Egypt’s solar industry wants a helping hand from the central bank

Good morning, wonderful people. It’s issue #2 of Enterprise Climate, and the region is giving us plenty to work with: A regional battle over clouds (yes, you read that right), district cooling and heating tech supplanting traditional ACs, and China eyeing potentially massive GCC investments.

OUR TOP STORY TODAY- Just when we thought we were out, Egypt pulls us back in: Egypt’s solar industry has topped coverage today, with solar players urging the state to ease import restrictions on solar components. A possible solution? Chinese FDI. We have more in today’s Solar section, below.

THE BIG NEWS FROM THE REGION-

YOUR MORNING MUST-READ: MENA’s water wars have taken to the skies, the New York Times says, noting that countries in our neck of the woods are now locking horns over cloud seeding.

The catch: All of Iran’s assertions that other countries are stealing its water are unfounded, atmospheric scientists tell the Gray Lady: Clouds usually evaporate within two hours — not long enough for them to drift from the UAE to, say, Iran.

Wait, what’s cloud seeding? It’s a (not uncontroversial) process of pumping chemicals that bond with water vapor into clouds to try to force or enhance precipitation. Clouds can be seeded from ground stations, airplanes or, occasionally, rockets.

We’ve heard this all before: Iran has been accusing Israel and the UAE of tampering with clouds over its land mass for more than a decade. “European countries used special equipment to force clouds to dump our water on their continent,” then-Iranian president Mahmoud Ahmadinejad said back in 2011, claiming western nations were hatching plots to limit Iran’s water supply and cause drought.

Those fickle foreign fingers… “Iran’s climate changes are unnatural and result from foreign interference, through their research; Iranian scientific centers have reached this conclusion,” Iranian news agency ISNA quoted a military commander in the country’s Revolutionary Guards as saying back in 2018.

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Just in time for the World Cup: Qatar’s circular economy is set to generate some USD 17 bn by 2030 for the Gulf country, according to the Investment Promotion Agency of Qatar (IPA). IPA notes that its circular economy will create 9k-19k jobs in Qatar by 2030 while serving as a magnet for green foreign direct investment.

CLIMATE DIPLOMACY- Japan’s NEXI inks decarbonization finance agreement with Afreximbank: Japan’s state-owned Nippon Export and Investment Insurance (NEXI) signed an MoU with the African Export-Import Bank (Afreximbank) to support investment, trade and decarbonization in Africa, NEXI announced in a statement yesterday. Among the key aims of the agreement: providing financial support to promote investment by Japanese companies in Africa and promoting information exchange in areas including decarbonization technologies and the energy transition, the statement noted.

NEXI wants to help fill the financing gap for green energy in Africa: Energy demand in Africa remains strong and infrastructure developments are needed as part of the growing green economy, said NEXI Structured and Trade Finance Insurance Department manager Yoji Akiyama in a joint Afreximbank-NEXI webinar held on Thursday. “The challenge is how to finance them.” NEXI plans to contribute to filling this finance gap with its ins. schemes, as well as by offering infrastructure bonds with banks and institutional investors, he added.

SOUND SMART– More and more consumers see energy efficiency as important, according to a recent survey (pdf) by digital automation and energy management company Schneider Electric. The study, which included 4k respondents from the US, France, Germany and Sweden, shows some 72% of consumers consider carbon footprint reduction to be a personal priority and 55% place importance on their homes attaining net zero emissions — though only 31% actually see this as achievable. We’d love to see a similar survey carried out in MENA…

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YOU’RE READING ENTERPRISE CLIMATE, the essential regional publication for senior execs who care about the world’s most important industry. Enterprise Climate covers everything from finance and tech to regulation, products and policy across the Middle East and North Africa. In a nod to the growing geographical ambitions of companies in our corner of the world, we also include an overview of the big trends and data points in nearby countries, including Africa and southern Europe. Enterprise Climate is published at 4am CLT / 5am Riyadh / 6am UAE Monday through Friday by Enterprise, the folks who bring you Enterprise Egypt, your essential 6am and 3pm read on business, finance, policy and economy in Egypt and emerging markets.

Subscribe to Enterprise Climate here or reach out to us on climate@enterprisemea.com with comments, suggestions and story tips.

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THE BIG CLIMATE STORIES OUTSIDE THE REGION-

#1- Biden’s climate + tax bill is paying off already: Honda and LG Energy have committed to building a USD 4.4 bn factory in the US that will produce lithium-ion batteries for electric vehicles, they announced in a joint statement yesterday. The factory is expected to have an annual production capacity of 40 GWh a year and work will begin in early 2023. This comes less than two weeks after President Joe Biden signed his landmark climate bill into law, which provides incentives to overseas companies to onshore EV production. (Associated Press | Reuters | WSJ | CNN | FT | CNBC)

It’s big that a South Korean company has signed up: One of the main goals of the bill is to hinder the growth of Chinese companies and maintain US competitiveness in the high-tech sector. To achieve this, the legislation requires companies to cut their reliance on Chinese components and raw materials if they want to benefit from the full USD 7.5k tax credit. This has caused consternation among many South Korean companies, whose supply chains depend heavily on China and have few alternative options in the post-pandemic world of supply disruptions.

#2- India’s Reliance Industries wants to build 20 GW of solar energy generation capacity by 2025 and 100 GW by 2030, Chairman Mukesh Ambani announced during the company’s annual general meeting yesterday.

Reliance is also investing some USD 9.38 bn over five years to expand its oil-to-chemicals business, which among other things could serve as feedstock for green materials, Ambani said. Last year, a non-binding agreement for Saudi Aramco to buy a 20% stake in Reliance’s oil-to-chemicals business for USD 15 bn was called off — reportedly due to valuation concerns.

This marks a notable shift towards green energy for the Indian multinational, which also operates the world’s biggest refining complex. Reliance said last year that it was investing over USD 10 bn to build four giga factories that will produce solar cells and modules, energy storage batteries, fuel cells and green hydrogen infrastructure. “In addition to solar energy, we are also actively progressing on bio-energy, offshore wind and other non-conventional forms of renewable energy, and will continue to expand our manufacturing ecosystem,” Ambani said yesterday.

ALSO- Bloomberg has a stunning photo essay to accompany its piece headlined “the world’s rivers, canals and reservoirs are turning to dust.” The imagery spans from Colorado to China by way of Italy, France and the Netherlands and comes as Europe suffers through its worst drought in some 500 years.

THE DANGER ZONE-

Water disasters could leave the global economy with a 13-figure bill: Climate chaos affecting the world’s water resources could cost the global economy USD 5.6 tn between now and the middle of the century, according to a report out yesterday.

The biggest victim? The US, which stands to lose more than USD 3.7 tn in output (or 0.5% of GDP every year) over the next 28 years, mainly thanks to storms.

The UAE also gets a mention: Floods are going to cost the Emirati economy around USD 27 bn (0.1% of GDP) between now and 2050.

The cost of the floods in Pakistan? More than USD 10 bn, the country’s planning minister said yesterday, according to Reuters. Unprecedented monsoon downpours have caused severe floods across the country, killing at least 1k people and leading to the displacement of 33 mn people.

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CIRCLE YOUR CALENDAR- Edge Innovation Forum is holding its Sustainability In Depth seminar on 30 August at Galleria40 in Cairo, Egypt. The seminar will focus on the role of government decisions in encouraging sustainable development and green financing.

The World Conference on Climate Change and Sustainability is taking place on 1-3 September in Frankfurt, Germany. The aim of the conference is to bring together “a range of key actors from institutions, governments, cities and communities, the private sector, and civil society, to make the world more climate-resilient,” the event’s organizers note. You can also attend the event online by registering here.

Execs from nearly 80 Russian companies are set to land in Tehran on 19 September to talk about business in fields including energy and recycling, according to the Iranian Chamber of Commerce.

A MENA youth climate innovation lab and Academy is set to run starting Friday, 16 September. Backed by Seedstars, the United Nations Climate Technology Centre and Network, and Denmark’s foreign ministry, the three-day event will spotlight climate tech developed by young folks from the MENA region. The deadline for applications is on 4 September; you can apply here.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

Import restrictions are threatening Egypt’s solar industry, industry insiders tell us: A shortage in solar panel components in Egypt could put projects in the country at risk, according to Egypt’s Solar Energy Development Association (SEDA). Key components including solar cells, transformers, solar heaters are increasingly rare, SEDA board member Hatem Tawfik tells Enterprise Climate. “This comes as a result of import regulations [in the country] that impose letters of credit (L/Cs) for imports,” he adds. SEDA understands that manufacturing is a priority for L/Cs, but it also believes that electricity production should be included as a priority area, as this is a critical industry right now, Tawfik says. “This is especially the case because every USD 1 mn spent on solar saves Egypt some USD 10 mn per annum in natural gas.”

A number of 30-40 MW solar projects are already at risk, SEDA says: “On-grid solar energy projects currently under development in the country range from 30 to 40 MW, and they could save up to USD 400 mn annually if used to generate power through renewable energy,” he tells us. These projects are at risk of continuing their work unless urgent action is taken, Tawfik noted.

Background: Last March, the Central Bank of Egypt made it mandatory for importers to obtain L/Cs for their imports. The policy was aimed at reducing the rate at which Egypt was burning foreign exchange amid a serious emerging-market sell-off triggered by Russia’s invasion of Ukraine.

SHORT TERM FIX- Enterprise Egypt reported yesterday morning that Egyptian officials may be about to take steps to make it easier for some importers to source hard currency if they’re bringing in critical raw materials or production inputs. The hope is that they could make it easier for solar products to source the components they need. The news comes after central bank governor Tarek Amer resigned with more than a year to go on his second (and final) term in office. He was replaced by veteran banker Hassan Abdalla, who previously led Arab African International Bank (AAIB), a joint venture between the central banks of Egypt and Kuwait.

LONG TERM FIX- A domestic component industry, thanks to Beijing? Egypt’s government is in talks with unnamed Chinese players to build and finance a USD 2.3 bn complex to make solar-panel components, Bloomberg Asharq reports, citing four unnamed government sources.

Details: The complex — which could be located in Suez, Minya or Aswan — would house silicone, polysilicon, chip-cutting, solar cell, glass, and PVC plastics factories, as well as a station to power the facility. Egypt’s electricity, military production, planning and trade ministers are all reportedly part of the negotiations with Chinese firms to build the project and are also in talks with Chinese banks for a long-term, low-interest loan to finance it. Asharq’s sources did not disclose a timeframe for the talks.

This isn’t just an Egypt problem: The solar industry has been hobbled by supply chain kinks and the cost of solar power components globally has risen sharply this year, climbing some 15% between May and early August, according to Bloomberg, which cites data from the China Silicon Industry Association.

Thankfully, this hasn’t put a damper on solar regionally — particularly in energy exporting countries. Just last week, Qatar awarded two major utility-scale solar power projects worth QAR 2.3 bn (USD 632 mn), according to Qatar News Agency.

EGYPT’S KARMSOLAR TO SELL FRESH EQUITY

Egyptian solar energy company KarmSolar will sell a minority stake to investors via a capital increase as it looks to expand its presence in Egypt and across the region, according to a company press release (pdf). KarmSolar hopes to raise “a significant amount” in the investment round, KarmSolar CEO Ahmed Zahran told Enterprise on Monday, without disclosing the target sum or how much equity will be on offer. The capital injection will help grow the company’s existing power generation and distribution business and allow it to push into new markets in the region, Zahran said, without naming any specific countries. Funding will also be directed to its solar-powered desalination firm KarmWater, he added.

EV charging firm in the works: Part of the capital increase will go towards a new EV charging venture, KarmCharge, that the company hopes to launch early next year, Zahran said.

You can catch the full story in today’s EnterpriseAM.

China’s State Grid Corporation is aggressively pushing into MENA: The State Grid Corporation of China (SGCC) — the world’s largest public utility — has set up its regional office in the Dubai International Financial Center (DIFC), according to a DIFC statement. The move could herald new regional investments in utility-scale renewables, as SGCC plans to pursue new business as the region kickstarts its energy transition — with investment, construction and operation of power grids as its core areas of business, the DIFC statement adds.

This marks the beginning of regional expansion for SGCC: Establishing its office in DIFC is a key step in SGCC’s MENA expansion plans — “especially in the GCC countries, such as the UAE and Saudi Arabia, which are in key stages of energy transition,” Chengzhong Liang, chief representative of the SGCC Middle East Representative Office, is quoted in the statement as saying.

And a potential decarbonization push for the UAE: The UAE is investing heavily in renewable energy and SGCC “is in a strong position to support the country and the wider region to realize these ambitions,” DIFC Authority CEO Arif Amiri is quoted as saying. SGCC is keen to work closely with local authorities and companies on the regional energy transition and capacity building efforts, the DIFC statement quotes Liang as saying.

This isn’t SGCC’s first rodeo in the GCC: One major regional investment was its March 2020 USD 1 bn acquisition of a 49% stake in Oman Electricity Transmission Company from the country’s state-owned Nama Group.

Saudi power developer ACWA Power appointed Kashif Rana (LinkedIn), the company’s former CFO, as its chief portfolio management officer. Rana brings a background in renewable energy to the table and will help ACWA become carbon neutral. Prior to joining ACWA, Rana was the CFO of US Electric power distribution company AES Corporation.

The environmental and financial case for adopting district heating and cooling systems: District heating and cooling systems (DHC), which provide centralized cooling and heating over a wide expanse of urban areas, is becoming all the rage in the MENA region, with the UAE, Bahrain, Qatar, Oman, Egypt, and Saudi Arabia, among others, launching a number of district cooling projects across the region.

It’s not hard to see why: Cooling and air conditioning systems, which utilize refrigerants that end up in the atmosphere, contribute over 7% of global greenhouse gas emissions, with estimates indicating that emissions will double by 2050, according to the UN Environment Programme. The number of air conditioning units in use is also expected to surge to 4.5 bn by 2050 from 1.2 bn in 2022.

What is DHC anyway? DHCs are alternative energy supply systems implemented within urban areas for the purpose of saving energy, space, and slashing air pollution. DHC plants produce chilled water in a centralized location for distribution to buildings through a network of insulated underground pipes. Cities with major downtown or commercial districts utilizing district cooling systems include Stockholm, Hamburg, Paris, Tokyo, and Houston.

Case in point #1- Saudi Arabia: “Saudi Arabia spends a large amount of energy to produce 60k MW of electricity to power the economy, of which 60-70% goes into air-conditioning. However, we are now increasing the district cooling supplies to reduce our dependence on energy and make the sector more environmentally friendly and sustainable,” Suliman Al Khliwi, Managing Director of Saudi Tabreed, told Zawya. “We have delivered SAR 1.75 bn worth of capex savings in Saudi Arabia. The district cooling market is expanding in Saudi Arabia where lots of new concession areas are coming up for all the district cooling providers. It is an exciting time for all of us,” he added.

Case in point #2- Egypt: In Egypt, some 50% of electric power goes to air conditioning during the summer months, according to Alaa Olama, a UNEP consultant, and the Head of the Egyptian District Cooling Code. This renders district cooling projects even more alluring to countries like Egypt that get uncomfortably hot during peak summer months. UNEP completed a feasibility study on a district cooling system entitled the “Seawater Air-conditioning System for New Alamein City”, on the north coast of the country. “With this cooling system, the city would reduce refrigerants emissions by 99% and CO2 emissions by 40%,” according to UNEP projections.

The returns don’t lie: District cooling providers are capitalizing on the alternative approach to both increase energy efficiency and create wealth. Dubai-based district cooling firm Empower recorded its highest revenues ever in 2021 — USD 670 mn — with a y-o-y growth of 9.3%. Their surge in revenues was bolstered by a series of acquisitions and capacity increases.

And the future looks brighter than ever: The global district cooling market is expected to rake in USD 47.64 bn by 2022 due to surging demand for DHS systems in the Middle East, according to Fortune Business Insights. The MENA region’s market is expected to reach a whopping USD 15 bn by 2027, according to a report by Global Market Insights.

Meet the regional players: Other major players in the MENA market include National Central Cooling Company PJSC (Tabreed), Danfoss District Cooling Company, Emirates District Cooling LLC (Emicool), and Siemens.

How the slow-food movement is slowly taking over MENA: Within the MENA region (and globally) food security is an area of increasing concern. High levels of food waste and insufficient agricultural production are two major sources of insecurity. Meanwhile, soaring CO2 emissions from international food transportation and food waste compound the health and environmental challenges of our currently unsustainable food system.

Enter “slow food” and its related movements: In a bid to counter this, the global slow food movement — a worldwide network promoting local produce and food traditions — is working to support local farmers, along with healthy and environmentally friendly food consumption.

Why is it taking off? Wastage is driving food insecurity. In the UAE alone, annual food wastage is worth an estimated USD 3.5 bn.

As is a slowdown in production: MENA has seen a significant slowdown in cereal yields since 2009, with growth between 2009 and 2019 coming in at 14.76%, down from 47.98% growth between 1999 and 2009, according to the 2021 UK Food Security Report (pdf).

Not to mention those pesky CO2 emissions: Global food waste releases some 3.3 bn tons of CO2 greenhouse gas (GHG) equivalent every year. In 2017, food transportation added emissions equivalent to 3 GT of CO2 to the atmosphere — some 7.5 times more than previous estimates — according to recent academic research.

A handful of regional slow food and farm to fork movements are working hard to reduce these harmful results. These organizations — many of them grassroots community associations — span Egypt, Jordan, Kuwait, Morocco, Kenya, Turkey and other countries in the region. Here are some of our favorites:

From Farm to Fork (Jordan) has produced a cookbook featuring 24 local products, 24 farmers, 24 chefs and 48 dishes from Jordan’s 12 governorates, while its website lists sustainable restaurants and meeting venues, culinary tours and food events, it notes (runtime: 01:31). It was founded in 2021, and is supported by over 50 stakeholders in Jordan’s agricultural, tourism, hospitality, food and beverage and education sectors, and co-funded by the Dutch agriculture ministry.

Food Heritage Foundation (Lebanon) seeks to promote Lebanon’s “collective memory and indigenous knowledge” of food and agriculture, it notes on its website. It runs projects including food tourism, community kitchens, farmers’ markets, traditional recipe promotion, and livelihood initiatives for rural food producers.

La Vie Cafe (Palestine) has created a garden supplying fresh, organic food, and regularly produces videos in Arabic and English discussing agriculture and how to start an urban garden. The café’s owners have also founded an arboretum and eco-park, Mashjar Juthour, where they host short courses on organic agriculture and sustainability.

My Arabian Almanakh (UAE) is an online urban gardening journal that shares tips for recreational and food-producing urban gardening. In 2017, the journal’s authors wrote a book that teaches readers how to grow and maintain green spaces over a 16-month period. Its focus is on growing food, using natural pesticides, and caring for plants that are native to the local environment, it notes.

Re:Food (Kuwait) aims to reduce food waste by collecting and repackaging unused food from local suppliers, manufacturers and distributors, and distributing it to those experiencing hunger through a subscription model. The organization has received multiple awards, with its founder being awarded the 2018 Kuwait Youth Award for Excellence and Creativity.

Spinneys Farm to Table school program (UAE) is the first step in the multinational supermarket chain’s bid to educate 1 mn people about healthy and sustainable diets by 2023, its website notes. The program consists of five modules, designed for children aged 7-11, focusing on how food is grown and transported, what sustainable food consumption means, and the basics of a healthy diet. It was designed with nutritionists and local farmers, and launched with schools in October 2021.

The UAE wants the private sector to get serious with its drive to decarbonize the economy, yesterday launching its Climate-Responsible Companies Pledge which aims to increase companies’ engagement with the government’s 2050 net zero strategy.

** We talked to UAE Climate Change and Environment Minister Mariam bint Mohammed Almheiri ⁠— who launched the pledge ⁠— for our inaugural issue of Enterprise Climate on Monday. You can check out the interview here.

Saudi Arabia signed a power-purchase agreement for an 80 MW solar plant in the town of Layla which lies 300 km south of Riyadh, according to Arab News. The value of the agreement was not disclosed.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

• South Korea’s Hydro and Nuclear Power Company will participate in the construction of Egypt’s first nuclear power plant, El Dabaa in Matrouh governorate, according to a statement.
• Egyptian IT consulting and service providing company Giza Systems won a tender for the development of Egypt’s first smart transportation system in the country’s new administrative capital, according to a statement picked up by Zawya.
• The Oman Water and Wastewater Services Company completed construction of a 4-km long, USD 70 mn rain water drainage project in the Al Hamra and Dakhliyah governorates in Oman, according to a statement picked by Zawya.

• Jordan is still working on cleaning the 11 tonne oil leak in the Gulf of Aqaba, according to The National.
• The Jordan Valley Authority will allocate more water for agricultural purposes to ensure crops do not fail in the wake of extreme heat waves, officials told Jordan News.
• Iran’s Department of Environment drafted a new law for the protection and sustainable exploitation of wildlife in the country, according to Iranian publication Tehran Times.

And now for your daily cuteness quota, we give you… an endangered giraffe calf born in Belfast Zoo: Newborn male Rothschild’s giraffe calf Ballyhenry — named after a town in Northern Ireland — was born in late-July, according to a tweet from Belfast Zoo. Dubbed Handsome Henry, he is the latest of 39 Rothschild’s calves to be born since the zoo started keeping them in 1988. Belfast Zoo estimates that only 2k Rothschild's giraffes remain in the wild, while the International Union for Conservation of Nature (IUCN) put the number as low as 1.4k in 2018. “Our breeding success helps to ensure that there is a 'safety net' population of this endangered subspecies,” a Belfast Zoo manager was quoted as saying.