Negotiations with Siemens on the establishment of 2,000 MW wind farms have stopped for the second time. The project was amongst the ventures agreed upon at the Sharm El-Sheikh economic summit in 2015.
Government sources said that the meetings and negotiations over the past two months have not resulted in new developments or agreements, hence, stopping the negotiation until reaching satisfactory terms between the government and the German company.
Sources explained that the main reason is the desire of officials of the New and Renewable Energy Authority (NREA) and the Egyptian Electricity Transmission Company (EETC) to reduce the purchase price of electricity produced from the project because of the high cost compared to other energy projects.
According to the sources, electricity officials proposed to Siemens to sign a contract at the same price agreed with the Toyota alliance to establish a wind station in the Gulf of Suez with the price set at 3.8 US cents per kW. The proposal was turned down by Siemens.
During its negotiations, Siemens stressed the need to increase the value they would receive, especially as the project was negotiated two years ago with the price at 5-7 cents per kW.
Moreover, Siemens highlighted that it would implement three traditional power plants outputting a total of 14,400 MW at a cost of €6bn—which is considered low compared to the technology used and the fuel saving which the plants offer.
The sources revealed that three scenarios were expected for the Siemens wind stations. The first is to reduce the planned capacity from 2,000 MW to only 200 MW. In this scenario, the EETC would buy the electricity produced at the price of 3.8 cents per kW.
The second scenario is the temporary postponement of the implementation of the wind stations, especially since the price of production of stations is decreasing, which means that the value of the purchase of energy capacity will be appropriate and may decrease slightly.
The sources explained that the third scenario includes a complete halt to the project, which the sources ruled out, particularly as the cabinet approved the contract and agreed on buying 2,000 MW from the plant.
The sources said that the government has good relations with the German company, but refused to pay more to buy the energy from Siemens compared to the purchase price of the same energy type from a different company.