The policy brief examines China’s involvement in Egypt’s national energy transition, focusing on Chinese renewable energy production and green hydrogen activities, and the challenges faced by Chinese investors in competing with other countries in the MENA region, as well as China’s competitiveness in providing technological and financial support for Egypt to become a regional hub for green electricity and hydrogen production. The report was prepared by a senior research fellow at IIGF, Wei Shen, and a research fellow at IIGF Han Chen. This report was commissioned by the African Climate Foundation (ACF) which we gratefully acknowledge. It was produced independently by IIGF and the contents represent the views of IIGF and its researchers and not necessarily that of the ACF.
Here are some key points from the report:
- Egypt has set ambitious targets to generate 42% of its electricity from renewable energy sources by 2035, requiring a total of 61 GW of installed capacity, as outlined in its Integrated Sustainable Energy Strategy to 2035 (ISES 2035), and enshrined in its National Determined Contributions (NDC) under the Paris Agreement, despite renewables currently only accounting for 10% of its total installed capacity as of 2021.
- Egypt’s heavy reliance on oil and gas resources to power its economy is no longer feasible due to increasing energy demand, rising concerns about national energy security, and environmental impacts such as air pollution, making diversification through renewable energy options crucial for achieving long-term energy security and providing health-related co-benefits.
- Egypt has abundant renewable energy resources, including solar and wind, with favorable geographic conditions, and since 2014, the government has implemented comprehensive regulatory frameworks and supportive policies that have led to the installation of significant solar PV and wind energy capacities, with completed projects, projects under construction, and projects in the pipeline, including off-grid and roof-top systems.
- The Egyptian government is exploring opportunities in biomass, nuclear, and geothermal sectors as complementary resources to decarbonize its energy system, with most renewable energy projects being funded by IFIs and DFIs, and a shift towards private investment, while also focusing on local content requirements and aiming to be a regional power hub for exporting surplus electricity to neighboring countries.
- China is playing a significant role in providing technological and financial support for Egypt’s transition to a sustainable and energy-independent economy, with Chinese companies (such as Chint, TBEA, Power China, and CEEC) involved in EPC contracts, financing, and manufacturing capacity development in the renewable energy sector.
- China’s financial support, particularly from its leading DFIs, and cooperation with other investors and financial institutions, as well as aid and international development projects, can play a crucial role in bridging the financial gap for Egypt to achieve its renewable energy targets, including supporting manufacturing capacities and fostering local industrial and research capacities.
- Egypt aims to position itself as a regional hub for green hydrogen production (the global production of low-emission hydrogen could reach 16-24 Mt per year by 2030, with 9-14 Mt based on electrolysis and 7-10 Mt on fossil fuels with CCUS), with support from international partners and ambitious targets for capacity installation, but faces challenges such as water scarcity and storage limitations.
- China’s involvement in Egypt’s hydrogen market is currently limited compared to European and MENA investors, but with the signing of an MOU for China’s first green hydrogen project in Egypt, China’s strong capacity in providing comprehensive infrastructure solutions and its domestic market focus pose challenges in fully leveraging its potential competitiveness in the Egyptian market.
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