The power crisis this year has been unprecedented in Egypt as blackouts have been frequent, sometimes for hours, in different cities and neighbourhoods. The crisis has reached vital areas, such as the subway, stock exchange, factories and productive sectors, leading to huge economic losses estimated by some factory owners and merchandisers at L.E. 6 billion (US $983 million) per month.

The power crisis this year has been unprecedented in Egypt as blackouts have been frequent, sometimes for hours, in different cities and neighbourhoods. The crisis has reached vital areas, such as the subway, stock exchange, factories and productive sectors, leading to huge economic losses estimated by some factory owners and merchandisers at L.E. 6 billion (US $983 million) per month.

In a first of its kind incident, trading on the stock exchange was suspended for one hour due to an outage last July, causing shares to lose around L.E. 1.3 billion (US $213 million) by the end of the session.

Multiple losses

Nabil Zaki, owner of a plastics plant in Shubra Al Khaimah, expressed his dissatisfaction with the multiple blackouts – more than three per day.  “It has been disastrous!  The plant is experiencing a difficult economic crisis due to constant outages, which has lead to financial losses amounted to L.E. 300 (US $49) per day, in addition to the destruction of raw materials.”

“At first,” said Zaghloul Elwan – the owner of a bakery in Shubra – “we demanded freedom and social justice, but now we unfortunately demand uncut power.”   The losses of the bakery, according to Elwan, have reached L.E. 1,000 ($163) a day due to damaged engines in addition to burned bread inside the oven due to outages.

At the same time, more than 300 plant owners and merchandisers filed a complaint to the Prime Minister, Hisham Qandil, maintaining that they were greatly affected by constant outages and explaining that the daily blackout for one to two hours made them incur losses amounted to L.E. 6 billion a month (US $983 million).

Excess loads are the main cause

In an attempt to interpret the power crisis, the Ministry of Electricity spokesman, Aktham Abulula suggested that the main cause for this exacerbated crisis this year was increased consumption and usage of air conditioners due to high temperatures.

Consumption has amounted to 27,000 megawatts while the productive power of national electricity stations is 24,000 MW only, which means there is a deficiency of 3,000 MW that reaches its peak during the afternoons in the summer, according to Abulula.

Illegal consumption due to insecurity in the past period, added Abulula, has had chilling impacts on the electrical networks’ abilities. “We have therefore developed a plan to cut power from most parts of Egypt in three stages to ease loads and save some power while considering important places, such as hospitals and some vital plants,” he explained.

Less consumption

Among the ideas raised to address the negative impacts of the crisis was the closure of shops at 9 p.m. to rationalize power consumption.  Some however believe it’s an impractical idea. “If this decision was activated”, objected Nabil Zaki, “I would immediately close the plant because it would be under heavy losses.  I’m sure that activating this decision would anger Egyptians and several protests would take place because its uninformed decision would destroy the lives of millions.”

Hisham Ibrahim, however, an economist and professor of finance and investment at Cairo University, explained that rationing the working hours of shops is enforced in most countries and that such an approach was activated in Egypt years ago but didn’t last long.

He suggested that this issue has negative as well as positive repercussions. On  the one hand, businesses would have reduced working hours, thus affecting the volume of sales, especially in shops, and would also reduce the volume of employment, due to the abolition of night shifts.  On the other hand, a great amount of power would be saved, Ibrahim said, and that funds saved there could be re-directed to other sectors, such as health and education.

Solutions and alternatives

As for the ways to overcome this crisis, Ibrahim believes that Egypt should reconsider the ways and methods of power generation and start a process of directed electric networking with Middle East countries.  This, he said, would provide a lot of financing resources for power generation projects and cover the existing deficit.  They would also re-examine the nuclear energy project to generate electricity.

Ibrahim adds that the High Dam, which is the main source of power in Egypt, hasn’t been developed since it was established and that water level has dropped during the past years.  It contributed to power generation in Egypt amounting to 68.8% from 2009-2010, according to an official report issued by the Egyptian Cabinet’s Information and Decision Support Center.

Importance of investment in power sector

On the other hand, Ibrahim points out that the state needs to build new power stations and repair damaged networks, but it also needs more funding because of the sheer expense.

And in light of the state budget deficit, which amounted to L.E. 140 billion, and also of the increased subsidy to the power sector – L.E. 6.3 billion in 2010/2011 compared to L.E. 3.2 billion in 2004/2005, an increase of 96.6% – the state needs support from the private sector and international funding institutions, such as the African Development Bank and World Bank, to expand power projects. Last month Mohamed Morsi’s government requested a US $ 4.8 billion loan from the International Monetary Fund IMF, to boost the economy.He also recommends that specialized committees of the Ministry of Electricity present developed projects to business communities abroad, especially in important economic conferences, to attract investments to the power sector, “Our marketing efforts in the field of investment are unfortunately very poor,” he added.