Fate of Egypt’s coal-fired project a sign of greener times
Chinese-backed Hamrawein proposal shelved indefinitely as large, unwieldy power stations become even less suitable
The Hamrawein coal-fired power proposal in Egypt has reportedly been postponed indefinitely. The huge plant was to have been the second largest on the planet, and its demise is symptomatic of the seismic shifts that are occurring in global energy markets, which have been rammed into overdrive by Covid-19.
The Hamrawein proposal was led by a consortium of China’s Shanghai Electric and Dongfang Electric, and Egypt’s Hassan Allam Construction. Egypt is a key Belt and Road Initiative (BRI) nation for China, sitting on the crossroads between Africa, Europe and Asia.
Egypt also finds itself at an energy technology crossroads. The country has until recently maintained an “all of the above” approach to power generation, encompassing fossil fuels, nuclear power, wind and solar. It now seems to be pivoting away from coal and towards renewable energy.
The indefinite postponement of the Hamrawein plant would mean a total of 15.2GW of proposed coal-fired power plants in Egypt have been either cancelled or shelved. There would be no coal projects left in the country’s project pipeline.
The news out of Egypt follows increasing problems encountered by the Chinese-funded Lamu coal power proposal in Kenya. The 1GW Lamu coal power proposal, which has been justified in part by the need to replace expensive diesel in the Kenyan power system, was halted in 2019 by Kenya’s National Environmental Tribunal amid significant local opposition to its construction.
Such local opposition to BRI coal plants is increasingly evident in developing nations around the world and led to the cancellation in March 2020 of another Chinese-funded coal power proposal in Bangladesh.
The Hamrawein proposal appears to have been shelved because Egypt now has sufficient power capacity and the construction of such a huge plant would exceed growth requirements.
Around the world the economic downturn, worsened by the Covid-19 pandemic, is suppressing power demand, further eroding the need for large, out-of-date coal-fired power plants.
For example, BRI coal power proposals in Bangladesh and Pakistan threaten to leave both nations with significant over-capacity, potentially leading to unaffordable capacity payments to coal power plants lying idle. The risk is only increased by Covid-19.
The pandemic-driven downturn, and the slow global recovery that is now seeming more likely, will also see power demand growth in Africa at lower levels than expected throughout 2020 and beyond. SA has already seen power demand plummet by more than 25%.
In this lower-growth environment large, unwieldy power projects are less suitable. Subdued demand growth is an opportunity for smaller, modular and ever-cheaper wind and solar projects to be rolled out to meet demand. Furthermore, coal-fired power is unable to complement the inevitable rise of renewable energy in Africa as the global energy transition continues.
African countries tend to have such low power capacities that a few new wind and solar installations can make them highly reliant on renewable energy quickly. This, in turn, creates an immediate need to balance the intermittency of renewables. The inflexibility of coal-fired power, which cannot easily be ramped up and down, means it is not able to provide this balance as well as power storage solutions like batteries.
Amid the increasing headwinds that Chinese coal power investment is faced with in Africa there have been early, encouraging signs of increased interest in African wind and solar power by Chinese companies. In February the state-owned China Energy Engineering Corporation revealed plans for 500MW of solar in Uganda. In March Chinese hydropower giant Sinohydro was awarded a contract to construct a 20MW solar plant in Guinea-Bissau, a project that will nearly triple the African nation’s effective power capacity.
These followed the completion of the Chinese-built and Chinese-financed 50MW Garissa solar plant in Kenya. It is the recently completed Garissa plant, along with the Lake Turkana wind farm, that are replacing expensive diesel-fired power in the nation’s power system — not coal.
Meanwhile, in neighbouring Tanzania China’s Sany Heavy Industries announced it had secured a deal for a 600MW wind plant in December 2019 which would be by far the largest in Sub-Saharan Africa.
Large coal-fired power plants in Africa will make less sense than ever and the coronavirus pandemic provides an impetus to reset the BRI’s approach to energy investment across the African continent.
With the opportunity for coal power in Africa now largely closed, we ought to see BRI energy investment on the continent move distinctly towards renewable energy.
• Nicholas is energy finance analyst at the Institute for Energy Economics and Financial Analysis.