Cross-border power trade booms in energy transition

From the newsletter

Egypt has approved a power deal with Emirati firm K&K to export electricity to Italy via an undersea cable, paving the way for feasibility studies. This is their second such agreement after one with Saudi Arabia. It adds to a growing list of cross-border power agreements in Africa, both intra-continental and extra-continental.

• At least five multi-billion-dollar projects are currently being planned to export over 15,000 MW of solar and wind power energy from sunny North Africa to chilly Europe.

• Electricity exports are becoming a major revenue source for Egypt. In 2023, its electricity exports totalled $119 million, ranking 89th in product export values, with Libya ($92.2 million) and Jordan ($26.5 million) as the primary destinations. The country imported no electricity that year.

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• The Egyptian Electricity Transmission Company (EETC) will spearhead this initiative, covering the costs associated with developing and strengthening the national electricity network. Egypt has been actively brokering electricity export agreements and is currently negotiating with other European countries such as Greece and Belgium, although significant progress has yet to be made.

• Egypt's power agreement with Saudi Arabia is materialising, with construction of the $1.8 billion electricity interconnection project nearing completion. Operations are scheduled to commence in July 2025, and the exchange of up to 3,000 MW of power, generated from Egypt's Red Sea wind and solar projects, is expected by early 2026. Egypt is also exploring hydrogen exports to Europe, with several projects earmarked for construction.

• The proximity of North African countries to Europe and the Middle East has presented them with an opportunity to fully explore their renewable energy potential and compensate for gas supply reductions from Russia. Giga-scale projects are in the pipeline to meet export market demands. Morocco, for instance, is developing a 10,500 MW project utilising solar and wind power, which will incorporate 5,000 MW of battery storage for export to the United Kingdom. While the project has secured some funding, progress remains slow.

• Its neighbour, Tunisia, is also exploring electricity exports to Italy. It has signed electricity export agreements, including one for green hydrogen, and has received funding to finance a submarine cable for exporting green electricity to the EU.

• Elsewhere in other regions of Africa, cross-border electricity trade is expanding and is being facilitated through regional power pools. Kenya imports approximately 200 MW from Ethiopia and also some power from Uganda. The Kenya-Ethiopia interconnector line was extended to Tanzania this year, and the country now intends to import electricity from Ethiopia. The electricity market is poised for increased trading, with the East African Power Pool market set to become operational in the first half of this year.

• Zambia’s energy challenges have forced it to source power both locally and across borders. It has four power deals in place with Tanzania, Mozambique, Botswana, and Angola. The country secured $292 million in funding from the World Bank for the Tanzania interconnector project and has subsequently issued a construction bid.

• Morocco has also struck a deal with Mauritania for electricity exports. Several countries rely on electricity imports to ensure a consistent power supply to meet their baseload demand. Firm renewable energy technologies, such as hydropower and geothermal, are particularly helpful in achieving this. This has even reignited demand for hydropower projects, with $900 million invested in supporting the sector since January.

Our take

• North African countries can capitalise on renewables for their electricity export ambitions. Europe's energy demands and gas supply cuts from Russia present a significant opportunity to be filled with renewable energy sources. The expansive wind coastlines and sunny deserts can be harnessed for both power and revenue generation.

• However, these projects will be very costly for governments to undertake within the required short timelines. Private sector involvement is the solution, but governments need to guarantee development to address private sector concerns.

• The increased cross-border electricity trade is likely to drive down electricity costs. Countries can invest in mega-projects and benefit from economies of scale. Additionally, with the declining costs of panels and battery storage, countries reliant on fossil fuels will have no option but to switch to renewables, and the most viable option could be to source this power from neighbouring countries.