally.

The center has made progress in the list of the best research centers regionally and globally, as it jumped 14 ranks in the ranking of the Middle East and North Africa research centers. It ranked 15th out of 103 research centers regionally, and 13th out of 60 research centers globally specializing in energy policy.

This article originally appeared on Saudi Gazette