Cairo

Source: Al-Wafd newspaper

Dr. Ali Mohamed Al-Khouri

The ongoing energy crisis in Egypt has become an embarrassing issue and poses major economic, social and environmental challenges. Despite the efforts made by the government to address the crisis, the recurring outages of electricity and energy distribution are still affecting Egypt, exposing its economy to major losses and undermining community confidence.
The direct economic impact of the power outage is evident in the disruption of industrial activities, in light of the factories facing halted production lines, especially those in sectors such as food and medicine that rely heavily on refrigeration. This stoppage exposes factories to significant revenue losses, damage to goods, and deterioration in product quality. This situation is exacerbated by the need for commercial sectors to use expensive diesel generators, the effects of which not only increase operational costs, but also contribute to environmental pollution. In addition to all of this, the transportation sector also suffers from disruption of fuel supplies due to its impact on power outages, which in turn negatively affects the trade and tourism sectors, and costs the overall economy billions of dollars annually.

In its indirect form, the energy crisis has begun to contribute to eroding investor confidence and hindering foreign investment, which are two elements that fuel economic growth. The successive effects of this crisis include high unemployment rates, a decline in the level of public services, and a decline in economic growth. For example, prolonged power outages have had severe impacts on the healthcare sector, with reports indicating that hospitals are struggling to operate essential equipment during power outages, and are more vulnerable to critical and worrying disruptions to patient care.

The Egyptian government has implemented short- and long-term strategies to mitigate the crisis. These short-term strategies included increasing fuel imports and enhancing the efficiency of energy distribution networks, allocating $1.18 billion to import natural gas and diesel for power stations during the summer of 2024, in addition to launching awareness campaigns to conserve energy during peak periods. This also included imposing higher tariffs on excessive energy consumption to encourage energy conservation.

As for long-term strategies, they aim to ensure energy sustainability through diversification of energy sources, which is evident from the government’s commitment to increasing the share of renewable energy in its energy mix. This is evident in the investments directed in clean energy projects such as the Benban Solar Energy Complex, which is one of the largest projects in the world. In addition, the development of wind farms and investments in green hydrogen technology confirm the country’s systematic commitment to reduce dependence on fossil fuels and benefit from natural resources. According to national plans, Egypt aims to generate 42% of its energy from renewable sources by 2035.

Despite all the efforts made, there are still challenges that need to be addressed. Reliance on gas imports has proven to be a major challenge, as evidenced by declining supplies due to regional tensions and increased demand. This decline in supply contributed to recurring power outages in 2023 and 2024, as power plants faced a shortage of fuel needed to operate turbines, which reduced electricity production and increased pressure on the grid.

In addition, the government’s decision to export natural gas to generate foreign currency, in light of the domestic shortage, created an unstable balance between domestic consumption needs and export obligations. This situation has become more complicated with the growing geopolitical tensions and the impact of climate change, causing severe heat waves and increasing demand for electricity for cooling purposes.

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