New Net Metering Rules in Egypt – by Riad & Riad Law Firm

On 28 April 2020, the Egyptian Electricity Utility and Consumer Protection regulatory Agency ("EgyptERA"), as the regulator of the electricity market, issued new rules for net metering.

Net Metering is a system allowing customers to establish solar plants within their premises to meet all or part of their needs from electricity and feed any surplus into the national grid with the option to claim it back in the following months when needed.

Net metering technically requires the connection of the solar plant to the grid and the installation of a bi-directional meter on the plant. This meter will record and offset between (i) the electricity supplied by the distribution company to the consumer from one side and (i) the excess electricity generated from the solar plant on the other side.

EgyptERA issued Decree no. 2 of 2020 (the “Decree”) setting out the requirements for net metering. This Decree is effective as of 20 May 2020 and it replaced previous decrees announced by EgyptERA in relation to net metering to the extent such decrees contradict with the provisions of the new Decree.

In this note, we will discuss the following:

Eligibility to Net Meter
- A. Eligible plants
- B. Eligible customers
Available Capacities
Technical Requirements
Billing for Net Metering

Eligibility to Net Meter

A. Eligible Plants:

In order to be eligible to net meter, the solar plant has to meet the following requirements:

1. The solar plant must be installed within the boundaries of the customer's premises

This requirement means that the plant can either be installed on rooftops or to be ground-mounted only within the boundaries of the facility or the premises. Solar plant installed on adjacent land to the customer's premises cannot currently net meter.

2. The capacity of the solar plant shall not exceed the maximum load of the owner during the year preceding the plant' commercial operation

This requirement aims to avoid abuses of the net metering system. Abuses can happen if a customer installs a plant which covers 100% of its electricity needs for the purpose of feeding huge surplus to the grid without buying any electricity from the distribution company. Such abuse will overload the network of the distribution companies without it receiving any financial interest.

3. The maximum capacity for plants owned by one customer should not exceed 25 MW in aggregate or 20 MW per project

The total capacity of all solar plants under the net metering scheme which are connected to the distribution grids and owned by one consumer shall not exceed 25 MW in aggregate, with maximum capacity of 20 MW per project.

B. Eligible Customers:

An eligible customer for net metering should not be licensed to distribute electricity to the same project. For instance, a distribution company which distributes electricity to a residential compound cannot install a solar plant to benefit from the net metering's system.

Available Capacities:

The aggregate capacity of installing solar plants under the net metering scheme across the country shall not exceed 300 MW.

At the issuance date of the Decree, there were only 75 MW already licensed by EgyptERA. The remaining 225 MW which are available under the net metering system, are divided into the following:

125 MW for capacity less or equal to 500 KW.
100 MW for capacity more than 500 KW and up to 20 MW.

Technical Requirements:

The total installed capacity for solar plants connected to the network of one distribution company under the net metering scheme shall not exceed 1.5% from the maximum load of such company registered on the meter during the fiscal year preceding to the contract.

In case the solar plant is connected to the medium voltage network, an additional technical study is required to be prepared, at the cost of the customer, to assess the impact of such interconnection on the grid.

Billing for Net Metering:

Payment for excess generated capacity shall be made on annual basis, after setting-off the consumer's consumption at the end of June of each year. Payment shall be calculated according to the recent purchase price (piasters/KWh) contracted between the Egyptian Electricity Transmission Company (EETC) and a solar energy's producer.

EgyptERA shall determine a balancing charge to be paid by the customer as a cost for combining renewable energy into the grid according to its voltage. Such charge shall be reviewed and amended by EgyptERA on regular basis. However, it is imported to mention that such charge shall not be considered as a wheeling charge, it is rather a charge relating to the production of energy.

RIAD & RIAD LAW FIRM

Riad & Riad (R&R) is a law firm that serves the full spectrum of the business legal needs in Egypt. R&R provides services on a wide variety of areas with specific focus on corporate law, energy law, oil & gas, merger & acquisition, project finance, equity project, banking, construction law, labor & employment, taxes, and litigation and arbitration.

Our energy and project finance team has extensive experience in both local and cross-border finance transactions. We act on behalf of developers, borrowers and financiers in various industrial sectors including renewable energy and infrastructure projects.

If you have any questions regarding this paper, feel free to contact:

Dr. Fatma Salah
Partner
Tel: +202 37488521
Email: f.salah@riad-riad.com
http://www.riad-riad.com/en