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20 April 2022

EDF eyes green fuel boom in Suez Canal

EDF Renewables and ZeroWaste have teamed up in Egypt’s Suez Canal Economic Zone in a deal that could start to lay the foundations for hydrogen trading in the region. Starting with a 350,000 ton per year green ammonia plant, the move comes as part of a larger push for Europe to secure its future hydrogen needs from the exceptional renewable resources of North Africa.

The project involves an investment of around $3 billion and will be implemented in stages, according to statements made by the Egyptian government. The first of these will start construction in 2024, with commercial operations to follow in 2026, producing 140,000 tons of green ammonia per year. This will then be gradually increased to around 350,000 tons per year, with the fuel initially used to fuel marine vessels in the Ain Sokhna region.

Tapping new renewable energy resources in the region, green hydrogen will be produced using desalinated seawater, before conversion into green ammonia (through the Haber Bosch process) as a logistically advantageous marine fuel. The group has secured initial agreements with three international banking institutions to finance the project. Other partners for the project include the Sovereign Fund of Egypt, the Egyptian Electricity Transmission Company, and the Renewable Energy Authority.

As pointed out by Egypt’s prime minister Mostafa Madbouly, who commented on the deal, the project marks one of many early projects in Egypt and across North Africa that are targeting green hydrogen and ammonia. Ahead of its COP27 presidency later this year, such projects will be vital in demonstrating Egypt’s climate leadership across the region.

Recent headlines have seen SCZone sign an MoU with Scatec to build a production facility with an annual capacity of one million tons of green ammonia, while another between AP Moller and Maersk for the production of green fuel for the decarbonization of the shipping industry. The Egyptian government has also agreed to fund a 100 MW electrolyzer project being developed by Scatec, Orasom, and Fertiglobe. Another project, producing 1 million tons of green ammonia per year, will also be developed by Scatec alone, while Eni and Thyssenkrupp have also submitted a $2 billion bid to develop a green hydrogen production plant in Port Said.

In September, Siemens Energy also announced a partnership with Egyptian Electricity Holding Company – the state-owned utility that owns 90% of the country’s generation capacity and all of its transmission infrastructure – to develop a ‘robust green hydrogen industry’ in the country. This will involve an initial pilot project with an electrolyzer of 200 MW capacity.

Not only does this build on the relationship between the two companies for energy projects in Egypt, but it continues to highlight Egypt’s willingness to partner with the international community throughout its energy transition. This will be vital in securing Egypt’s role in hosting a significant share of the 40 GW of electrolysis capacity that Europe is hoping to deploy across North Africa and Ukraine, with 32.5 GW set to be exported – primarily into Europe – capitalizing on the huge renewable power potential of the region.

In Egypt, specifically, the coastal area around the country’s Red Sea often sees wind speeds of up to 10 meters per second, compared to a global average of below 4 meters per second. For solar power, a global horizontal irradiation of 2,300 kWh per square meter per year provides a potential yield that is 60% higher than the average country.

The Suez Canal itself offers a unique opportunity for the country. The channel, which made headlines last year when it was blocked by the Ever-Given vessel, causing global economic disruption, is traveled through by over 12% of all global trade, representing 30% of all global container traffic and over $1 trillion worth of goods per year.

Situated as an African outpost to both the Middle East and to Europe, Egypt’s interest here is naturally focused on its ability to hold its position as an export trading hub between Africa and the rest of the world. The Suez Canal and Suez Mediterranean Pipeline have played a huge transit role in the international energy market to date.

Whether it is oil companies making vein attempts to reduce their operational emissions, or logistics companies looking to evade the incoming carbon taxes on the maritime sector, there is a huge surge of interest of the use of hydrogen and ammonia in the decarbonization of shipping. It will become a reality in just one year, according to the Fortescue Metals Group, which recently unveiled plans to have the world’s first ammonia-powered ship ready by the end of 2022. Producing and providing the green fuel for these vessels presents a huge source of income for Egypt.

Egypt is fast becoming one of the most ambitious players in the race to become the future green powerhouse of Africa. However, despite strong ambitions, generous incentives, and an acceptance of international investment, Egypt – the fourth largest economy in the region – has so far failed to realize its true renewable potential, providing a warning sign for the rest of its peers.

The country’s aim to lead the spectacular energy transformation of the MENA region now rests on a handful of huge-scale projects that must be installed over the next five years. Otherwise, having developed as the central hub of the oil world, the region now stares down the barrel of economic turmoil should it fail to replace its fossil exploits with clean energy revenues; the oil and gas sector accounted for 24% of Egypt’s GDP in 2020.

However, the overall view is starting to shift towards renewables, holding onto a long-term plan of energy diversification, which pre-dates the recent large Zohr gas discovery offshore. The country’s energy minister has previously outlined a future partnership with the EU to establish a special committee to develop a strategy for the use, production, and exploration of hydrogen as a clean fuel.

In fact, as far as providing an economic platform for the development of renewable energy in Egypt, the country has stormed ahead of its MENA peers. Renewable energy policies and incentives are established at the national level by the government, typically through the Cabinet of Ministers. In 2016, the government set a target for 20% of electricity consumption to be generated from clean energy sources by 2022, before reaching 42% by 2035, according to the Energy Strategy approved in 2016. Of the 2022 goal, 12% is set to come from wind energy, with the remainder coming from small hydro and solar projects.

The truth is that the bulk of the spoils from policies implemented in the mid 2010s will be realized in the next few years. The country has a huge 9.2 GW pipeline of renewable energy projects – mostly wind power – putting it on track to overtake South Africa as the ‘Green Powerhouse of Africa’ by 2025. Over the next five years, four out of the top 10 projects developed in Africa will be built in Egypt.

Growth will come from large projects including the 2 GW Gulf of Suez Red Sea Wind Project, which will be located in the governorate of the Red Sea. The first 500 MW phase of the project will be developed by Siemens Gamesa, while the remaining 1,500 MW has yet to be awarded.