Gas is central to the EU’s current energy relationships with Egypt and Algeria. But as the gas supply crisis ends and EU gas demand falls, it is time to review and reset these relationships. Supporting Egypt and Algeria in realising their abundant solar and wind potential and boosting energy efficiency can address their rising electricity demand and deliver local benefits, while at the same time strengthening the EU’s energy and geopolitical security.
Energy has risen as a priority for the EU’s engagement with its Southern Neighbourhood since it began diversifying its gas supplies away from Russia. Egypt and Algeria have entered the spotlight, with a flurry of diplomatic activity delivering several bilateral gas agreements. This approach to managing these relationships is not futureproof in the context of falling gas demand. Gas is losing relevance for the EU: demand already reduced by 18% in 2023 compared to 2019, and the EU’s projections indicate a further demand reduction of over 50% by 2030 compared to 2019.
This poses an existential threat for Algeria given its slow pace of economic diversification away from fossil fuel exports and its dependency on European buyers. Meanwhile, gas supply issues and increased electricity demand are exacerbating Egypt’s economic problems.
Shifting the EU’s relationships with Egypt and Algeria to focus on renewables and energy efficiency would support both countries in enhancing their energy security and economic resilience, by providing the electricity needed for their economic and industrial development, boosting investor confidence, and even creating new potential for renewable electricity and clean technology exports. In turn, these developments would benefit the EU through enhanced regional stability, greater energy security and increased EU competitiveness.
The EU (Commission, EEAS and Member States collectively) should:
- Modernise its energy relationships with Egypt and Algeria to focus on boosting renewables capacity and energy efficiency in the power sector. The EU should use the “reset moment” of the new Commission to shift the focus away from gas.
- Be fully transparent with North African countries about future EU energy demand, so that they can plan for a realistic balance between gas, hydrogen and renewable electricity exports.
- Use existing diplomatic channels to jointly formulate priorities for mutually beneficial energy transitions, channelling EU finance to develop the business case for accelerated deployment of renewables and energy efficiency.
- Make clear that Egypt and Algeria will be supported if they raise their ambitions further in upcoming revised NDCs, to give both countries confidence to set ambitious goals ahead of COP30.
- In the medium term, review how it can use its expertise, diplomatic leverage, financial tools and trade policy to scale up energy transition cooperation with Egypt and Algeria.
- Take a more holistic view towards energy relations with Egypt and Algeria, placing energy in the context of wider economic prosperity and regional stability by establishing new intra-Commission coordination mechanisms.
Member States should also take action at a national level:
- Spain, Italy and Greece should focus their energy hub aspirations on renewable electricity imports from North Africa, by supporting Egypt and Algeria to develop generation capacity that can both supply their domestic needs and create export potential.
- Germany should focus more on renewable energy and efficiency in its own energy partnerships with Egypt and Algeria, including establishing a new partnership with Egypt to focus on energy issues beyond hydrogen.
- All Member States should align their policies with the above recommendations and should include explicit emphasis on local benefits for partner countries in their energy diplomacy and partnerships.
