Intelligent Energy

The energy subsidy-blackout link in Egypt

The energy subsidy-blackout link in Egypt

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In Egypt, where citizens are dealing with daily power outages that last several hours, subsidies are fueling the country's energy woes.


Poor energy policy, weak infrastructure and rising demand have been blamed for the massive blackouts in India that left hundreds of millions without power.

In Egypt, where citizens are dealing with daily outages that last several hours, energy subsidies are fueling the country's energy woes.

The blackouts can be blamed on conventional causes, such as increasing demand and fuel shortages, both of which Egypt grapples with. For example, energy consumption has skyrocketed, thanks to a 3,000 percent increase in air conditioner use over a 13-year period. About 196,000 air-conditioner units were in Egypt in 1999. Today, there are more than six million, reported Egyptian newspaper Al-Ahram. These devices account for 20 percent of total electricity use, according to a spokesman for Egypt's ministry of electricity.

However, rising demand, which has outpaced the population growth rate, has been primarily driven by a subsidy program that keeps prices artificially low, noted Rebel Economy, a post-revolution website founded by Farah Halime, a business reporter who has written for the NYT, WSJ and once covered finance and regional equities for The National.

The government spends two thirds of its annual $25 billion subsidy bill on fuel, with much of those funds used to keep prices low, reported Rebel Economy. Egypt's gasoline prices are among the lowest in the world, which has helped fuel consumption.

Egypt is a large oil producer. However, the country consumes 90 percent domestically, leaving little to export for revenue, reported National Geographic.

Instead of cutting subsidies, Egypt is trying to shift its industries from oil and diesel to cheaper natural gas to solve the problem. Unfortunately, it's putting Egypt into an even deeper hole.

Egypt already relies heavily on natural gas for electricity. Nearly 90 percent of the country's generating capacity is thermal, most of which comes from natural gas turbine and combined cycle plants, according to the Ministry of Electricity and Energy 2010-2011 annual report.

The upshot? Shortages in the summer months when demand outpaces supply.

Rising demand now threatens Egypt's ability to meet export contracts, a failure that some conclude led to the demise of the so-called peace pipeline deal with Israel.

Photo: Cairo traffic from Flickr user Gigi Ibrahim, CC 2.0

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Kirsten Korosec

Contributing Editor

Kirsten Korosec has written for Technology Review, Marketing News, The Hill, BNET and Bloomberg News. She holds a degree from Northwestern University's Medill School of Journalism. She is based in Tucson, Arizona. Follow her on Twitter. Disclosure