Solar Energy Cost Efficiency: A Simulated Case Study in the Egyptian Context

In Egypt, electric energy coming from fossil fuels represents around 85% of total electricity requirements. However, the supply of energy in the Arab world is expected to run dry in the coming 30-50 years. With the increase in energy needs, rise in fossil fuel prices, and the swelling of green house gas emissions, the use of renewable and more environment-friendly energy sources to supply power is gaining increased attention. Being a country on the Sunbelt, Egypt has great potential in utilizing solar energy to generate energy products and electricity. However, solar energy is still abandoned in Egypt due to its high costs. This paper first aims to examine the relative significance of several accounting and economic related variables to reduce solar energy costs. To be more specific, the paper seeks to examine the effect of using accounting and finance-based factors, related to depreciation schemes and financing options, to decrease solar energy costs. These factors are considered as a substitute for direct subsidies which are difficult to implement because of the narrow financial scope of the Egyptian government. The results of the study provide a number of policy implications that can be applied to make solar energy closer to cost-competitiveness and contribute to solve the energy problem in Egypt.