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FINANCING MECHANISM FOR PROMOTING SOLAR

WATER HEARES MARKET IN EGYPT

Dr. Hamed Korkor [email protected]

The current paper presents different tasks and activities

that have been performed under work packages WP 6.1b

of MED DESIRE project which aims at identifying and

designing an innovative and appropriate incentive tool to

strengthen the promotion of Distributed Solar Energy

Technologies DSETs in Egypt.

DSETs:

PV plants up to 500 kW (supported by Feed in Tariff).

Solar Water Heaters (SWHs).

One of the key elements for successful deployment of

distributed solar energy technologies (DSET) is The

establishment of appropriate financing mechanism that

enable financial barriers to be overcome.

Introduction

SWHs have been chosen as targeted DSETs and the Residential Sector for their implementation.

Sub-Task 6.1b.1- Assessment of the Current Solar Energy Market: • DSETs market analysis.

• Targets and strategies analysis.

• Assessment of existing mechanisms.

• Recommendations and proposal for DSETs promotion.

Sub-Task 6.1b.2- Potential of Solar Energy Market Development: • Analysis of financial and economic profitability.

• Identification of the most suitable beneficiary sector to be targeted.

• Identification of public administrations, local agencies, utilities, market players and financial institution to be involved.

Sub-Task 6.1b.3- Identification of the Most Appropriate Financing Mechanism: • Definition of methodology and criteria for model selection.

• Economic Assessment.

• Technical and social sensitivity analysis.

• Stakeholders and decision-makers consultation.

• Definition of the financial mechanism.

Main Activities and Tasks of WP 6.1b (Elaboration of Egypt Specific

Options of an Innovative Financial Mechanism for SWHs)

Oil 45.8% Natural

Gas 49.9%

Hydro 3.6%

Wind 0.3%

Solar 0.1% Coal

0.3%

Heavily reliance on depleted energy resources, mainly oil & natural gas in satisfying energy demand.

High energy demand growth rates: more than 4% for oil, 10% for natural gas, and 7% for electricity annually.

Heavily subsidized energy prices which led to high growth in energy demand and energy subsides (LE 128 billion for petroleum energy (%20 billion) and LE 27 billion ($4.2 billion) for electricity in 2012/2013).

Imports of large quantities of crude oil and oil products which accounted for 12.3 million tons in 2012/2013 with a value of $11 billion in order to diminish supply /demand gab.

Renewable energy share of total primary energy consumption and electricity generation is very small although it could contribute in decreasing pressure on conventional energy resources.

Energy consumption is almost doubled each decade (Egypt primary energy consumption accounted for more than 75 mtoe in 2010 and is expected to reach 300 MTOE by 2030.

Thermal 91.2%

Hydro 7.9%

Wind 0.8% Solar

0.1%

Electricity Generation by Source 2012/2013

Egypt’s Energy Sector Main Characteristics & Challenges Primary energy consumption by energy type 2012/2013

Total= 76 MTOE

Petroleum energy subsidy development

Unlike PV systems (which is supported by Feed in Tariff), there is

no any supportive policies (rather than conventional fuels price

increase and decree number 401 for the year 1987) for the promotion of SWHs market in Egypt.

The residential sector is considered as one of the major energy

consuming sectors in Egypt with a share of about 21% of total

final energy consumption, 43% of electricity and 99% of LPG

consumption in 2012/2013.

Large quantities of LPG, natural gas and electricity are

consumed for water heating in residential sector in addition to

diesel fuel and fuel oil in other sectors such as commercial and industry.

About 50% of total LPG quantities consumed annually in Egypt (4.2 million tons in 2012/2013) are imported from abroad with Value of $2 billion.

Why SWHs in the Residential Sector?

Sub-Task 6.1b.1:

Assessment of the Current SWHs Market:

• SWHs market analysis.

• Targets and strategies analysis.

• Assessment of existing mechanisms.

• Recommendations and proposal for SWHs promotion.

Egypt was among the first countries that utilized solar energy for different applications including its usage for water heating.

The first solar thermal plant worldwide was built in (1911-1913) in Maadi /Cairo to provide power for a series of large water pumps for irrigation.

During the seventies and the eighties of last century few hundreds of SWHs were installed particularly in rural areas to promote that technology and to identify its economic and environmental benefits.

In 1991, the solar atlas for Egypt was issued indicating that the country enjoys 2900-3200 hours of sunshine annually with annual direct normal energy density of 1970-3200 kWh/m2.

There are 22 companies listed in the registry of the Federation of Egyptian Industries (FEI) that have among its scope of activities the production and/or the imports of solar thermal technology. Of these companies 12 are involved in the manufacturing of SWHs).

The lack of supportive policies and measures during the last few decades for the development of DSETs market were behind the low growth of installed SWHs in Egypt during the period (2000-2009) that didn't exceed 1.5%. Number of SWHs account for about 400 thousand (NREA).

Solar water heaters are currently used in domestic, commercial and touristic sectors with varying degrees of success.

SWHs Market Analysis

Standards and codes for solar water heaters have been set up as follows:

Standard No. 1634 of 1987: technical definitions and specifications of solar water heating systems.

Standard No. 1634 of 1988: specifications of solar flat plate collector components and thermal tanks.

Standard No. 5990–1 of 2007: for testing thermal performance and differential pressure of solar panels.

Standard No. 6,302 of 2007: for testing solar systems performance characteristics in addition to its annual

performance (without stand by electrical heater).

NREA is currently conducting all tests for solar water heaters and its components in addition to

providing the necessary certificates for its quality and all the technical support and expertise needed in

that regard. Available tests for solar water heaters in the solar thermal test lab include proficiency

testing, low pressure tests, and static pressure testing.

SWHs are manufactured with volumes or capacities of 80, 150, 300, 500, and 750 liters per day, most of

which are flat solar collectors with natural flow-thermo-siphon.

Approximately 56% of SWHs components materials are totally imported from abroad, 33% are partially

imported, while only 11% are produced locally.

Total number of other types of water heaters (LPG, natural gas

and Electricity) estimated at about 10 million.

The initial cost of SWH range between $520 -$1800 depending

on the type and the capacity of the SWH.


CIF Price 74%

Custom duties 13%

Others 13%

SWH Cost Breakdown

Barriers for SWHs Market Development in Egypt include as examples: High investment cost.

Mistrust and doubts about the quality and performance of SWHs.

Low energy prices and large subsides given to conventional energy sources.

Lack of synergies among different SWHs stakeholder.

Lack of reliable data, information and statistics on different aspects related to SWHs market.

Unavailability of enough space for SWHs installation on buildings' roofs.

Lack of supportive policies and measures.

Lack of appropriate incentives for SWHs manufactures and clients.


The Financing Market and Banking Sector in Egypt: The financing market in Egypt is regulated and controlled through the Central Bank of Egypt (CBE).

The banking system currently comprises 57 state owned commercial banks which includes 28 commercial

banks, four of which are state-owned, 26 investment banks (11 joint venture banks and 15 branches of

foreign banks), and three specialized banks.

State-owned or nationalized banks account for 85% of bank accounts in Egypt and around 60% of the

total savings.

The penetration of banking is low in rural areas at only 57 % of households.

High transactions costs associated to Small and Medium Enterprises SMEs lending.

Collateral requirements that hinder SMEs access to credits.

Banks tend to lend more to traditional sectors.

Large corporate loans represent up to 70% of total loans for banks.

High interest rates on loans (at least 9%).

LPG 50%

Electricity 30%

Natural Gas 20%

Water Heaters Share of Total Number in Egypt

Total = 10 million Water Heaters

Assumptions: • Total number of families = 10 million Families

• Average no. of persons/family = 4 persons

• Average number of WHs/family = 1 heater

• Total number of water heaters = 10 million

LPG = 5 million

Natural Gas = 2 million

Electric = 3 million

• Average hot water consumption/day/family= 200 liters (50 liters/person).

Time of hot water use (month) Amount of hot water consumption (Billion Liters / million m3)

12 730

8 480

6 360

3 240

Estimates of Residential Sector Hot Water and the Corresponding Energy Demand

Amount of hot water consumption in residential sector in Egypt range between (0.2 - 0.7 billion M3) annually depending on the time of use.


Electricity 9.3 KWh/day 1.927 Kg OE/day

LPG 0.664 kg /day 0.590 Kg OE/day

Natural gas 0.872 M3/day 0.604 Kg OE/day

Energy Consumption & Cost of Heating of 200 Liters of Water*

Price of LPG: 0.64 LE/Kg. (LE 8/ bottle 12.5 Kg) Natural Gas: LE 0.40/M3). Electricity: LE 0.24/KWh.

Cost of water heating by electricity is more than 5 times that of LPG and 6 times that of natural gas.


* Equivalent to one SWH.

USD Cents 29

4.6 5.6

Hot water Usage Period

(month)

Hot water consumption (billion liters)

LPG ('000 tons)

Natural Gas (million m3

Electricity (million KWh)

LPG

Natural Gas

Electricity Total

('000 TOE)

12 730 1212 668 10194 1364 742 2111 4216

8 480 797 419 6703 897 465 1388 2749

6 360 598 314 5027 672 349 1041 2062

4 240 398 209 3351 448 233 694 1375

Share at 8 month time use of hot water 33% 17% 50% 100%

Quantity of Hot Water Consumption and the Corresponding Energy Consumption

Energy consumption for water heating range between (1.4 - 4.2) MTOE annually depending on the time of use.


Targets and strategies only exist for electricity generation. No announced targets and strategies for SWHs market promotion and development.

The Ministry of Electricity and Renewable Energy Plans include renewable energy share of 20% of total electricity generation by the year 2020 (equivalent to 7200 MW) of which 3000 as wind energy and 4200 MW as solar energy of which 3500 MW as solar thermal and 700 MW as photovoltaic systems.


SWHs Targets and Strategies:


2015 2020 2025 2030 2035

Population (million) 90 99 110 121 134

Hot water demand (billion liters) 497 598 790 1017 1284

Total number of water heaters (million) of which: 10.4 12.4 16.5 21.2 26.7

LPG, natural gas & electricity heaters number (million) 10 11.9 13.5 13.2 13.7

SWHs number (million) 0.4 0.5 3 8 13

Total energy demand (MTOE) 2.5 2.9 3.7 4.9 6.1

Future Hot Water Demand and the Corresponding Energy Demand (50% Share of SWHs of total water heaters number in 2035)


As a result of population growth and increase of standard of living, hot water demand is expected to increase from about 0.5 billion m3 in 2015 to 1.3 billion m3 in 2035. Consequently energy demand for hot water is expected to increase from 2.5 MTOE in 2015 to 6.1 MTOE in 2035.



SWHs share of total hot water and the corresponding energy demand is expected to increase to reach 49% & 41% in 2035 respectively compared to 4% & 3% in 2015.

Performing that activity was achieved through several activities and

initiatives that include:

The preparation of a questionnaire to assess different SWHs market

stakeholders and concerned entities views and evaluation of

existing and implemented financing mechanisms.

Direct interviews with some SWHs market stakeholders and

partners such as SWHs manufactures, suppliers, banks, etc.

Literature review of the most important and successful

implemented mechanism in Egypt and some countries in the region.

Assessment of Existing Financing Mechanisms

Financing Mechanisms for Distributed Solar Energy

Technologies:

PROSOL (Tunisia).

NEEREA (National Energy Efficiency and Renewable Energy

Action- Lebanon).

EGYSOL (Green Hotel Program - Egypt).

EGY-Sun (Egypt).

Natural Gas Connection Programme.

For Other Technologies:

Smart Card (for vehicles Conversion to CNG –Egypt).

OVSRP (for Old Vehicles Scraping and Recycling –Egypt).


PROSOL (Tunisia):

Is an innovative financial mechanism designed to remove the main financial,

technical and organization barriers against the development solar market (SWHs &

PVs).

Starting Date: 2005

PROSOL is a combination of Loans, Credit, Grants, and Subsidy.

It consists of:

The provision of a public subsidy of 200 TND for (1 – 3) m² SWHs and 400 TND

for SWHs from (3 – 7) m² to lower the price of SWH acquisition and improve

profitability to the final consumer.

Granting the consumer a bank loan repayable over a five years period, and

through STEG electricity bill to facilitate consumer access to SWH.

A system of quality control for upstream and downstream suppliers and their

products marketed within the program to ensure the after-sale service and

improve SWH brand image.


NEEREA (Lebanon): National Energy Efficiency and Renewable Energy Action

Type of Measures/ Technologies: Energy Efficiency & Renewable Energy

Type of Financing: Credit & Grant

NEEREA loans can be accessed through local banks which are refinanced through the Central Bank.

Eligible to: Private individuals & SME

Financing range (EUR): up to 1 Million €

Description & Conditions:

Private sector investments in EE, RE and green buildings of up to 1 Million. € (no minimum amount).

The maximum amount of the loan depends on the project and technology used.

Financed through a subsidized loan with an interest rate of 0%.

Above that amount (maximum 1 Million €) the loan will be provided at an interest rate of 3%.

Repayment of the loan takes place over 5-10 years.

In addition to the subsidized loan scheme a sub-component (grant) is to be offered for solar thermal

systems of 200 US-$ (about 20% of total investment costs) to be accessed in addition to the loan.


EGYSOL (Green Hotel Program - Egypt).

Based on a Public-Private Partnership (PPP).

Objective: to replace conventional energy (electricity, LPG, natural gas) by solar

energy produced through (SWHs) into the Egyptian hotel sector.

Designed to build a sustainable long-term framework for the SWHs market in

Egypt.

Has two components:

Capital cost subsidy of 25% to SWH installations (up to 250 m² for each

hotel), to be granted to the hotel.

Decreasing maintenance cost subsidy over a 4 year term (4 USD/m2/yr) for

the maintenance cost component for the first 2 years of operation (after the

year of warrantee), and (3 USD/m2/yr), for the remaining two years, to be

granted to the hotel in order to assure the long-term quality functionality of

installed systems.

Each SWHS’s supplier is allowed to install up to 1,000 m² of SWHSs, while

each hotel is allowed to have up to 250 m² of SWHS.


Egy-Sun (Egypt): is an efficient lighting and PV integrating systems initiative for

public buildings.

The direct targets of the initiative include:

The implementation of 100 to 150 projects of the (integrated efficient lighting and

PV systems) in public buildings by mid 2016.

Installing a total capacities ranging from 5 to 8 MW, reducing consumption by 27

to 43 GWH per year leading to a reduction of fuel consumption by mid 2016 to

range from 5430 to 8680 TOE per year.

The Energy Efficiency Unit (EEU) at the Cabinet will provide:

The costs of technical and logistical services related to technical support

factors.

50% of the costs of the equipment supplied to any of the projects but not

exceeding 300,000 L.E. for each site.

The remaining 50% of the cost will be covered by the beneficiary + direct cost of

site preparation of the project.


Smart Card (for vehicles Conversion to

CNG –Egypt):

The Smart Card system is a combination of loan,

equity, and incentives (price of CNG is 50% of

gasoline price).

Two types of financing mechanism are

implemented; the first is a 100% loan of the total

investment or conversion cost (LE 5000) from one

of the commercial banks while the second is a

loan plus equity each of 50% of the total

investment or conversion cost (i.e. LE 2500). A

discounted interest rate of 6% annually compared

to 9% as a prevailing commercial interest rate.

Therefore, estimated payback period for the case

of taxi vehicles that represent almost 70% of

converted vehicles population is about 6 months

for the case of 100% loan and 2 years for the case

of loan and equity case.

Figure (1) Simplified presentation of the smart card framework


Financing Mechanisms for Other Technologies

Old vehicles Scraping and Recycling Program (OVSRP): Initiated in 2009 with fuel saving and the reduction of GHGs emissions as the main objectives. Program FM Structure: Combination of Loan, Grants, Economic incentives, and Guarantees.

Program Design Main Consideration:

Greater Cairo Region taxies are considered as the main target for the first phase of program. Based on Public Private Partnership (PPP).

Stakeholders including: Ministry of Finance (MoF), Ministry of Interior (MoI), 2 local banks, 5 vehicles

manufacturing companies, an insurance company, an advertising company, old vehicles owners, the CDM Awareness and Promotion Unit (CDM AP), and the World Bank Carbon Finance Unit.

Program Design Main Consideration (cont.) - Incentives:

The MoF provides a grant of LE 5000 for each scraped old vehicle, bear the cost of surrendered vehicles, cost of sales tax for new vehicles (LE 7000 to 13000), custom duties fees for the components

of new manufactured vehicles, providing guarantee for loans from local banks.

Banks provide loans for old taxi owners of a maximum LE 70 thousands for 60 installments over 5 years period with an interest rate of 7.5% compared to 9% as prevailing market interest rate.

Vehicles manufacturing companies and suppliers offer lower prices for new vehicles (25%-30% less

than market price), provide spare parts and the necessary maintenance for new vehicles at reduced cost (a discount of 30% is given to spare parts).

The insurance company provides insurance against theft, fire, and accidents for each taxi at an interest

rate of only 3.25% compared to prevailing market interest rate of 6.25%. The advertising agency that has an exclusive right to advertize on new vehicles, pay a monthly

advertising cost of about LE 550 for 5 year period for the benefit of taxi vehicles owners.

Financing Mechanisms for Other Technologies


Sub-Task 6.1b.2:

Potential of SWH Market Development:

• Analysis of financial and economic profitability.

• Identification of the most suitable beneficiary sector to

be targeted.

• Identification of public administrations, local agencies,

utilities, market players and financial institution to be

involved.

Analysis of Financial and Economic Profitability

Financial and Economic Profitability on National, SWHs Manufacturing and Consumers Levels (examples):

On the national level:

Significant savings of conventional energy, mainly electricity, LPG and Natural gas.

Reduction of LPG imports.

Allocating occurred savings in natural gas to more value added activities.

Avoiding the emission of significant amounts of pollutants.

Avoid large investments needed to add additional installed capacities for electricity

generation, LPG and natural gas facilities.

Creating new job opportunities and reducing unemployment problem.

On SWHs manufacturers level:

Expand SWHs manufacturers’ market and consequently expected sales and profits.

Help SWHs manufacturers to improve quality and efficiency of their products.

Help SWHs production companies, suppliers and installers increase their staff capabilities.

Increase cooperation with national and international concerned entities.

Improve their knowledge and knowhow.

On the consumers level:

Savings in fuel cost.

Avoid problems related to fuel supply shortfalls.

Size of SWH (Liters) 200

Cost of SWH (LE) * 5000

Of which: loan (LE) 4000

Subsidy (grant) (LE) 1000

Cost of electric heater (LE) 650

Average electricity consumption for electric heater (KWh/day)

(KWh/year)

9.3

2232

Average electricity consumption for SWH (KWh/year) 279

Electricity Savings (KWh/year) 1953

Life time of SWH (year) 10

Life time of electric water heater (year) 10

Interest Rate (%) 9

Loan period (years) 5

Basic data and assumption utilized

* Based on MERE announced prices in 1/7/2014 for the period (2015-2019). Electricity prices to increase by 2.5% annually after 2019.

Electricity Prices (LE/KWh)*

Techniques utilized : NPV, IRR and Payback Period

Parameters Utilized for SA: SWHs Cost, Electricity Prices and Loan Interest Rate.


Assuming that no custom duties or sales tax, etc. imposed on SWHs.


Impact of SWHs Investment Cost on its Financial and Economic Feasibility & Profitability

SWHs were found to be a viable financial alternative to replace electric water heaters at a cost of not more than LE 5000 (at current average electricity price of tariff tires 4 & 5 which is LE 0.29/kWh).


Impact of Electricity Price on SWHs Financial and Economic Feasibility and Profitability

SWHs were found to be a viable financial alternative to replace electric water heaters at electricity price of not less than LE 0.34/KWh [the current prevailing electricity tariff for the 5th tier of residential customers (351-650 KWh/month)] with NPV and IRR of LE 261 and 10% respectively.


NPV and IRR Sensitivity Analysis 12 combination of SWH cost and electricity prices scenarios were examined using the NPV and the IRR techniques.

SWHs were found to be a viable financial alternative to replace electric water heaters at a cost of not

more than LE 4000 and electricity price of not less than LE 0.34/KWh (current electricity tariff for the 5th

tier of residential customers 351-650 KWh/month) with NPV and IRR of LE 261 and 10% respectively.


Payback Period Sensitivity Analysis:

A payback period of about 4.5 & 8 years is estimated at a cost of SWHs of LE 4000 and electricity prices

of LE 0.62 & LE 0.29 per KWh respectively.


Interest Rate Sensitivity Analysis

SWHs were found to be a viable financial alternative to replace electric water heaters at a cost of not

less than LE 5000 and electricity price of not less than LE 0.34/KWh (current electricity tariff for the 5th

tier of residential customers 351-650 KWh/month) with NPV and IRR of LE 127 and 9% respectively.

Sub-Task 6.1b.3: Identification of the Most Appropriate Financing Mechanism:

1. Definition of methodology and criteria for model

selection.

2. Economic Assessment.

3. Technical and social sensitivity analysis.

4. Stakeholders and decision-makers consultation.

5. Definition of the financial mechanism.

Definition of Methodology and Criteria for Model Selection

Important issues considered on model design: Appropriate for the target consumers in the residential sector.

Appropriate for the target technology (SWHs).

Clarity of purpose and explanation of benefits and risks of utilization.

Targets

Annual Energy Savings and Avoided CO2 Emission & Damage Cost Per One SWH: Total annual energy savings: 0.2-0.7 TOE

depending on the time of use of hot. Total annual avoided CO2 emissions: 0.6- 1.7

tons of CO2 (case of utilizing natural gas for electricity generation) and 0.7-2.3 tons of CO2 (case of utilizing Fuel oil for electricity generation) .

Total annual avoided damage cost: $88/year (Case of hot water use for 240 days per year, total annual avoided CO2 emissions by one SWH of 1.1 tons of CO2. ).

Economic Assessment

Economic benefits on the national Level (examples):

Technical and Social Sensitivity Analysis

In light of the technical analysis performed

solar water/ flat plate collector of surface

area of 2 m2 and capacity of capacity 200

liters is found to be reasonable for most of

families in the residential sector in Egypt.

The analysis made covered several aspects such as: • Different types of SWHS. • Building types and architecture. • Customers social benefits.

http://4.bp.blogspot.com/_Z67v3ky2Zw0/SkfqdhEIZOI/AAAAAAAAA4w/pfL0SGbI8Sg/s1600-h/active_closed_loop_solar_wa.gif

(80% Loan + 20% Subsidy)

Proposed SWHs Financial Mechanism Structure

The proposed financing mechanism is a combination of loan, subsidy and some other economic incentives (e.g. exemption from custom duties and sales tax, etc.).

Proposed SWHs Financial Mechanism Main Objectives & Targets

Main objective: to overcome the high upfront cost of SWHs

in Egypt therefore enhance the growth of its market.

Other associated objectives and targets:

Help addressing different SWHs benefits (economic, financial, social

and environmental).

Help making the installation of SWHs as a habitual design element in

new buildings.

Help achieve sustainable development in Egypt through attaining more

energy security, environment protection, creating more jobs,

technological development and improve living standards.

Target: Install 100,000 SWHs in new buildings of the residential sector in

new cities and settlements over 5 years period (i.e. 20,000 SWHs

annually).

Proposed Financing Mechanism Main Features

− A combination of loan, subsidy and economic incentives with no initial down payments.

− Supported by some incentives (such as exemption from custom duties, sales tax, etc.).

− The subsidy is made to curb the high prevailing interest rate.

− Subsidy can be made through available grants from international donors, the National

Green Energy Fund that comprise costs of fuel's savings and subsidy removal in addition to

the national budget.

− Loan repayments are in the form of monthly equal installments to be paid through

electricity monthly bills over 5 years period.

− Loan disbarment is in line with SWH installation and operation progress.

− The utilization of one stop approach which means minimum procedures.

− Clear, simple and straightforward procedures.

− Minimum or no collateral requirements.

− The implementation of the financing mechanism is accompanied by performing awareness

and publicity campaigns.

− Quality assurance in addition to better monitoring, reporting and verification (MRV).

− Reliable and effective criteria for selecting eligible customers to participate in the national

programme for SWHs and to get loans.

Proposed SWHs Financial Mechanism Budget & Main Actors

Financing budget:

Estimated at $80 million (LE 610 million). Of that amount $64 million

(LE488 million) as loans from local banks (80% of SWHs initial cost) and $16

million (LE 122 million) as a subsidy (20% of SWHs initial cost) which can be

allocated to the programme through available grants from international

financing donors and the Green Energy Fund GEF.

Main actors and stakeholders:

• The New and Renewable Energy Authority NREA.

• The Ministry of Electricity and Renewable Energy,

• Commercial Banks,

• SWHs manufactures, suppliers and installers,

• Electricity Distribution Companies,

• The Electric Utility and Consumer Protection Regulatory Agency (EGYPTERA,

• The Ministry of Finance (MoF),

• The Ministry of International Cooperation (MoIC),

• New Urban Communities Authority (NUCA) and

• Residential sector Energy Consumers.

Proposed SWHs Financial Mechanism Main Procedures

1. Customer welling to install SWHs in their homes can contact the national programme

development unit (affiliated to NREA) and fill a simple application form to join the

programme. The application form contains some general information on applicant (such

as name, address, job, income level, etc).

2. The programme unit study the client application and once it find that the client is eligible

to participate in the programme it informs him in addition to the lending bank and SWHs

supply and installation company on its approval.

3. The lending bank and the National Green Fund to disburse portions of the initial cost or

investment of SWHs (loan plus subsidy) through a line credit to SWHs supply and

installation companies according to the achieved progress of SWHs installation and

operation.

4. SWHs supplying companies to install SWHs according to the preset and approved

specifications, norms and standards.

5. Once the SWH is commissioned and starts operation appropriately, the programme

monitoring unit to inform the national programme development unit and consequently

the lending bank and the Green Energy Fund which in turn transfer the last disbursement

of SWHs cost to SWHs supplying or manufacturing Company and installers.

6. Residential unites' owners to repay back the cost of SWHs on equal monthly installments

through the electricity bills.

7. Electricity Distribution Company to transfer collected money to the lending bank.

Proposed Financing Mechanism Benefits

The banks will get more cash by freeing up part of its reserves, thereby enhancing

its corporate social responsibility.

The users will be provided with loans for the purchase of SWHs at appropriate

terms and conditions (interest rate of about 5% and loan repayment period of 5-

year. In addition, they are guaranteed to have high quality technical and financial

propositions. Moreover, energy savings as a result of utilizing SWHs instead of

conventional water heaters (electric, LPG and natural gas) will help the user to

offset the cost of energy purchased from electricity, LPG and natural gas utilities or

distribution companies.

The National Economy : in addition to energy savings, the national economy on a

larger scale will be benefitted from leveraging local investments. Most

importantly, the implementation of the financing mechanism will help promoting

renewable energy industry and contributes to creating sustainable jobs in

addition to strong base industry.

Proposed National Programme for the Promotion of SWH Market in Egypt

Main Objective: Support the promotion of SWH technology through its

implementation in residential buildings in new cities and settlements.

Partner & Stakeholders: NREA, MoH (NUCA), MoF and SWHs Suppliers and

installers, Clients.

Main Assumptions/Results: Number of SWHs to be installed: 100,000 (over 5 years- 20 thousand per year).

Number of buildings to be equipped with SWHs: 10,000 (5 floors/2 flats).

Total initial cost of SWHs= $80 million.

SWHs Type: evacuated tube flat plate collector.

Electricity Savings = 1.1 billion KWh (based on 9.3 KWh as daily electricity

consumption for heating water needed for one family).

Avoided Power Plant Installed Capacity = 200 MW (with investment of $300

million).

Fuel Savings= 46 thousand TOE /year

Avoided CO2 Emissions= 113 thousand tons /year.

Avoided Damage Cost : $ 9 million /year).

Number of Jobs to be Created: 1000 Job.

Summary of Financial Benefits of implementing the Proposed Programme

financing mechanism for promoting solar water … korkor... · of med desire project which aims at...

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