Egypt Bets on Solar Power to Boost Aluminum Industry Competitiveness

Egypt has signed preliminary agreements on October 26, 2026, for the Dandara Project, a $650 million investment designed to supply renewable electricity to one of the country’s leading industrial players. Developed by Norwegian energy company Scatec with the support of three international banks, the facility is set to reach a capacity of 1,000 MW of solar power, complemented by 200 MWh of battery storage.

Strategic Location and Dual Objectives

The project will be located in Nagaa Hammadi, in the Qena Governorate in southern Egypt. It is expected to cover approximately one-third of the electricity needs of EgyptAlum, the state-owned aluminum producer.

The initiative serves a dual purpose:

• Reducing the carbon footprint of aluminum production.
• Preserving export competitiveness in markets where environmental requirements are increasingly stringent.

Financial Structure and Stakeholders

The financing package involves the African Development Bank (AfDB), the European Investment Bank (EIB), and the European Bank for Reconstruction and Development (EBRD), alongside Scatec. The National Bank of Egypt is also set to take an equity stake in the project company.

The signed agreements cover:

• Preliminary financing conditions.
• Grid connection to the national electricity network.
• The bank’s equity participation.

These agreements represent a crucial step toward finalizing the financial structuring and constructing the facility. It is important to note that they do not signify that the full amount of funds has already been disbursed.

Two-Phase Industrial Investment

The Dandara project will be constructed in two distinct phases:

Phase 1

• Capacity: 500 MW solar plant coupled with 100 MWh of battery storage.
• Cost: Exceeds $290 million.
• Financing: The AfDB has approved a package of up to $66 million, comprising:
  • $46 million from its ordinary resources.
  • $20 million from the Clean Technology Fund, an international mechanism for financing low-carbon technologies.
• Timeline: Commissioning is expected in early 2028.

According to AfDB estimates, this first phase should generate approximately 1,373 GWh of electricity annually. Supply will be governed by a 25-year Power Purchase Agreement (PPA) with EgyptAlum, supported by an agreement allowing electricity transit through the national grid. The battery storage system is designed to release energy during peak demand hours when solar generation declines.

Environmental and Commercial Implications

The stakes extend beyond mere electricity generation. Aluminum is an energy-intensive industry, meaning the cost and origin of electricity directly influence both operating expenses and the carbon footprint of the metal produced. By sourcing part of its energy from solar, EgyptAlum can significantly reduce the carbon intensity of its production.

The EBRD estimates that the project could avoid up to 686,000 tonnes of CO₂ emissions per year once fully operational.

This environmental dimension is particularly critical for exporters to the European Union. Since January 2026, the EU’s Carbon Border Adjustment Mechanism (CBAM) has entered its definitive phase. It imposes obligations related to embedded emissions in several imported products, including aluminum. Consequently, the ability to document and reduce emissions has become a commercial imperative, in addition to being a climate goal.

Solar Power Gains Ground in Egypt’s Energy Strategy

The Dandara project is part of a broader acceleration in renewable energy investments in Egypt. The government now targets a 45% share of renewable energy in electricity production by 2028, up from a previous target of 42% by 2030. This revision reflects a commitment to:

• Diversify energy supply sources.
• Limit dependence on fossil fuels.
• Reduce pressure on foreign exchange reserves linked to energy imports.

Other Major Scatec Projects in Egypt

Scatec is also developing other large-scale projects in the region:

1. Energy Valley:

   • In January 2026, Scatec announced a PPA with the Egyptian Electricity Transmission Company (EETC) for 1.95 GW of solar capacity and 3.9 GWh of battery storage.
   • Unlike Dandara, this project is designed to feed electricity directly into the national grid and includes standalone storage facilities.

2. Obelisk:

   • A 1.1 GW solar plant with 200 MWh of battery storage, also located in Nagaa Hammadi.
   • Electricity will be sold to EETC under a 25-year contract.

The concentration of these projects in the same region underscores the potential role of southern Egypt as a hub for solar capacity development and electricity storage.