Report No: ACS22504 Arab Republic of Egypt Egypt Energy Efficiency Implementation Energy Efficiency and Rooftop Solar PV Opportunities: Report Summary June 15, 2017 GEE05 MIDDLE EAST AND NORTH AFRICA Standard Disclaimer: This volume is a product of the staff of the International Bank for Reconstruction and Development/ The World Bank. The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Copyright Statement: The material in this publication is copyrighted. 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TRACE 2.0 IMPROVING ENERGY EFFICIENCY in Egypt Energy Efficiency and Rooftop Solar PV Opportunities in Cairo and Alexandria Report Summary Acknowledgements This report summary was written by Pedzi Makumbe, Manuela Mot, Marwa Moustafa Khalil, and Mohab Hallouda, as part of a Project funded from the World Bank’s Energy Sector Management Assistance Program (ESMAP) - a multi-donor technical assistance trust funds administered by the World Bank. The work was done in close collaboration with the Energy and Extractives Global Practice of the World Bank Group, and the main beneficiary of the report is the Government of Egypt. The World Bank team was supported by The Energy Research Center of the University of Cairo. The authors benefitted tremendously from discussions with key professionals from the Government of Egypt who shared their time, experience, and resources, and would like to thank the following: • Ministry of Electricity and Renewable Energy: Dr. Mohamed Mousa Omran, First Under Secretary of State for Research Planning and Authorities Follow up • Ministry of Finance of Egypt Mr. Yasser Sobhi, Deputy Minister of Finance for Macro-Fiscal Policies • Egyptian Electric Utility and Consumer Protection Regulatory Agency; Dr. Hatem Waheed, • New Urban Communities Authority: Dr. Hend Farouh, Executive Director, Central Unit for Sustainable Cities and Renewable Energy • New and Renewable Energy Authority: Dr. Mohamed El-Sobki, Executive Chairman • Ministry of Trade and Industry: Ms. Hanan El Hadary, Chairwoman, Industrial Council for Clean Production • Housing and Buildings National Research Center: Dr. Khaled El Zahaby, Chairman The team would also like to thank Erik Magnus Fernstrom (Energy and Extractives Global Practice Manager for Middle East and North Africa), Rohit Khanna (ESMAP Manager), peer reviewers Martina Bosi (Senior Energy Specialist, ESMAP) and Yabei Zhang (Senior Energy Specialist, ECA), and Ashish Khanna (Egypt Sustainable Development Program Leader in Egypt) for their feedback provided. The findings, interpretations, and conclusions expressed in this report do not necessarily reflect the views and positions of the Executive Directors of the World Bank or of the Government of Egypt. 1 Energy Efficiency and Rooftop Solar PV Opportunities Abbreviations and Acronyms ASHRAE American Society of Heating, Refrigerating and Air-Conditioning Engineers CAISO California Independent System Operator (CAISO) CAPMAS Central Agency for Public Mobilization and Statistics CFL Compact Fluorescent Lamps CIB Commercial International Bank EE Energy Efficiency EEIGGR Energy Efficiency Improvement and Greenhouse Gas Reduction EESL Energy Efficiency Services Limited EEU Energy Efficiency Unit ESCO Energy Service Company EU European Union EUR Euro FIT Feed-in Tariffs GEF Global Environment Fund GoE Government of Egypt HPS High Pressure Sodium HVAC Heating, Ventilation and Air Conditioning kWh Kilowatt Hour MJ Mega Joule MoERE Ministry of Electricity and Renewable Energy MoP Ministry of Petroleum NMEEE National Mission of Enhanced Energy Efficiency PV Photovoltaic R2E2 Fund Armenia Renewable Resources and Energy Efficiency Fund RE Renewable Energy TDA Tourism Development Authority UNDP United Nations Development Program Currency: Egyptian Pound = 100 Piasters Exchange Rate: US$ 1 = LE 7.75 (as of 2015) US$ 1 = LE 18.00 (2017) List of Abbreviations and Acronyms 2 Contents Abbreviations and Acronyms/1 Potable Water/24 Executive Summary/3 Potable Water EE potential (25 - 30%)/24 Potable water EE measures/25 Introduction/5 Implementation/25 Methodology/6 Context/7 Street Lighting/26 Recommendations/9 Street lighting EE potential (40 - 60%)/26 Street Lighting EE measures/27 Public Buildings Sector/11 Lighting Controls: Dimming and Centralized Public Buildings EE Potential (30 - 50%)/11 Management/27 Public Buildings RE/EE Measures/13 Rooftop solar PV/13 Transport/28 Transport EE potential (10 - 20%)/28 Holistic building EE/13 Transport EE measures/31 Combination of rooftop solar PV and holistic EE/14 E-ticketing/31 Public Buildings RE/EE Scaled-up Delivery/15 Non-motorized transport network/31 Revolving Fund/15 Development of parking Facilities and Introducing Super-ESCO/15 Parking Restraint Measures/31 Commercial Buildings Sector/16 Annex 1: Key Assumptions Used in the Commercial Buildings EE Potential (40 - 60%)/16 Models/32 Commercial Buildings RE/EE Measures/18 (1) Solar Rooftop Model/32 Combination of RE/EE Investment in Commercial (2) Municipal Offices Audit & Retrofit Program/32 Buildings/19 (3) LED Street Lighting Calculation/32 Scaled-up delivery of rooftop solar PV and EE Investments in the commercial sector/19 Annex 2: World Bank-GEF Armenia a. Third-party Financing with Government guarantees/19 Energy Efficiency Project/33 b. On-lending/19 Residential Buildings Sector/20 Residential Buildings EE Potential (30 to 50%)/20 Residential Buildings RE/EE Measures/22 Scaled-up Delivery EE Investments in the Residential Sector/22 a. Distributed Companies/22 b. Commercial Financing/22 c. Market Transformation Programs/22 3 Executive Summary The Government of Egypt (GoE) is making progress towards cost reflective tariffs, and supporting various supply and demand solutions to energy challenges facing the country. The Government set a target to reach 300 MW of installed rooftop solar PV capacity as per Ministerial Council Decrees no. 1947/2014 and 2532/2016 for the first and second rounds of the feed-in tariff respectively. The government also issued Ministerial Decree No. 230/2016 - Executive Regulations of the Electricity Law - to improve energy efficiency for facilities with large electricity consumption (“customers whose contracted capacity exceeds 500 kW”). The World Bank conducted an assessment of rooftop solar PV and energy efficiency (EE) opportunities in Cairo and Alexandria, and findings can contribute to meeting these two objectives of the GoE. The findings are summarized in this report summary, and detailed in the report available online at https://www.esmap.org/. Rooftop Solar PV and EE in Public Buildings. The Tool for Rapid Assessment of City Energy 2.0 (TRACE 2.0) analysis showed that the GoE could realize about 65 MW in Cairo, and 30 MW in Alexandria of rooftop solar PV installations in public buildings. The payback period for these investments will be about 7 years for an investment estimated at US$ 22/m2. However, when these rooftop solar investments are combined with EE investments, the cost rises to about US$ 30/m2 but the payback period is reduced to 3.5 years. The total investments could go as high as US$ 838 million, generating an estimated saving of US$ 237 million per year. While there are pilot investments in combined rooftop solar PV and EE in the public sector in Egypt, there is an opportunity to scale up implementation. Options for increasing the implementation include using a revolving fund or a super-ESCO (Energy Service Company). Both models have succeeded in countries such as Armenia and India, and there is potential to investigate the applicability of the models in the Egyptian context. Rooftop Solar PV and EE in Commercial Buildings. Similarly, rooftop solar PV and EE investments can be economically made in the commercial buildings sector in Cairo and Alexandria. An estimated 8 MW can be installed in commercial buildings in Cairo, and 6 MW in commercial buildings in Alexandria. The combined rooftop solar PV and EE investments would payback in less than 2 years, with a normalized investment of about US$ 30/m2 for a total investment estimated at US$ 189 million. Similarly, there are commercial facilities making similar investments in both cities, and the implementation of the investments can be scaled in order to realize the potential in the cities. Implementation models which have worked well in other countries include third-party financing with guarantees that reduce risk, and on-lending with a delivery mechanism. Both the revolving fund, and the super-ESCO models can be explored in the commercial sector as well. However, global experience has shown that the models are typically implemented in the public sector first. 4 EE investments in residential sector. There is 30-50% EE potential in the residential sector in Egypt based on TRACE peer- city comparison, and it would be challenging to implement a scaled-up rooftop solar PV program because of the limited rooftop space. Since the government has an ongoing LED lighting program, the investments could focus on space cooling and water heating. The two represent about 25% of energy consumption in the residential sector, and the EE investments are estimated to cost US$ 10-20/m2 with a payback period of 4-8 years depending on the specific costs of the investments.1 Market transformation programs, commercial financing, and involving distribution companies have proven to be successful implementation models in other countries. Pump replacements in the water sector. There is 25-30% EE potential in Cairo and Alexandria based on a comparison of “energy density of potable water production (kWhe/m3)” among peer cities. The potential could be economically realized through a pump replacement program. Similar programs have been implemented through energy service companies (ESCOs) or direct expenditures by the water utility companies. The payback period in reviewed case studies (Fortaleza, Brazil, and San Juan, Puerto Rico) was about 5 years. There was limited data to run detailed models for the intervention in both Cairo and Alexandria. LED lighting with centralized control. The mission echoed findings that LED lighting investments would result in the most significant energy savings – typically between 30-60% depending on existing technology. Given the several pilots and studies done in the sector, the mission did not develop additional analysis.2 However, there is an opportunity for the Government to realize additional savings by scaling up the implementation of LED programs including centralized LED controls. The program would allow the authorities to dim the street lights slightly when the streets were mostly deserted, and allow the utilities to reduce operation and maintenance costs as well. The savings in such scenarios would be close to 60%. Transportation soft measures. Lastly, the study investigated soft opportunities (besides infrastructure improvements) which could be implemented to realize EE potential in both Cairo and Alexandria. Both Cairo and Alexandria consumed 1 MJ/ passenger-kilometer for private transportation, which was close to the average of cities used for the peer-to-peer TRACE 2.0 analysis. Both required less energy than similar cities such as Amman, Tehran, or Johannesburg. Public transportation in both cities was more efficient than many cities in the database. However, the public transportation systems in both cities could be made more efficient by introducing multimodal electronic tickets, congestion pricing, or parking restraint measures. The measures help improve fuel efficiency by encouraging modal shift to public transportation. Since the transport-related EE measures do not contribute directly to addressing the demand-supply power gap, a more detailed analysis with regard to public and private transportation would be necessary in order to assess costs and opportunities pertaining to fuel efficiency and congestion. 1 Similar programs done by the World Bank typically evaluate a suit of investments for each qualifying building, and investments are chosen for implementation using a payback period criterion. This allows for a variation in investment cost per m2 while broadly ensuring sustainability of the financial resources. 2 According to the Ministry of Housing, Utilities, and Urban Development, there are 10 million streetlights in Egypt with a load of 1,600 MW. Replacing all lights would cost US$725million. A US$268.2 million program to replace 3.89 million lamps was announced in 2015, but there has been limited implementation. 5 Energy Efficiency and Rooftop Solar PV Opportunities Introduction Cities serve a significant role as engines of sustainable development. They account for nearly half of the global population and about two-thirds of energy demand. Rapid urbanisation is placing significant constraints on cities’ energy infrastructure, which in turn is constraining growth. For example, growth in electricity demand has outpaced economic growth in Cairo and Alexandria, and in the absence of targeted reforms, electricity demand is expected to grow at 5 to 7 % per year for the foreseeable future. This has created about 5GW in supply-demand gap leading to major power cuts and service delivery challenges for households, small and medium enterprises (SMEs), and large scale industries as well. Energy efficiency and distributed solar can therefore play a central role in supporting the development cities’ energy infrastructure. This report is a summary of findings from an analysis of rooftop solar PV potential and energy efficiency conducted in Cairo and Alexandria as the largest energy demand centers in Egypt. It is the conclusion of a technical assistance (TA) program between the World Bank and the GoE. The objective of the program is to identify feasible renewable energy (RE) and energy efficiency (EE) interventions which could be implemented in cities in order to contribute towards alleviating energy shortages. It provides quick summary of the key applicable interventions based on their energy efficiency and rooftop solar PV potential, and the political and economic environment in the country. The results presented are based on a rapid assessment using TRACE 2.0, an analysis which was produced using data and information available for the year 2015. There have been some challenges in data collection and aggregation considering that getting statistics at the city/ governorate level is quite difficult since data is typically aggregated at the national level. Since this is a rapid assessment performed with challenges identified, a more detailed pre-feasibility analysis is needed to better inform decision making. While Phase 1 of the TA is outlined the EE measures identified as having the highest implementation potential, Phase 2 of the Project would ideally aim to conduct pre-feasibility studies for one or two EE/RE measures with the most implementation potential (to be agreed with the GoE), as well as to look into most suitable delivery mechanisms and implementation models. The next steps in this program should lay down the ground for potential investments by preparing pre-feasibility studies based on detailed appraisal on a sample of buildings (e.g., energy audits, cost-benefit analysis), as well as evaluate the delivery mechanism The report is structured such that this introduction briefly describes the TRACE 2.0 methodology, and the high-level findings from the TA. The key interventions are then described starting with the public buildings sector, followed by the commercial buildings sector, the residential sector, potable water sector, lighting sector and concluding with the transportation sector. Methodology 6 Methodology This report is based on the implementation of Tool for Rapid Assessment of City Energy – TRACE 2.0 in Cairo and Alexandria in spring 2016.3 TRACE 2.0 is an enhanced decision-support tool designed to help cities quickly identify under- performing sectors; evaluate improvement and cost-saving potential; prioritize sectors and actions for energy efficiency (EE) intervention; and model potential interventions. It covers eight sectors: municipal buildings, residential buildings, commercial buildings, water and waste water, passenger transport, public lighting, solid waste, and power and heat. TRACE 2.0 consists of three modules: a sector assessment module which compares key performance indicators (KPIs) among peer cities, and prioritize sectors that offer the greatest potential; a recommendations module which functions like a “playbook” of tried-and-tested EE measures and helps select locally appropriate EE interventions; and a results and analysis section which presents results in a user friendly manner (see Figure 1). TRACE 2.0 is the improved version of TRACE which was implemented in over 65 cities around the globe, and led to over US$ 250 million in investments in city energy efficiency and renewable energy. The data on energy consumption and expenditure used to calculate the KPIs for the TRACE 2.0 analysis in this report are for the reference period July 2014-June 2015. Some of the data comes from different sources provided by government entities, utilities, and national statistics. When such data was not available the KPIs were calculated based on expert estimates. Figure 1. Homepage TRACE 2.0 To apply TRACE 2.0, the World Bank contracted The Energy Resource Center at the University of Cairo to collect data from stakeholders such as electricity distribution companies, Cairo and Alexandria governorates, water utilities and other relevant stakeholders. The data was entered into the tool, and used to obtain estimates of energy savings and rooftop solar generation opportunities. After the team had draft results, a World Bank team travelled to Cairo and Alexandria, and met with the relevant stakeholders, verified the data, discussed the preliminary findings and ran detailed models for technically, politically and economically feasible recommendations. 3 The full report is available online at http://www.esmap.org 7 Energy Efficiency and Rooftop Solar PV Opportunities Context Table 1. Cairo – City Facts Cairo Alexandria Population 9,278,441 people 4,812,000 people Area 3,085 km2 2,300 km2 Human Development Index (country) 0.69 0.69 Climate Arid Arid Key Economic Sectors services, industry manufacturing, shipping, petrochemical industry GDP per Capita US$ 10,751 US$2,285 Primary Energy Consumption per Capita 41.02 GJ/capita 41.02 GJ/capita Primary Electricity Consumption per Capita 1,910.46 kWh/capita 1,910.46 kWh/capita Average Cost of Electricity US$ 0.08/kWh US$ 0.08/kWh Average Cost of Gas US$ 0.01/kWh US$ 0.01/kWh The proposed EE measures would help reduce consumption, and open the road for a more efficient use of energy. As of now, industry is the largest energy user in Egypt, consuming more than one-third of the overall consumption. Commercial and public sectors need almost a quarter of the total use, and transport and residential sector using nearly one-fifth each (see Figure 2). Figure 2. Energy consumption in Egypt by sector Industry sector 5% Transport sector 22% Residential sector 36% Commercial and Pub sector Agricultural & fishing sector 18% 19% recommendations 8 Almost half of the nearly 143,000 GWh of electricity Figure 3. Electricity consumption by sector in Egypt consumed annually in Egypt has to satisfy the demand in the residential sector, a quarter in the industrial Industry 14.3% sector, and the rest is used in commercial sector, public Agriculture 4.6% lighting and other entities (see Figure 3). Gov. & public utilities 11.3% Residencial 51.3% Commercial 4.1% Public Lighting 4.7% Others 9.7% EE should be considered the “first fuel” of energy policy makers and governments as it can help meet growing energy demands through clean and cheap energy, increase competitiveness, generate employment, secure energy, reduce poverty, and benefit development. As one of the most critical policy tools, EE can support countries meet the substantial growth in energy demand while easing the environmental impacts of that growth. EE is a win-win-win option for governments, with energy savings offering positive returns to the government, energy consumers, and the environment. According to the International Energy Agency, EE can prompt more efficient allocation of resources at the global level, and could potentially boost the economic output worldwide by US$ 18 trillion by 2035.4 EE can foster economic growth, improve economic savings in the form of avoided energy costs, enhance opportunities, and improve competitiveness by developing new industries from the reduction of energy waste, increasing productivity, and creating new employment opportunities. Lowering energy bills can help decrease energy poverty, which would contribute to overall poverty reduction. At the same time, EE can facilitate energy access by supporting reduction in energy losses that increase energy access or lower upfront costs for off-grid energy services. In addition, EE is an instrument that can help local governments to provide more reliable public services (like water and street lighting) while reducing the costs. Less money spent on energy bill is translated into more money for the local budget that can be used for other priorities. At the citizen’s level, EE can improve indoor comfort for city residents in their homes, lower the energy consumption, reduce and save money on energy bills. Studies show that high-efficient appliances (and insulation) can reduce the household energy bill by 30%, hence provide significant financial savings for the electricity/heating expenditures, and offer comfortable and enjoyable environment for people in their homes. EE is not only good for environment because it can save energy resources (e.g., oil, natural gas), but is crucial in mitigating climate change and avoid pollution that could harm the environment. Less energy means less fuel and greenhouse gas emissions (GHGs). Reducing pollution in the atmosphere is an important step in diminishing the impacts of climate change at both local and global level. A less polluted environment and improved quality of air would enhance the quality of life for people, and help citizens to breathe fresh, cleaner air which would also translate into less health related problems. 4 A Knowledge Note Series for the Energy & Extractives Global Practice – Live Wire, World Bank, 2016/53 9 Energy Efficiency and Rooftop Solar PV Opportunities Recommendations The list of recommendations filtered for further evaluation is shown in Figure 4. Details about each recommendation, and case studies are available in the detailed report, which is available online. Figure 4. List of selected discussed recommendations Public Buildings Sector Rooftop Solar Photovoltaic Panels Holistic Public Buildings EE Combination of Rooftop Solar PV and Holistic EE Commercial Buildings Sector Rooftop Solar Photovoltaic Panels Holistic building EE Commercial buildings RE/EE measures Residential Buildings Sector Efficient cooling Efficient water heating Public Lighting Sector Street Lighting LED Program Implementation Lighting Controls: Dimming and Centralized Management Water Sector Improve Efficiency of Pumps and Motors Active Leakage Detection of Water and Pressure Management Transport Sector Development of Parking Facilities and Parking Restraint Measures Non-Motorized Transport Network development Public Transport Development – E-ticketing Solid Waste Sector Waste Infrastructure Planning recommendations 10 Through discussions government officials, a few recommendations were selected for more detailed investigation. These recommendations were summarized in the Executive Summary above. Figure 5 is summary of the same recommendations with additional analysis of the significance of the recommendation, the gap in ongoing activities in the sector, and ease of implementation. Figure 5. Summary of short-listed recommendations Relative Immediate Estimated Estimated Estimated Sector Importance authority Potential Ease of Payback Investment Ongoing Gap in (EE/RE (2014 responsible Savings*** implementing Period*** Cost*** Programs Activity5 measure) Consumption for paying the (US$ million/ measures6 (years) (US$ million) GWh) electricity bill year) Significant LED Residential bulb distribution buildings program, 12,702.2 Private citizens 300 4-8 1,500 Moderate Moderate** (holistic building UNDP Project EE) for appliance replacement Public buildings (rooftop solar 3,814.20 Government 250 4 850 Egy-Sun Pilots Significant High* PV + EE) Commercial CIB investment, buildings 2,181.1 Private citizens 150 2 250 Tourism Ministry Moderate High* (rooftop solar Program PV + EE) LED pilots, and Public lighting replacement with (LED street 281.9 Government 9 6 55 Limited High* HPS in some lighting) parts of the cities (Large potable water supply WB not aware of 1.2 Government 0.02 Significant High* pumps ongoing programs replacement) High* - WB has significant scaled up implementation experience; Moderate** - WB has limited scaled up implementation experience ***large figures have been rounded up to match the level of accuracy in the data used. 5 This suggests the gap or lack of government activities in the sector. A significant gap in activity means that there has not been too government investment activities in the sector, while a limited gap means that there is a significant amount of activities in the sector. 6 Ease of implementing measures refers to lack of various political and economic barriers in Egypt to implement the EE/RE recommendations. 11 Energy Efficiency and Rooftop Solar PV Opportunities Public Buildings Sector Public buildings EE potential (30 - 50%) In this report, public buildings include all buildings managed and/or owned by municipal, governorate, or national government. This includes Government administration offices, police stations, hospitals managed by the Ministry of Health and Population, and schools and universities managed by the Ministry of Education. According to the Central Agency for Public Mobilization and Statistics (CAPMAS), there are 345,078 public buildings in Egypt which represent about 3% of the buildings stock in the country. These public buildings and utilities represented 11% of the electricity consumed in Egypt in the 2013-2014 period. There are over 10,010 public buildings in Cairo which account for 2.3% of the building stock in the city. The buildings account for 19.4 million m2 of floor space, and consume 2,724.4 GWh per year. Alexandria has 7,860 buildings which account for 8.9 million m2 of floor space, and consume 1,089.76 GWh per year. Most public buildings are equipped with fans for cooling, and a few have central air conditioning system. Additionally, only a few public buildings are equipped with roof top solar panels to help meet the electricity consumption needs of the buildings. According to TRACE 2.0 analysis, and compared to cities with similar Human Development Index7 (HDI see Figure 6) the public building sector in Cairo has a technical energy savings potential8 of 60%. However, there is substantial need for cooling in Cairo compared to benchmarked cities; hence the realizable EE potential9 is estimated to be between 30 to 50%. Similarly the technical potential in Alexandria is 55%, and the realizable EE potential compared to peer cities is between 25 and 45%. Alexandria consumes less energy per m2 than Cairo because it is located by the Mediterranean Sea while Cairo is located in interior of the country by the Nile River. The amount of EE potential realized depends on the investments made and the economic and financial criteria for making the investments. The Mogamma building, hosting a government office in Tahrir Square Source: Shutterstock.com 7 The TRACE benchmarking has used the Human Development Index (HDI) for the comparison with peer cities since this criterion is the most relevant, as it provides a summary measure of average achievement in key dimensions of human development, namely a long and healthy life, knowledge and a decent standard of living. This is also important in highlighting the level of quality of public services, such as access to electricity, water/sewage, public lighting coverage, solid waste collection etc. 8 Technical EE potential is potential from the technical analysis without factoring in the local factors which make it difficult to realize the technically derived potential 9 Realizable EE potential is an estimate of the potential which can be realized in Cairo given the local context. This is typically less than the technical potential. Public Buildings Sector 12 Figure 6. Peer City Benchmarking of Energy Consumption of Buildings in Cairo My City Non-Peer City Peer City Selected Better Cities Average 0.00 100.00 200.00 300.00 400.00 500.00 600.00 700.00 800.00 900.00 1,000.00 Paris Gaziantep Barcelona Jakarta New York Tallinn Singapore Kuala Lumpur Toronto Mumbai Cebu Ljubljana Quezon City Pune Cape Town Helsinki Cairo Shanghai Beijing Bangalore New Delhi Puri Johannesburg Bogota Public Buildings Electricity Consumption Tokyo Danang [kWhe/m2] Craiova Guangzhou Banja Luka Chengdu Bangkok Belgrade Pristina Sarajevo Tbilisi Skopje Kiev Ploiesti Timisoara Ternopil Cluj-Napoca Brasov Iasi Kamianets-Podilskyi Kathmandu Constanta Addis Ababa 13 Energy Efficiency and Rooftop Solar PV Opportunities Public buildings RE/EE measures There are several measures that the GoE could implement to realize its EE potential. As explained above, the measures were technically identified from TRACE 2.0 analysis by matching requirements for implementing the measure, and the capabilities available to implement the measures in Cairo and Alexandria. For example, if a measure required significant data to implement, but the data did not exist, the recommendation would not be suggested. Additionally, the measures were screened through a political economy lens. From this process, a combination of solar rooftop PV and holistic building EE measures emerged among interventions that should be prioritized for further consideration for potential investments: • Rooftop solar PV - The GoE issued Ministerial Council Decree no. 1947/2014 and 2532/2016, which set a target to reach 300MW of installed rooftop solar photovoltaic (PV) capacity. It also established a Feed in Tariffs (FIT) program set at LE 1.085/kWh for installed capacity less than 200kW, and LE 1.02/kWh for installed capacity between 200-500kW. Results from TRACE 2.0 model for rooftop solar PV for public buildings are summarized in Figure 7 (see Annex I for assumptions). Based on the assumptions, about 95MW of rooftop solar PV could be realized from Cairo and Alexandria for an investment of US$ 22/m2. The payback period for both investments is about 7 years, and the annual cost savings is US$ 3.20/m2 – about US$ 90 million/year. The domestic content from both investments is US$ 210 million, and would create 1600 jobs.10 Figure 7. Summary of estimated results for implementing rooftop solar PV in Public Buildings* Cairo Alexandria Total Energy Produced (kWh/year) 566,030,821 258,756,827 Energy Cost Savings (US$/year) 67,923,699 31,050,819 Annual Ops & Maintenance Cost (US$/year) 5,660,308.21 2,587,568 CAPEX (US$) 427,631,248 195,488,480 Total Cost Savings (US$/year) 62,263,390 28,463,250 Simple Payback (years) 6.87 6.87 * Results in the table are estimates based on TRACE 2.0 models, and detailed pre-feasibilities are needed to improve the specific accuracy • Holistic building EE: There are several EE measures that the GoE can implement to realize the EE potential in public buildings. Based on global practices, the measures tend to be implemented as a basket of investments by energy service companies, hence are often analyzed together using the ASHRAE Standard 90.1. ASHRAE is an international standards society focused on the built environment building systems, energy efficiency, indoor air quality, refrigeration and sustainability within the industry. Annex 1 reproduces a section of the standard used for this analysis. • The specific investments under a holistic building EE renovation include installation of: (a) more efficient lighting, (b) more efficient cooling, (c) solar hot water systems, (d) more efficient building mechanical systems (elevators, mechanical ventilation etc), and (e) installation of more efficient windows and doors. Using the assumptions in Annex 1, implementing a suite of these measures to the best and good ASHRAE categories results in 48%, and 49% energy savings in Cairo and Alexandria respectively as summarized in Figure 8. Efficient cooling 10 PV Component and Local Manufacturing in Egypt, WB, 2016. 800 jobs per 50 MW Public Buildings Sector 14 options considered include central cooling systems for Figure 8. Summary of estimated Results for implementing large public buildings, more efficient split systems for mid- holistic building EE measures* Cairo Alexandria sized buildings, and more efficient fans for smaller offices. Efficient lighting options include LED lighting; efficient kWh Saved 1,241,405,000 511,659,132 solar hot water heaters system which have solar energy factors 2 or higher11, and efficient windows and doors Energy Cost Savings 99,312,400 40,932,731 (US$/year) minimize air-flows, and have low thermal remittance. More efficient elevators will be particularly important Energy Savings (%) 48% 49% in buildings frequented by the public for services. The suitability of each of these measures depends on building CAPEX (US$) 147,440,000 58,646,575 in question, and not all buildings will need all five forms of Domestic Content of investments. Investments (US$) 44,232,000 17,593,972 • Combination of rooftop solar PV and holistic EE: Solar CO2 Saving per Year 6,207,025 2,558,296 rooftop PV utilizes roof space to generate electricity, Simple Payback (Years)12 1.7 1.4 and EE investments reduce electricity wasted inside the buildings so that more of the electricity generated could * Results in the tables are estimates based on TRACE 2.0 models, and be efficiently used or sold. This will help to optimally size detailed pre-feasibilities are needed to improve the specific accuracy the solar rooftop investment to maximize production while minimizing the investment costs. The analysis Figure 9. Summary of estimated Resource Efficient Invest- indicates that combined investment would have an ments in the public building sector* Resource Efficient (RE attractive payback period of 3.5 years (Figure 9), which + EE) investment is less than half the payback period of an investment in Total Investment (US$) $829,206,303 solar PV alone. This would require an investment of US$ 30/m2 and the estimated savings to be achieved would be Local Content (US$) $276,402,101 about US$ 8.50/m2. Savings (US$/year) $239,219,649 Equivalent Electricity Produced kWh/year 2,577,851,780 Simple Payback Period (years) 3.5 Avoided Running Costs (US$) $205,261,448 Alexandria - Alexandrina Library, interior Source: Shutterstock.com 11 The solar energy factor is defined as the energy delivered by the system divided by the electrical or gas energy put into the system. The higher the number, the more energy efficient. Solar energy factors range from 1.0 to 11. Systems with solar energy factors of 2 or 3 are the most common. 12 The realizable payback will be slightly higher. This analysis did not consider taxes which will increase the costs, and the savings will be lower as energy consumption will likely increase slightly as the country develops. However, the results are broadly in line with results from pilots implemented in the country. 15 Energy Efficiency and Rooftop Solar PV Opportunities Public buildings RE/EE scaled-up delivery The GoE has implemented pilots of combined RE/EE investments funded by an EUR 1 million grant from the European Union under the Egy-sun initiative. The “Shamsek ya misr” initiative was launched on 2/2/2014 by the energy efficiency unit (EEU) aiming to promote the usage of energy efficient lighting along with PV systems in public buildings in Egypt. The initiative was backed by decrees issued by the supreme council of energy and the ministerial council on promoting EE and RE. It promoted: (i) the usage of the energy efficient lighting along with PV systems; (ii) local manufacturing of equipment; and (iii) local service providers in this area. The program also aimed to create new job opportunities and increase awareness of EE and RE. The pilots typically consisted of 10kW rooftop solar systems paired with LED lighting. About 0.5MW had been installed as of June 2015, and 250MW saved through efficient lighting. While the pilots were successful, there is need to scale up the delivery of more comprehensive resource efficient (combined RE/EE) investments. Detailed pre-feasibility studies would be needed to further look into the technical feasibility of expanding beyond lighting to include cooling and water heating in public buildings, and finding the most appropriate ways to implement a scaled up program. Some models to consider include revolving fund, and super ESCO models: • Revolving Fund: A revolving fund is designed such that savings from the RE and EE investments are used to make additional investments. The World Bank has experience implementing scaled up programs in public buildings using the revolving fund model. One of the recent projects to conclude successfully is the Armenia EE project in which the Armenia Renewable Resources and Energy Efficiency Fund (the R2E2 Fund) successfully invested US$ 10 million in public buildings, and is able to make additional investments without additional capital injection except for the capital reflows. Under the project, the R2E2 Fund provided turn-key services (energy audit, procurement, detailed design, financing, construction and monitoring) for EE upgrades in eligible13 public buildings. For more information about the revolving fund developed for the project, please see Annex II. • Super-ESCO: An ESCO is a company that offers a host of services for implementing and financing EE projects, and is paid from the cost savings. An ESCO typically uses usually performance-based contracting models under which payments are made based on results and the ESCO undertakes most of the technical, financial, and performance risks. A super-ESCO is a government-owned company that serves as an ESCO for the large public sector, such as schools, hospitals, municipality/government buildings etc. The Super-ESCO provides financial assistance for EE projects in the public sector, with repayment based on energy cost savings. It also offers capacity development and activities for other ESCOs. The super-ESCO acts as a leasing or financing company to provide ESCOs and/or customers EE equipment on lease or on benefit-sharing terms. Super-ESCOs can facilitate project bundling and overcome procurement and contracting challenges that arise in the public sector. India’s Energy Efficiency Services Limited (EESL) provides an example of a successful super-ESCO. The super ESCO was established by the Ministry of Power (MoP) of the Government of India, as a joint venture company of several public sector units of the MoP: the National Thermal Power Corporation, the Power Grid Corporation of India, the Power Finance Corporation, and Rural Electrification Corporation Limited. As a super-ESCO, EESL has a strong public sector mandate to lead the market development and implementation functions of the National Mission of Enhanced Energy Efficiency (NMEEE), which was established by the Prime Minister to unlock the EE market in India. The super-ESCO has transformed the LED market in India by implementing programs which reduced the cost of LEDs bulbs by 75%, installed 1, 321, 212 street lights as of February 2016, and started a cooling program using efficient fans and air condition. 13 Client eligibility criteria include: (a) confirmation of public ownership of facility; (b) structural soundness of the facility (absence of major structural damages that may jeopardize integral stability of the building); (c) absence of plans for closure, downsizing or privatization of the facility; and (d) comfort level of more than 50%. Subproject criteria involve: (i) at least 20% energy savings; (ii) simple payment period less than 10 years; (iii) investment size should be US$ 50,000-500,000, and (iv) the borrowers should be in good financial standing. Commercial Buildings Sector 16 Commercial Buildings Sector Commercial buildings EE potential (40 - 60%) There are 240,000 commercial buildings, in addition to 436,000 mixed use building used for both residential and commercial purposes in Egypt. For the purpose of this study all mixed facilities were considered residential buildings. Thus commercial buildings are exclusively used for commercial activities, such malls, hotels, banks, clubs, and office buildings. These consume 5,003 GWh which is 4.1% of all electricity consumed in Egypt. 36% of the total energy consumed in commercial buildings is consumed for lighting, 35 to 40% for cooling, ventilating and air conditioning (HVAC) systems, and the rest for other uses. There are 22,168 commercial buildings in Cairo (5% of the total number of buildings in the city) with 3,807,458.14 m2 of floor area which consumed 1,250.75 GWh in 2014. Given the normalized consumption of 328.5 kWh/m2, commercial buildings in Cairo consume twice as much electricity as Brasilia, and three times as much as` Sao Paolo and Beijing. As a result, there is potential to realize 67% energy efficiency potential as per TRACE 2.0 peer comparison analysis. Similarly, there are 17,700 buildings in Alexandria with 3,040,058.15 m2 of floor space, which consumed 930.3 GWh in 2014. With a normalized consumption of 306 kWh/m2 the commercial buildings in Alexandria are more efficient than buildings in Cairo but still have 60% EE potential compared to peer cities with similar HDI as shown in Figure 10. Given the Egyptian relatively warm climate, the team estimates the realizable potential to be between 40 and 60%. Mall in Greater Cairo Source: World Bank/Manuela Mot 17 Energy Efficiency and Rooftop Solar PV Opportunities Figure 10. Peer benchmarking of commercial buildings in Alexandria My City Non-Peer City Peer City Selected Better Cities Average 0.00 100.00 200.00 300.00 400.00 500.00 600.00 700.00 800.00 900.00 1,000.00 Hong Kong Kuala Lumpur Jeddah Johannesburg Mumbai Sydney Rio de Janeiro Gaborone Cairo Buenos Aires Santiago Alexandria, Egyot New York Durban New Delhi Barcelona Bogota Cape Town Seoul Vienna Shanghai Brasilia Tehran Beijing Sao Paulo Amman Zarqa Tokyo Guangzhou Mexico City Quezon City Commercial Buildings Electricity Consumption Tunis Jakarta [kWhe/m2] Singapore Budapest Lima Algiers Banja Luka Colombo Nairobi Lagos Gaziantep Bangkok Kathmandu Dakar Dar es Salaam Karachi Casablanca Rabat Addis Ababa Commercial Buildings Sector 18 Commercial buildings Figure 11. Summary for estimated results for rooftop solar PV investment in commercial buildings* RE/EE measures Cairo Alexandria The RE and EE measures which can be implemented in Total Energy Produced 63,356,320 50,586,793 (kWh/year) commercial buildings are nominally the same as those that can be implemented in commercial buildings given that both Energy Cost Savings 7,602,758 6,070,415 sectors have large buildings with roof space. The results of (US$/year) potential rooftop solar PV investments and cost estimates in Annual Operation & commercial buildings are summarized in Figure 11. The quick 633,563 505,867 Maintenance Cost (US$/year) calculations performed indicate some estimates of 15 MW for total rooftop solar PV installation with 7 years’ payback CAPEX (US$) 47,865,136 38,217,872 time for the investment. Assumptions used in the analysis are Total Cost Savings available in Annex I. Technically, the investment is similar to 6,969,195 5,564,547 (US$/year) the investment in public buildings but smaller, and about 200 jobs will be created. * Results in the tables are estimates based on TRACE 2.0 models, and detailed pre-feasibilities are needed to improve the specific accuracy Energy consumption in commercial buildings is different Figure 12. Summary of holistic EE investments in from public buildings. As a result, the EE investments in the commercial buildings* Cairo Alexandria commercial building sectors will be slightly different from those in the public buildings sector. The average public building kWh Saved 692,203,729 513,158,165 in Alexandria and Cairo consumes 131 kWh/m2 per year, while the average commercial building consumes 317 kWh/m2. This Energy Cost Savings 55,376,298 41,052,653 (US$/year) is partially because commercial buildings have more cooling, and mechanical systems than public buildings. Thus the Energy Saving (%) 56 53 investment costs in commercial buildings will tend to be higher per square meter than those in public buildings. The payback CAPEX (US$) 28,936,682 23,104,441 period for the investment is less than a year (Figure 12). CO2 Savings Per Year 3,461,019 2,565,791 Simple Payback (Years)14 0.52 0.56 PVs on an industrial building in Greater Cairo Source: World Bank/Manuela Mot 14 The realizable payback will be slightly higher. This analysis did not consider taxes which will increase the costs, and the savings will be lower as energy consumption will likely increase slightly as the country develops. However, the results are broadly in line with results from pilots implemented in the country. 19 Energy Efficiency and Rooftop Solar PV Opportunities Combination of RE/EE Investment in Commercial Buildings Similar to public buildings, a combination of rooftop solar Figure 13. Summary of estimated financial resource neces- PV, and EE investments would be the most resource efficient sary for EE/RE investments in the commercial buildings* investment. Estimates of the results of the combined Combined commercial buildings resource efficient (RE + EE) investment investment are shown in Figure 13. The size of the total investment is smaller than the investment for the public Total Investment (US$) 182,511,960 building sector largely because the total surface area of commercial buildings is much smaller than that of public Local Content (US$) 60,837,320 buildings. Since commercial buildings have higher consumption than public buildings, the EE component of the investments is Energy Savings (US$/year) 108,962,694 proportionally larger hence the overall investment has lower payback period. Equivalent kWh Produced/year 1,319,305,007 Simple Payback Period (years) 1.7 Avoided Running Costs (US$) 105,049,661 * Results in the table are estimates based on TRACE 2.0 models, and detailed pre-feasibilities are needed to improve the specific accuracy Scaled-up Delivery of Rooftop Solar PV and EE Investments in the Commercial Sector The GoE is supportive of investments in solar PV and EE. For example in cooperation with business organizations, the GoE is engaged in promoting EE in commercial buildings by funding energy performance assessments aimed at reducing energy consumption, as well as operation and maintenance related costs. The Tourism Development Authority (TDA) is encouraging new hotels and resorts to supply a quarter of electricity from renewable sources or reduce consumption by 25% through EE measures. The Energy Efficiency Improvement and Greenhouse Gas Reduction (EEIGGR) project under MoERE/UNDP/GEF is implementing several LED lighting programs including one with the Commercial Infrastructure Bank (CIB). The CIB installed LEDs at its headquarters in Cairo, and subsequently achieved 40% overall energy savings. Lighting typically constitutes 20% of commercial buildings electricity consumption, thus LED lighting is helping lower cooling costs as well. This success is being replicated across all 160 branches of the CIB for LE 15 million investment (approximately US$ 1.6 million). These examples illustrate the interest in combined RE/EE investments. There are several models which can be considered for scaling up the rooftop solar PV and EE investments in the commercial building sector. These include: a. Third-party financing with Government Guarantees – There are two prominent models under third-party financing: (a) A third-party leases roof space from a commercial facility, and implements the solar PV system and EE investments. The electricity produced can either be sold or the facility can sign a power purchasing agreement with the third party. (b) the commercial facility can sign a power purchase agreements (PPA) to pay a specific rate for the electricity that is generated each month from a system installed by a third party. 70% of rooftops solar PV installations in the US are financed using third party models. In markets where third party financing is not common, Government guarantees may help the third party entities raise financing for the investments. b. On-lending - the Government can provide financing to an intermediary financial institution, which will then lend to commercial facilities for the RE/EE investments. The on-lending bank is typically a Government-owned bank. The World Bank is concluding a project in Turkey where over US$ 1 billion was learnt to commercial industries using the on-lending model. Residential Buildings Sector 20 Residential Buildings Sector Residential Buildings EE Potential (30 to 50%) Cairo has 2,587,852 households with a total floor area of 120,000,000 m2 which consume 7,745.25 GWh of electricity annually. The consumption of 64.5 kWh/m2 is on the high end compared to peer cities such as Casablanca, Tehran, Amman, Rabat and Sao Paulo (Figure 14). According to the TRACE 2.0 analysis, the EE potential in Cairo, based on peer analysis is 59%. The peer cities were chosen based on the human development index which accounts for the level of development which influences energy usage. Figure 12 shows that Cairo has a substantially higher energy consumption than cities in the same climate as well. Alexandria has 1,766,918 households which consume 4,956.96 GWh per year with a total area of 81,932,877.15 m2. Given the lower energy consumption of 60.5 kWh/m2 Alexandria’s EE technical potential according to TRACE 2.0 peer analysis is 52%. Similarly the peers where chosen using the HDI, and Alexandria has higher energy consumption than cities in the region such as Karachi (15.5 kWh/m2), Tunis (23.5 kWh/m2), and Amman (33.5 kWh/m2) just to name a few cities. The realizable EE potential is between 30% and 50% due to the warmer climate in Egypt, the difficulty of making collective decisions in multi-family buildings, the small size of individual investments which increases transaction costs, and low comfort levels (e.g., under-cooling) which reduces the EE potential savings as the savings might be offset by an increase in energy consumption to improve the comfort levels. Residential buildings in Alexandria Source: World Bank/Manuela Mot 21 Energy Efficiency and Rooftop Solar PV Opportunities Figure 14. Peer benchmarking of residential buildings energy consumption in Cairo My City Non-Peer City Peer City Selected Better Cities Average 0.00 20.00 40.00 60.00 80.00 100.00 120.00 140.00 160.00 180.00 200.00 Johannesburg Hong Kong Kamianets-Podilskyi Pristina Toronto Durban Buenos Aires Lagos Seoul Paris Mumbai Cairo Guangzhou Sydney Skopje Tehran Singapore Rio de Janeiro New York Brasilia Sofia Caracas Chengdu Gaborone Belo Horizonte Tokyo New Delhi Sao Paulo Mexico City Vienna Amman Zarqa Porto Shanghai Warsaw Alexandria Lima Cape Town Tbilisi Residential Buildings Electricity Consumption Bogota Algiers [kWhe/m2] Yerevan Beijing Tunis Jakarta Baku Bangkok Casablanca Rabat Gaziantep Quezon City Karachi Cebu Dakar Dar es Salaam Addis Ababa Nairobi Residential Buildings Sector 22 Residential Buildings RE/EE Measures Residential buildings in Egypt tend to have smaller rooftop area per square meter of residential floor area; hence implementation of rooftop solar PV investments will be challenging. Thus the measures synthesized from TRACE 2.0 tend to focus on EE. Figure 15 shows the residential energy use in the residential sector in Egypt. Lighting is responsible for the largest percentage of consumption at 31%. The GoE is distributing 12 million LED bulbs to residents through local distribution companies. Residents have the option to either pay up front for the bulbs or use a two-year on-bill payment option. 5 million LED bulbs had been distributed across the country as of June 2016, of which 1.3 million of the bulbs (including 500,000 9W LED bulbs) were distributed to residents in Alexandria. While the program has had some difficulties (e.g., 10-20% of the LED lamps distributed in Alexandria had challenges from the beginning and/or stopped working within 3 months), it is being improved and is expected to result in a realization of energy savings in the residential sector. Figure 15. Residential energy use in Egypt Space cooling 13% Water heating 11% Lighting 31% Cooking 2% Refrigeration 13% Cloth washing 5% Dish washing 1% Other Electric 24% Cooling and water heating provide an opportunity to lower energy consumption even further. While many residents use fans there has been a significant growth in the number of split system cooling units in Egypt. According to some estimates, the number of cooling units increased seven times over the past five years. Efficient cooling options including, more efficient split system cooling units for the middle income, and efficient fans for low income. About 10% of electricity spent in a household is used for electric water heating. There has been some limited public uptake of solar water heaters because of the high costs - LE 14,000 - LE 18,000 for 200liter water tank. In addition, additional piping will be required and there is limited roof space in tall buildings. Centralized solar water heaters pilots are currently being implemented in the new cities developed by the New Urban Community Authority, and they are yet to evaluate results from the pilots. Additional opportunities might be in refrigeration, and a deeper look into the “other electricity use.” Scaled-up Delivery EE Investments in the Residential Sector Due to the small nature of the individual residential home, investments in the residential sector have to be combined. There are several delivery models which have been used by several countries around the world as shown in Figure 16. The following might be applicable in Egypt and warranty further investigation: a. Distributed Companies can be involved as is the case with the LED lighting program. b. Commercial Financing can be used where the Government lends to a bank which then lends on the homeowners association or private residents. Typically, the commercial banks are provided with a first-loss guarantee or some kind of mechanism to minimize the risks from customers defaulting. c. Market Transformation Programs - In commercial programs, the Government can purchase a larger number of the appliances to help lower the costs, and then support distribution to residents. The programs can be run through the market channels – provision of coupons or rebates for purchase energy efficient appliances or through the standards and labels programs. 23 Energy Efficiency and Rooftop Solar PV Opportunities Figure 16. Delivery Mechanisms for Residential Energy Efficiency Delivery mechanism Description Key success factors Country examples Regulatory mechanisms to oblige utilities to implement EE measures in their customers’ premises. Proper incentives for utilities To meet these obligations, utilities may (i) directly implement (e.g., utility obligations) and Belgium, Canada, EE measures in residential buildings, (ii) engage savings UTILITY DSM measures to address conflicts Denmark, France, achieved by others2, or (iv) establish a (revolving) fund for EE PROGRAMS with utilities’ core energy sales Ireland, Italy, measure implementation. business (e.g., decoupling energy Netherlands, UK, USA Utility programs may include demand response programs which sales and profits). encourage end-users to make short-term changes in energy use in response to price signals (e.g., to reduce peak demand). Government or donor credit lines to commercial banks, or Technical assistance to help specialized lending windows, for on-lending to residential COMMERCIAL strengthen banks’ capacity to Poland, Lithuania, consumers. Schemes include direct loans to homeowners and FINANCING assess projects, standardized Thailand, Mexico, Serbia HOAs for building renovations, or credit schemes through project appraisal procedures. vendors or retailers for qualifying energy-efficient appliances. Constant and predictable Subsidized or preferential mortgages to promote energy Germany, USA, funding for green mortgages to GREEN MORTGAGES efficient building construction and retrofits based on predefined Australia, Netherlands, allow investors to make long- “green” measures. Mexico term plans. A public or private agency (e.g., development or commercial Credit guarantees require large Bulgaria, Czech Republic, CREDIT bank, insurance or guarantee company) provides guarantees enough project pipelines to Estonia, Hungary, Latvia, GUARANTEES that cover a portion of loan losses from defaults to encourage justify such schemes, proper Lithuania, Slovakia banks to lend for EE and defray perceived higher risks. assessment and pricing of risks. Created by national or state governments to provide Funds can provide other concessional loans or incentives for EE projects. services (e.g., audit templates, Bulgaria, Slovenia, EE FUNDS In the residential sector, EE funds (usually 20-30%) from guidebooks, online EE Armenia, Romania government budgets or special taxes. calculators). Bulk procurement and distribution: Purchase of a large quantity Measures to ensure that Vietnam, Uganda, of energy-efficient appliances by the utility or a government efficient appliances are available Rwanda, Ethiopia, agency to achieve price reductions, and distribution to in the market after the end of Bangladesh, Philippines customers. program. Market channel-based approaches: Utilize existing market Marketing and awareness- channels to distribute energy-efficient appliances using a MARKET building campaign to ensure Sri Lanka, India, Mexico combination of coupons, branding and promotion programs and TRANSFORMATION high consumer participation. rebates. Standards and labeling: Establish efficiency standards and/ Strong market monitoring, or labels to provide information to assist customer decision verification and enforcement Cuba, Australia, Canada, making. For lighting, many countries use phase-out policies, schemes to protect consumers UK, USA, EU which eliminate incandescent bulbs (IBs) from the market from non-complaint products. through legislation or regulation. Source: Energy Efficiency in the Residential Sector: Energy Efficiency Community of Practice Briefing Note/ World Bank Potable Water 24 Potable Water Potable Water EE Potential (25 - 30%) Egypt has very good drinking water coverage, with 99% at the national level, covering more than 83 million people. Over 12.7 million households are connected to drinking water networks through 146,000 km of water pipes. There are 2,500 water treatment plants in the country. In recent years, water connections were expanded to 22 new communities, covering 5 million people. The new communities have 10,000 km of water pipes, 7,000 km of sewage network, in addition to 29 potable water plants and 26 wastewater treatment facilities. Figure 17. Peer Comparison of Energy Density of Potable Water My City Non-Peer City Peer City Selected Better Cities Average 2.00 1.80 Energy Density of Potable Water Production [kWhe/m3] 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Ti ova nh Bo i ov ta iro ng k a ra i iro ng r Cu t -N a Te e ns v a Ho ina Br i si te il de nta t p ub Pur ky a p ac e oc d k op es i li te Ia Ph soa go w on as Ki Pe o gy ra Lu ne as t ils ai K tt ap oi an ta rn es Be Pris Br lg riz ,E Ja Cr Pl od m i a an m zi Be nj no -P Ga Ho Co uj Ba Ca ts Cl lo Bh o ne Ri ia m Ka 25 Energy Efficiency and Rooftop Solar PV Opportunities Similarly, 99% of Cairo residents are connected to drinking water and sanitation network, and the city requires 1.6 million m³ of potable water annually. The energy density of its potable water is 0.52 kWh/m³. This is 15% less than Rio de Janeiro, but twice as much as Bogota. Bogota is in a valley, and Rio de Janeiro is hilly; hence water has to be pumped to reach residents. At the same time, many of the existing water pumps in Cairo are oversized and require significant amount of energy to operate. The energy to produce water accounts for 33% of the total water operating cost, which is relatively high. Alexandria requires a little less energy to produce each unit of portable water. The energy density of potable water in Alexandria is 0.46 kWh/m3, which is less than peer cities such as Rio de Janeiro and Pristina, more than Beijing. Energy consumption to produce potable water accounts for 23% of the total operating cost for water production. The analysis also showed that there is a technical 37% potential energy savings in Cairo based on a comparison of “energy density of potable water production (kWhe/m3)” among cities in the databases (see Figure 15). Given that the database was narrowed to cities with substantial need for pumping (e.g., Sidney and Bogota were removed from the databases), the realizable potential savings is between 25% and 30%. Potable Water EE Measures TRACE 2.0 analysis shows that improving or replacing inefficient water pumps and motors would reduce energy consumption in the water sector. This measure targets improving or replacing water pumps and motors used during extraction, along water transmission mains, distribution pipes, sewage pumping mains or irrigation networks. Energy is usually lost when motors run at inappropriate speeds and pumps are not working at their duty points. This could occur due to changes in network flow or general wear and tear. Pumping efficiency can be improved by upgrading or replacing pump and/or motors to match duty requirements with peak efficiency, replacing single speed pumps with multistage and/or extending to variable speed, re-winding motors, relining the pumps, or employing off-peak pumping to even out and reduce daily energy demand. Adjustment, upgrading and/or replacement of the main elements of pumps and/or motors can improve overall operation of the system and make considerable energy savings. A suitably rated pump would be subject to less and tear, and could reduce the potential risk of damage to the associated pipeline and fittings. Off-peak pumping can help power companies to achieve EE at their main plant by leveling out the daily demand profile and offering preferential tariffs to end users. An operation and maintenance program for pumps and motors could help maintaining optimal energy performance on the long run. Implementation A feasibility study would be needed to evaluate the technical and financial viability of this solution. The investments to upgrade the pumping/motor infrastructure could be covered by the water company’s budget or tackled by other funding mechanisms such as using an ESCO mechanism. Since the national water company owns the water infrastructure, and the network is operated by the local supply companies, engaging an ESCO for the different parts of the value chain could might be economical. Additionally, experience and expertise can be obtained from partnering with different organizations, such as Alliance to Save Energy, in order to implement the measure. Street Lighting 26 Street Lighting Street Lighting EE Potential (40 - 60%) Cairo and Alexandria have substantial public lighting infrastructure. There are more than 250,000 lighting points in Cairo and 110,000 lighting points in Alexandria. While in Cairo all streets are lit, public lighting coverage in Alexandria is only 88%. Most of the lamps are high-pressure sodium (HPS) and CFLs. Public lighting failure due to power outage or technical issues related to operation and maintenance is 15% in both cities. With an energy consumption of 494 kWh per lighting point, Cairo is in the middle of the TRACE 2.0 database, performing comparable to other cities with similar HDI. Cairo requires less energy per lighting point than Bogota, Algiers or Rio de Janeiro, but 10% more than Lima and twice as much as Amman. Cairo is quite efficient when it comes to energy used per km of street lit (4,540 kWh/km). Figure 18. Peer benchmarking of street lighting energy consumption in Alexandria My City Non-Peer City Peer City Selected Better Cities Average 2,000.00 Electricity Consumed per Light Point [kWhe/point] 1,800.00 1,600.00 1,400.00 1,200.00 1,000.00 800.00 600.00 400.00 200.00 0.00 ty ep vo rk iro an pt to je bi bu ta ey rg lisi a ba ris na os ne lhi ah ku is an qa ca at m Ci ant aje Yo ne rev gy ron kop airo Ce ogo dn sbu Tbi Lim ba Pa isti Lag oro De dd Ba Tun m Zar lan ab laa n i r w a e E o S N y e A r b e m b R a zo az Sa Ne e J Y ia, T B S n n is P Ga Ne w J A sa S ue G d dr ha dd Ca r es Q io a n Jo A a R ex D Al 27 Energy Efficiency and Rooftop Solar PV Opportunities Alexandria requires twice as much electricity as Cairo to light one kilometer of streets, i.e., 10,591 kWh. The city is performing better than peers like Tbilisi or Bogota, but uses more energy than Pristina or Johannesburg. The energy consumption per lamp is also high, 785kWh/ year, nearly 50% more than in Lima or Bogota. The TRACE 2.0 assessment based on benchmarking with peer cities estimated that the technical energy savings potential in Alexandria is nearly 43%, which is slightly higher than 36% in Cairo. Street Lighting EE Measures Based on simple LED models, the realizable potential savings ranges from 40%to 60% depending on the mix of investments. The GoE has a program to replace a number of the existing lamps with more efficient 100 and 150W high-pressure sodium lamps. Some pilot projects are introducing LEDs. For example, as of April 2016, 3% of the lamps in Alexandria were LED, and only a few had been installed in Cairo. Each LED lamp installed could save approximately LE 37 per month. In addition to energy savings, LEDs can help reduce operation and maintenance costs, enhance visibility and safety, and reduce light pollution. LED lamps can become more efficient if supplemented by a timing program and a centralized lighting control program. Lighting Controls: Dimming and Centralized Management The street lighting sector in Cairo and Alexandria could further improve efficiency by introducing a centralized smart control system. Such program with a light point would further reduce electricity consumption by about 10% and maintenance related costs, but also provide higher operational life of luminaries. A smart control system would allow dimming, appropriate timing, and two-way communication for reading commands and sending key information to a central operational control center. Control systems can switch on/off at the appropriate time, adapt lighting levels at each light point depending on the activity, meter energy use per pole, and identify failures on street light networks. Besides reducing energy consumption, such systems could help diminishing costs related to maintenance by partially substituting crews driving the streets to identify light failures with an automatic failure identification mechanism, thus enabling remote real time control and monitoring. Smart controls systems can be compatible with HPS as well, by using a combination of ballasts and timers to dim street lights. Nightview of the Nile and central Cairo Source: shutterstock.com Transport 28 Transport Transport EE Potential (10 - 20%) According to the TRACE 2.0 analysis, Cairo has the second largest share of public transport among peer cities with similar HDI, as more people use public transport system than in cities in the region such as Tunis or Amman. Although Cairo has 70 km of metro network and is also home to more than 25% of the bus fleet in the country, the existing rolling stock cannot adequately cover the commuting needs, Hence, in addition to buses operated by the Cairo Transport Authority and private operators that have legal agreements with the Governorate, there are a number of private companies providing transportation services without contracts but tacitly accepted by local authorities. Public transport in both Cairo and Alexandria consumes 0.06 MJ per passenger-kilometer. Such an apparent energy efficient performance is hiding challenges being faced by system which include: (a) inadequate rolling stock; (b) relatively low quality; and (c) unreliable services to the city residents. The technical energy savings potential for public transport in Cairo is 22%, a similar figure with Alexandria. Cairo, Ramses Square, the terminus of intercity buses Source: eFesenko / Shutterstock.com 29 Energy Efficiency and Rooftop Solar PV Opportunities Figure 19. Peer benchmarking of public transport energy consumption in Cairo My City Non-Peer City Peer City Selected Better Cities Average 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00 Baku Amman Quezon City Paris Tallinn Sofia Tbilisi Toronto Hong Kong Casablanca Cebu Warsaw Sydney Singapore Dakar Mexico City Bogota Jakarta Belo Horizonte Tehran Guangzhou Santiago Johannesburg Cape Town Bangkok Sao Paulo Pristina Budapest Rio de Janeiro Belgrade Gaziantep Seoul Skopje Banja Luka Kuala Lumpur Public Transport Energy Consumption per Passenger km Sarajevo Tokyo [Mj/passenger km] Cluj-Napoca Shangai Beijing Mumbai Cairo Transport 30 Private transport in Cairo uses 1 MJ per passenger-kilometer, which is on the low end of peer cities in the analysis. However, approximately 37% of the total private cars in Egypt are registered in Cairo and Alexandria. The upsurge of private vehicles has led to traffic congestion, which reduces fuel efficiency of transportation in both cities. Figure 20. Peer benchmarking of public transport energy consumption in Cairo My City Non-Peer City Peer City Selected Better Cities Average 0.00 1.00 2.00 3.00 4.00 5.00 6.00 Toronto Amman Baku Cebu Tehran New York Jakarta Bogota Tibilisi Paris Sydney Rio de Janeiro Tokyo Singapore Seoul Zarqa Johannesburg Hong Kong Skopje Shanghai Mumbai Pristina Timisoara Kuala Lumpur Banja Luka Sarajevo Quezon City Beijing Gaziantep Private Vehicles Energy Use per Passenger km Belo Horizonte [Mj/passenger km] Cairo Mexico City Cuttak Bhubaneswar Ho Chi Minh 31 Energy Efficiency and Rooftop Solar PV Opportunities Transport EE Measures The rapid assessment using TRACE 2.0, indicates that besides the development of adequate infrastructure and purchase of energy efficient buses, public transport sector can be improved and upgraded by implementing some soft interventions. However, a more detailed analysis is required to assess costs and opportunities in order to address the issues with regard to fuel efficiency and congestion. E-ticketing Introducing an electronic ticket that could be used for more trips and means of transportation within a given amount of time would make public transport more appealing to the public, but also help improve revenue collections and transfers. E-ticketing can help in collecting public transport system data, and at the same time provide support for more accurate information for decision making. Non-motorized Transport Network A non-motorized transport network with zero fuel consumption, such as bike lanes and pedestrian corridors, can help reduce energy consumption in the transport sector. There is limited non-motorized transport network in both Cairo, and Alexandria. Development of dedicated pedestrian networks, and bike infrastructure with a bike sharing program would help the city residents rely less on their private vehicles. Bike sharing programs have proven to be very successful in many cities such as Paris, Beijing, Bogota, and Washington, D.C. For example, Bogota has the largest bike network in the world with around 350 km of dedicated bike lanes, which are used during week days by more than half million people for their daily commutes. Development of Parking Facilities and Introducing Parking Restraint Measures Building some genuine parking facilities allowing people to park their cars but also help the city to generate additional revenues. At the same time, development of park and ride facilities (wherever the location permits) would enable people to leave their cars and take public transport to their workplace. The park and ride structures tackle three things, namely promote multimodality, link public transport to parking, and discourage people from using their cars for their daily commutes. Also, they can help reduce the vehicle-miles of travel and related GHGs by decreasing the distance traveled daily by vehicles. 6th of October Bridge in Cairo Source: Baloncici / Shutterstock.com Annex 1: Key assumptions used in the models 32 Annex 1: Key Assumptions Used in the Models (1) Solar Rooftop Model • Available Roof space: Average public building is 4 stories high both in Cairo and Alexandria resulting in technical roof space of 4.86 million m2 and 2.22 million m2 respectively. Given the use of roofs for other purposes, we assume 50% of the roof area is potentially available for rooftop solar PV installation resulting in 2.4 million m2 in Cairo and 1.1 million m2 in Alexandria. • For commercial buildings, the average public building is assumed to be 7 stories high in both Cairo and Alexandria resulting in technical roof space of 543,922 m2 and 434,294 m2 respectively. Similarly, we assume 50% of the roof area is potentially available for rooftop solar PV installation resulting 271,961 m2 in Cairo and 217,147 m2 in Alexandria of the potential rooftop space available for solar rooftop installation. • FIT is US$ 0.12/kWh • Unit cost of rooftop solar array is US$ 1/Wdc • Technical production is 4 kW=25 m2 • RE job creation – 800 jobs / 50 MW of solar PV installation • EE job creation - 2400 jobs / 50 MWeq saving (2) Municipal Offices Audit & Retrofit Program Lighting Rating Guidlines 25 W/m2 WORST (Incandescent, old fluorescent w/ mag ballast, pre 1990 lighting) 18 W/m2 BAD (T12, direct illumin, pre 2000) 14 W/m2 GOOD (T8, electronic ballast, indirect, post 2000) 7 W/m2 Best (LED lighting) Cooling Rating Guidlines 25 W/m2 WORST (SEER <20, COP <2.5, pre 1990) 18 W/m2 BAD (SEER <25, COP <3.0, pre 1990) 14 W/m2 GOOD (SEER >25, COP <3.0, post 1990) 7 W/m2 Best (SEER >25, COP <2.5, post 1990) (3) LED Street Lighting Calculation • Cost per light point = $150 33 Energy Efficiency and Rooftop Solar PV Opportunities Annex 2: World Bank-GEF Armenia Energy Efficiency Project Background. The energy sector of Armenia has achieved significant results through reforms and restructuring. However, the sector still faces a number of challenges, including (i) an emerging power supply gap; (b) threatened energy security; and (c) increasingly unaffordable energy tariffs. Recognizing this, the Armenian government established the Renewable Resources and Energy Efficiency Fund (R2E2 Fund) in 2005 as a non-profit organization to promote the development of RE and EE markets in Armenia and facilitate investments in these sectors. The R2E2 Fund is overseen by a Board of Trustees (BOT), comprising of representatives of government agencies, NGOs and the private sector, and chaired by the Minister of Energy and Natural Resources. The US$ 10.7 million WB-GEF Energy Efficiency Project was designed to support EE improvements in public buildings in Armenia. Under the project, the R2E2 Fund provides turn-key services (energy audit, procurement, detailed design, financ- ing, construction and monitoring) for EE upgrades in eligible15 public buildings. The project was designed to develop, test and disseminate replicable and sustainable models for EE service provision through the use of a new instrument, energy service agreements, or ESAs (Box 1). Box 1. Energy Service Agreements Case Study Waste Infrastructure Planning Under an ESA, the financier (the R2E2 Fund, in this case) offers a full package of services to identify, finance, procure, implement and monitor EE projects for clients. The client is only asked to pay what it is currently paying for energy, i.e., its baseline energy costs, from which the financier uses to make the new (lower) energy payments and recover its investment cost and associated fees until the contract period ends. The figure on the right illustrates the basic idea EE retrofit of a client’s cash flows under the ESA, with payments equal to their baseline energy bill. Baseline payments to escrow accounts for 5-10 years This allows them to maintain a constant cash flow while retaining their energy cost savings for the duration of the ESA. In some cases, the Baseline Investment contract duration is fixed; in other cases, the energy repayment contract is terminated after an agreed level of costs payment has been made, which encourages the Agency cash flow client to save more energy. Reduced New energy For public clients, ESAs are generally not viewed energy bill bill as debt, but rather long-term service contracts, thereby allowing financing of central Govern- ment entities that are typically not allowed to borrow, and municipalities that may have already reached their debt limits or otherwise have borrowing restrictions. This provides a dual advantage to the client of being relatively Baseline During Contract After Contract simple to implement with very little risk. 15 Client eligibility criteria include: (a) confirmation of public ownership of facility; (b) structural soundness of the facility (absence of major structural damages that may jeopardize integral stability of the building); (c) absence of plans for closure, downsizing or privatization of the facility; and (d) comfort level of more than 50%. Subproject criteria involve: (i) at least 20% energy savings; (ii) simple payment period less than 10 years; (iii) investment size should be US$ 50,000-500,000, and (iv) the borrowers should be in good financial standing. Annex 2 - World Bank-GEF Armenia Energy Efficiency Project 34 Objective and indicators. The project development objective is to reduce energy consumption of social and other public facilities through the removal of barriers to the implementation of EE investments in the public sector. To measure the progress toward achieving the objectives, key outcome indicators should include: (a) energy savings (in kWh) in the retrofit- ted social and other public facilities; and (b) CO2 emission reductions (tCO2) in retrofitted social and other public facilities through EE investments. Institutional Arrangements. The R2E2 Fund is responsible for all aspects of project implementation - conducting market- ing campaigns to attract clients and develop its subproject pipeline, screening of clients and facilities to determine eligibility, preparing walk through audit reports and tender documents, financing the renovation works, evaluation of bids and award- ing of contracts, construction supervision and monitoring of equipment performance and energy savings for one-year. Innovative Procurement Scheme. Unlike traditional procurement, which is based on lowest cost, the R2E2 Fund uses an output-based, performance-based contract. Under this scheme, the Fund conducts a walk-through energy audit to identify typical EE measures and estimate energy savings. A modified works (design and build) tender is issued (following World Bank National Competitive Bidding procedures) with a required minimum energy savings level without requiring specific EE measures or technologies. Bids must include preliminary designs to show their proposed measures, technologies, costs and expected energy savings. The Fund evaluates bids and awards the contract to the bidder with a technically viable solution and the highest net present value or NPV (combining investment, energy cost savings and equipment lifetimes). Payments are then made based on both milestones and performance: 10% advance payment, 10% after approved final design, 50% approved after delivery of project per design, and the final 20% after a commissioning test to verify the actual energy sav- ings (against the promised savings in the contractor bid), and 10% after a 12-month defects and liability period (to allow for performance monitoring over one full heating season). Repayments. Under the ESA, the R2E2 Fund recovers its full investment plus fees (currently about 2.5% per year based on the outstanding balance) from the clients’ energy cost savings. This ensures a sustainable model while allowing funds to recycle to cover more buildings and generate additional energy savings. To date, repayment stands at 100%. Currently, the fees are sufficient to fully recover the Fund’s financing costs and administrative expenses. However, these fees are based on a previous IDA credit; future financing which will be more expensive will necessitate a new fee structure. Lessons Learned. Because the project introduced several innovations in EE financing and implementation in Armenia, a number of lessons have emerged. On the positive side: (i) the demand-based approach assures commitment of client to the project; (ii) repayments increases ownership, accountability and quality of energy management of the client; (iii) a strong, dedicated institution (R2E2 Fund) which has a clear mandate, well trained and motivated staff with adequate compensa- tion, and a strong marketing plan was critical to the project’s success; (iv) strong marketing campaigns are critical to raise awareness and understanding of EE and to build the subproject pipeline; (v) EE financing through a revolving fund structure is possible on a sustainable basis, even in social institutions that have budgetary constraints and are fully budget-dependent; (vi) procurement based on highest NPV encourage innovation and new technologies to be deployed; and (vii) the introduction of performance based payments help ensure quality and accountability of contractors. However, areas for improvement were also identified. First, the Fund’s high rejection rate (209/326, or 64%) show that many facilities did not meet the eligibility criteria, mainly due to low comfort levels or structural deficiencies, which also resulted in higher administrative costs in the early years. Unless some budgetary funds or grants are offered, energy cost savings alone will be insufficient to cover investments in these buildings. Second, while the procurement process was ultimately effective, substantial time and training was required to build capacity of construction firms to effectively participate in the project (determining NPVs, finding design company partners, mobilizing working capital). Third, follow-on financing should have been secured before the World Bank project ended, to ensure no disruption in the Fund’s operations and continued pipeline development. Uncertainties over financing sources and costs, potential new donor requirements, etc. may result in minor declines in new business development. 35 Energy Efficiency and Rooftop Solar PV Opportunities Results obtained. Overall, the project has been rated as Highly Satisfactory given its ability to successfully introduce new approaches to EE financing in Armenia. To date, 63 ESAs totaling US$ 9.89 million have been signed by the Fund, of which 47 (representing 98 facilities) are completed and commissioned and 16 are under procurement or construction. In 2016, the R2E2 Fund initiated 10 new subprojects (US$ 2.11 million). As a result, the Fund has more than doubled the project’s key indicator targets, reaching 520 million kWh and 137,569 tons of CO2 to date (versus the project targets of 215 million kWh and 50,549 tons CO2). The completed and commissioned subprojects show impressive results. Energy savings have averaged almost 51% and pay- back periods ranging from 2.6 to 8.8 years. The investment costs required to achieve these savings has been about half of World Bank projects in neighboring countries—at only about US$ 32.6/m2—due in large part to the NPV-based procure- ment scheme. Energy savings have been achieved at a cost of only 1.93 US¢/kW, showing that EE is the cheapest resource Armenia has. Due to the relatively low grid emission factor and baseline heating fuel (natural gas), the cost per ton of CO2 emissions reduction is somewhat higher than other projects (US$ 71.9/ton CO2). Social and market impacts. In addition to energy savings, the procurement scheme encouraged the development of a local ESCO industry and introduced newer technologies, such as LEDs, condensing boilers and heat pumps. Many beneficiaries have reported substantial improvements in their building conditions and in operations and maintenance savings, which they have used to invest in extending services and investing in additional internal repairs and renovations. And, initial feedback shows strong employment benefits as well; several contractors indicated hiring of 15-20 additional temporary workers per building; or some 3,000-4,000 temporary workers for all 200 buildings. Fund sustainability. Since there are some 5,800 public buildings in Armenia and only about 326 have applied to date, signif- icant market potential remains. The Fund is now finalizing a new Operations Manual which will allow it to continue singing ESAs in the years ahead. In terms of the Fund’s overall finances, projections show the Fund can be sustainable over the next 3-5 years by investing US$ 1.3-1.5 million per year; investments can be increased with access to additional capital.