1

Availability and Feasibility of Demand Side

Management Projects in Egypt

Mohamed Gaber Ahmed Mohamed Atef Amr El Zawawi Mohammed Salah

Electrical Construction Engineer Electrical Maintenance Engineer Electrical Engineering Dept. Mathematics and Physics Dept.
PETROJET Company Egyptian Steel Company Faculty of Engineering Faculty of Engineering
Northern Branch, Egypt Alexandria Plant, Egypt University of Alexandria, Egypt University of Alexandria, Egypt
E-mail: mohamed.g.zidan@gmail.com E-mail: ahmed.atef8@yahoo.com E-mail: amr.elzawawi@yahoo.com E-mail: m.salah@mena.vt.edu

Abstract--Demand Side Management (DSM) results in energy

consumption reduction accompanied by lower cost according to A. Classification of DSM Programs
the feasibility study for each project. In Egypt, DSM projects are There are three main different programs of DSM. They
scarce due to lack of good studies proving their underlining have been discussed in [3] and can be classified as shown in
profitability. This paper studies the major types of DSM Fig.1.
programs and their availability to be executed in Egypt. Tips to
measure feasibility for these projects are given using the Net
Present Value (NPV), Internal Rate of Return (IRR), DSM
Profitability Index (PI), Payback Period (PP) and Discounted
Payback Period(DPP). Different factors affecting the projects to
study like the inflation factor and the discount rate are studied. Load Growth and
Energy Reduction
This paper also investigates a new sustainable way for natural Program
Load Management Conservation
illumination called the sun tunnel. This method is presented with Program
its different types: rigid and flexible as a case study
Tariff Incentives and
Index Terms--Day Light, Demand Side Management, Energy Load Leveling Load Control Penalties
Efficiency, Sun tunnel, Sustainable Lighting

Peak Clipping Time of Use Rates

I. INTRODUCTION
Energy shortage and increasing energy price in Egypt force
many researchers and companies to reduce energy
Power Factor
consumption as well as studying new ways for sustainable Valley Filling
Penalties
energy generation from renewable energy by users, although
energy cost increasing is a main hurdle which motivates to
find new ways to reduce energy consumption. This paper may Load Shifting Real Time Pricing
serve as a reference for studying any project to take a decision
about its execution. It also includes a case study for installing
a sun tunnel. Fig.1. Classification of DSM Programs

1. Energy Reduction Programs (Energy Efficiency):

II. DSM
Energy reduction programs are considered as cost negative
DSM has considerable potential to reduce power system due to energy saving. They provide a large number of energy
generation, transmission and distribution costs. However, the saving tips in all sectors. This can be implemented by more
integration of DSM into existing restructured electricity efficient processes, buildings and equipment. In Egypt, it can
markets is not straightforward. DSM has been receiving be extended to lighting, motors and boilers.
increasing attention, particularly with the widespread of
advanced metering systems, like smart meters, which facilitate 2. Load Management
more detailed monitoring and control of customer loads. It aims to change the load pattern and encourage less
The main goals of DSM are: peak clipping, valley filling, demand at peak times and peak rates and this can be done by
load shifting, strategic load growth and strategic conservation three different ways:
[1].Distributed generation and energy storage can also be  Load Leveling
classified as DSM [2]. Improved generation without increasing the reserve
capacity. This is done by peak clipping, valley filling and load
shifting using thermal energy storage for water, space heating
and reducing the peak demand.
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 Load control [4] IV. ECONOMIC ANALYSIS

Direct control of particular loads such as air conditioning, Economic study is the most important part in any project
hot water systems and swimming pool pumps remotely by the related to DSM. Most of these projects need feasibility studies
utility. In this case, the utility offers special low kWh prices to be executed. The following section will describe this.
for customer and this method is not available in Egypt.
 Net Present Value (NPV) [4]
 Tariff Incentives and Penalties The method used to perform the economic analysis is NPV
There are three different programs regarding tariff since it is commonly used to measure the viability of
incentives and penalties: engineering projects. NPV is defined as the difference of all
o Time of use rates: Utilities have different charges cash inflows and outflows taking into consideration the time
for power use during the day to reduce peaks. This value of money. Inflows refer to revenues and outflows refer
method is not used in Egypt. to capital cost as well as Operation and Maintenance (O&M)
o Power factor penalties: A penalty is applied in costs. The NPV can be calculated using relation (1):
Egypt for any given factor less than 0.9 inductive
for industrial loads.
o Real time pricing: according to utilities loads. It (1)
may be continuous or by the hour pricing. This
method is not used in Egypt. Where,
Bt = Benefits at the end of each year of the project
3. Load Growth and Energy Conservation Ct = Cost for each year of the project
n = Number of years
 Load growth
i = Discount rate
By improving the customer productivity, this increases the
market share of the utility and imposes its ability to fill valleys
and shave peaks. This is done in Egypt by distributed  Profitability Index (PI)
generation using renewable energy projects. PI is actually a modification of the NPV method. While
NPV method gives an absolute measure for project; the
 Conservation programs
profitability index gives a relative ratio for it. The project that
This result from utility-stimulated programs directed to
has a PI above 1 should be accepted. PI as discussed in [6] is
customers. These programs are used in Egypt.
calculated by comparing the NPV with the initial investment
as shown in (2).
𝑁𝑃𝑉
III. ENERGY SAVING TIPS PI = (2)
𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
Declaring energy saving tips is required by users to be
award with different projects for different loads as following:  Payback Period
1-Industial and commercial sector: Payback period is a procedure used to calculate the period
Energy saving tips for Boilers, that are most commonly of time needed to make up for the initial expenditure by
used in industry can be found in [3]. Also tips to avoid leaks in discounting future cash flow. The payback period is calculated
steam systems is studied in [3]. Lighting is considered as one when the inflows equal the outflows. it can be calculated using
of the most important ways to reduce energy consumption. formula (3):
|𝐶𝐶𝐹 |
using LED instead of fluorescent lamps and using interactive Payback Period = (T-1) + 𝑇−1 (3)
𝐶𝐹𝑇
lighting scenarios are found in [5]. High efficiency motors Where,
and motors drives are used in most of factories to save energy. T is the year when the cumulative cash flow begins turning
Compressed air system saving tips in [3] are very important, zero or positive
because in an average facility, 70% of the generated CCFT-1 is the cumulative cash flow at the year T-1
compressed air is used in air blow applications, 10% for CFT is the cash flow of the year T
actuation with the remaining 20% are lost through leakage.
Actions must be taken to solve leakage problems and to adapt  Discounted Payback Period (DIPP)
pressure for minimum requirement. For the devices which DIPP, as reviewed in [7], is a procedure used to calculate
need higher pressure, pressure booster can be used. the period of time needed to make up for the initial
expenditure by discounting future cash flow and also taking in
2-Household consideration the time value of money (discount rate). The
There are many practices for houses for energy saving like discounted payback period is calculated when the inflows
sealing, insulation, hot water cylinder, washing machines, equal the outflows. DIPP can be calculated using formula (4):
heaters, and lighting, energy saving tips are applied [3]. The |𝑁𝐶 |
most applicable module is saving energy using lighting DIPP = (T-1) + 𝑇−1 (4)
𝐷𝐶𝐹𝑇
programs by changing lamps, using intelligent lighting Where,
systems and using natural lighting like sun tunnel if T is the year when the cumulative NPV of cash flow begins
applicable. turning zero or positive
NCT-1 is the NPV of the cash flow at the year T-1
DCFT is the discounted cash flow of the year T
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Our study is for a room with dimensions 2.5m width x 6m

 Internal Rate of Return (IRR) length x 2.8m height to maintain an approximate illuminance
IRR as defined in [8] is the discount rate at which the NPV of 500 Lux. Room dimensions and the required illuminance
equals zero. If the IRR is above the planning discount rate that data were inserted in DIALux program. Using luminaire type:
means, that the project is economically viable. When Philips noted as "Finess TCS198 2xTL5-14W/840 HF C6",
comparing two or more mutually exclusive project. The the distribution of the required luminaires is shown in Fig.4.
project that has the highest value of IRR should be accepted.
To calculate IRR, relation (1) is solved for i , such that
NPV = 0.

V. SUN TUNNEL
Sun Tunnel brings natural light into even the darkest and
most isolated spaces through a specially designed high
reflective tunnel that passes from roof to ceiling, it is a better
solution for any place has working hours during day time
There are two types of sun tunnel.
Flexible type, as shown in Fig.2 [9], is more suitable for
shorter distances, cheaper to purchase, easier to install and Fig.4. Luminaire Distribution Using DIALux
allowed negotiating around obstructions in the roof space. Due
to the build of the flexible tube. Light will reflect less in
a flexible sun tunnel, effectively directing the light away from
There are different parameters that need to be taken into
its required destination, resulting in less light reaching the
consideration when performing this kind of analysis.
required room.
Rigid type, as shown in Fig.3 [9], gives a better light
transmittance than the flexible sun tunnel. The less the light A. Project life
bounces off the internal surface of the tube, the more natural The lifetime of project will be 20 years.
reaches the required room.
B. Project costs
The cost of the project for 8 TL5 luminaires that includes
luminaires cost, electrical cables and switches, 5 times
lamps replacement and maintenance cost for 20 years and
equal 150$
Sun tunnel type is studied in [10], and the results for the
room data is 2 X Flexible sun tunnel TWF, 14" diameter
and its cost as given by [11]was 198.41$

C. Inflation
Inflation is the annual rate of change in prices that reduces
the purchasing power of the customers. O&M costs are
affected directly by this parameter; therefore, it needs to
Fig.2. Flexible sun tunnel be considered in this study. Inflation is arbitrarily
assumed to be 12% in Egypt as repeated values for all
years.

D. Discount rate
Discount rate is explained in [12]. It reflects the time
value of money. It is the rate at which any investor
can expect to earn on his invested money. It is assumed at
18% for this study.

E. Weighted Average Cost of Capital (WACC)

WACC [13] is the minimum acceptable rate of return at
which a company yields returns for its investors. If project
return is less than WACC this means that the project is
Fig.3. Rigid sun tunnel losing value. Here we considered WACC= 18%.
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F. Depreciation VI. CONCLUSION

Depreciation is a measure of the decrease of the financial The increasing electricity selling price, enhanced the use of
value of an asset over time due to the use and wear. using the DSM. There are different programs for DSM but not
Depreciation is used to calculate the income tax for a all of these programs are available in Egypt. Sun tunnel
project. project, which is considered as one of peak clipping program
projects is profitable. This study shows its profitability
G. Income tax according to NPV and IRR.
There is a fixed percent income tax rate that applies to
any project or economic activity that has not been carried
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