Blackouts in Egypt have become more frequent this summer, accentuated by new factors. The shortfall between production and consumption that persisted for several years has expanded even more because of a shortage of dollars affecting fuel supplies needed for electrical power plants. But liquidity problem is only an added reason — the roots of the crisis were already there. Yet this crisis is far from a surprise to officials and experts. Over the past two years, annual consumption of power has exceeded expectations, increasing by more than 10 percent while official figures forecast a rise of eight percent. This increase was accompanied by a slowdown in construction of new power plants due to political instability. "Production capacities totaling 2,800 Megawatts (almost 10 percent of the total production capacity of Egypt) were not delivered due to suspension of work because of social tensions," says Aktham Aboul-Ela, spokesman for the Egyptian Ministry of Electricity. After the revolution, work was suspended in all power plants under construction — sometimes by locals demanding jobs, sometimes by employees working in onsite construction. "People are still blocking the work in two plants; in Banha in the Delta and north of Giza. These plants should have been operational since 1 June," says Mahmoud Shahuta, Freedom and Justice Party (FJP) MP and member of the Energy Committee of the Shura Council. Mohab Hallouda, senior energy specialist for the MENA region at the World Bank, underlines other reasons that contributed to aggravating the crisis, including heat waves experienced by Egypt recently with temperatures exceeding 40ºC, and the lack of maintenance in the central power grid. "Production capacity can drop up to 15 percent due to the heat. Added to this, actual production has been affected by a lack of renovation and maintenance," says Halouda. Actual power production in Egypt has fallen to 19,000 Megawatts (MW) at some points, while the country has capacity that should exceed 26,000 MW. The political instability that followed the revolution was not only reflected in social unrest but also government performance. The electricity crisis revealed a lack of coordination between different departments. Overwhelmed by criticism, the minister of electricity blamed the minister of petroleum for natural gas and diesel fuel shortages. The minister of petroleum, for his part, blamed the Ministry of Electricity and other governmental bodies for a liquidity shortage, alleging they do not pay their debts to his ministry. He revealed that the debt of state bodies to his ministry had reached LE9 billion ($1.28 billion). A big part of that debt is owed by the Ministry of Electricity. Currently, power outages are being felt in every part of the country, including in hospitals, industrial areas, at Cairo Airport, and even during the opening of the Ismailiya Festival for Documentary Films. In the street, angry demonstrations have been held in various governorates where daily blackouts last several hours. "The power cuts affect all industries and could affect investment in general. Who would invest in a country where energy is not available or only intermittently?" warns Mohamad Zaki Al-Sewedy, a member of the Energy Committee of the Federation of Egyptian Industries. Despite the risks the energy crisis poses to the economy, no radical solution is expected in the short term. The government announced a five year plan to produce an additional 13,200 MW. To build power plants with this capacity, investment of LE90 billion ($12.85 billion) will be needed according to official figures. However, building new power plants will not be enough. The government needs to improve gas supplies, calm social tensions, encourage people to rationalise consumption, and finally reduce subsidies to solve the financial liquidity problem, according to experts.
Posted on: Wed, 12 Jun 2013 20:26:31 +0000
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