AGOA and Renewable Energy

At the just concluded 8th AGOA forum in Nairobi, I gave a brief presentation on opportunities in renewable energy for African companies as well as American technology providers. I also highlighted both the challenges and risks that African companies face should they not take the initiative to address "carbon risk", energy costs and energy reliability.

With renewable energy, African companies have opportunities to use what once a handicap to their great advantage as follows:

• Monitize the carbon offsets through either CDM or the Voluntary Carbon market.
• Lower their energy costs and consequently their operating costs through captive generation.
• Improve energy reliability through control of their own generation and distribution.
• Anticipate and address the "carbon risk" to their goods when they are targeted to markets in the West.
• Position themselves as "clean" and "green" companies. An increasingly important positioning particularly to customers in the West who are demanding cleaner and greener products across entire value chains.

For African companies, adopting renewable energy is easier said than done. Lack of technical expertise and financial constraints limit the implementation of renewable energy.

This is where we can help. Renewable Energy Ventures (K) Ltd. (www.energy-kenya.com) is a renewable energy project development and advisory firm. We have established global relationships in technology and finance. We are working closely with African companies to help them identify the right technology be it solar, wind, biomass and right finance structure be it Power purchase agreement or outright ownership to help them realize the many advantage that renewable energy presents.

Implementing Renewable Energy in Emerging Markets

Just attending REEM'09 courtesy of Sirona Fuels , a company that is working with small scale farmers in Emerging markets to grow biofuel feedstocks. They then leverage their access to capital and biofuels expertise to extract maximum value across the supply chain.

Key take aways from the conference:

1. Money for Renewable Energy Projects in Emerging markets:
a) USTDA
B) OPIC
C) USAID
D) EX IM Bank

2. There are companies that have technology and project execution expertise looking
for quality partners to work with in emerging markets.
a) Sirona Fuels
b) SunEdison
c) Envision Solar
d) Dissigno
e) Recurrent Energy

Of course, bringing together the financing, the technology and the expertise and executing in emerging markets calls for managing all the moving parts effectively. However, the declining cost of technology, particularly PV, the increasing pool of technical expertise and the global focus on Renewable Energy both for Climate Change mitigation as well as energy independence all work towards making the space ever more attractive.

Hamburg, Germany

What economic crisis?

From Hamburg

The skyline of one part of Hamburg. Notice the large number of cranes competing with the skyscrapers. Clearly a lot of construction going on. Not sure whether it is based on German's stimulus package or by a thriving economy in Hamburg, but what is clear is the level of investment being undertaken.

Afrika Verein

Just spent a week in Hamburg where I attended the Afrika-Verein

The topic was on "Creating a Sustainable Energy Parntership". This was particularly true in the case of Germany working with Nigeria to form a comprehensive technology and expertise relationship in which Germany would supply their tens of years of experience in the energy sector and their undisputed superior technology to Nigeria's complex power sector challenges in exchange for access to Nigeria's Natural Gas.

Apparently, Nigeria has been flaring it's natural gas that comes as a bi-product from its oil wells. Natural gas, currently trading at $6 to $8 is a valuable commodity that will only continue to grow in value as it gains a large percentage in the electricity generation sector. Among its strong selling points are the fact that it is cleaner than coal and burns efficiently with current combined cycle turbines. The challenge in Nigeria has been to capture the natural gas. No current infrastructure exists to this end and so this will be a comprehensive nationwide program. I also believe that Germany is anxious to diversify its source of Natural gas for heating and electricity generation from Northern Europe and Russia, with the latter currently accounting for 34% of all of Germany's natural gas supply. The issues in Georgia and Ukraine in the last few months may be one more reason that Germany desparately wants to and needs to diversify its production.

What was most interesting about this partnership between the German Govt. through several energy companies and the Nigerian government is that it is touted as an equal partnership and a win win situation for both countries. Germany wants to distant itself from the "exploitation" mentality that pervades the "natural resource extraction" industry across Africa. Of particular note is that this arrangement was sealed under the growing and rather ambitious presence of the Chinese. From conversations with high ranking Nigerian energy officials, it sounds like the Chinese had opportunities to step up but consistently under delivered on quality hence the need to form the partnership with the Germans. How accurate this is, is anyone's guess.

One dark spot on this partnership as was raised in the closing discussion in Hamburg is that while private German companies are involved on the German side, on the Nigerian side, it is strictly a Government affair. This was attributed to the fact that there are no "real" Independent Power Producers in Nigeria at the moment. However, there are measures at policy level that are being undertaken to address this under the Power Holding Company of Nigeria PLC.

I am willing to bet on a much stronger Nigerian electricity sector in the not too distant future. And if this model is succesful, it could form a template for future win win partnerships between African Countries and natural resource constrained countries.

Energy Investment Opportunities in Kenya

Energy - Kibera and other Slums the New Saudi Arabia

Kibera is an informal settlement in the heart of Nairobi City Center the size of Central
Park in New York City. Population estimates range from 700,000 to over 1 million
people living in this space. Population growth estimates project a doubling in population
by the year 2020.

Being an informal settlement with such a large population, infrastructure is very limited
and there is very little if any urban planning. This results in huge challenges in sewer and
garbage disposal.

Currently, there are youth groups involved in a project called “Taka ni Pato” that collect
household garbage and use it to make compost. The compost is sold for modest amounts
of money in the ksh 10 to ksh 30 ( $.14 to $43 ) per kilo to farmers. Any plastics
collected are sold to companies who recycle the material.

The sewer infrastructure constitutes of:
* Pit Latrines: These are owned and operated by landlords, local NGOs or CBOs
that allow Kibera residents to use them for a fee.
* Bushes along the River: For those residents who cannot afford the modest fee
($.07), they use the bushes along the river at night.
* Septic Tanks: Some more formal buildings have septic tanks that serve as
reservoirs for sewage.

We propose a comprehensive waste to energy solution for Kibera. The goal would be to
provide portable toilets (Porta-Jons) spread out throughout Kibera where residents would
have the opportunity to use them for free.

We would develop hand driven equipment for emptying the toilets at specific intervals
depending on volume of usage. In the USA, Port-a-jons used on construction sites are
emptied by modified trucks that ensure sanitation for the worker. The waste collected
from these would be delivered in a biogas digester that we would use to generate methane
gas. Using this methane gas and reciprocating engines, we would generate electricity to
feed into the grid. While the current feed-in-tariffs are not attractive on their own, by
leveraging the community infrastructure component, carbon credits and monetizing the
compost, the project would effectively generate positive cash flows and be sustainable.

We propose movable toilets as the government is in the process of upgrading the slums.
That said, we anticipate the process to be slow and therefore feel that there is large
enough a population base that will continue to need this service.

Implementation:

For the project to be successful, we must work with the community, its leaders, existing
solution providers and the government.

Already trained and formed groups such as the “Taka Ni Pato” group would work on the
emptying and cleaning of the toilets in exchange for income pegged on volume,
cleanliness of their Port-a-jons and other incentives. By incorporating energy generation,
the youth will have an additional revenue stream.

We must not deprive existing solution providers of their revenue. So a careful analysis of
how best to incorporate them in the project or help generate alternate revenues will be
key to the success of our project.

Revenue Steams:

Fee from the Govt. for sanitation services:
While we will be providing a key service to the community, we anticipate a long drawn
out discussion with government on if they will pay a fee for our services and what that
fee will be. So while this is a possibility, it shouldn’t be required in establishing the
viability of this effort.

Electricity generation through biogas

Using Biogas digesters, we will generate biogas to power engines that generate
electricity. Kenya currently has a feed in tariff of $.07/kWh for biomass energy
generation.

Biogas sales

Whenever possible, we will site our digesters in proximity to biogas off takers such as
industries that can use it for boilers or other uses that need thermal power. Currently,
such industries utilize diesel or Heavy fuel oil.

Compost sales

Due to the inclusion of human waste in the composting, we will need to identify non food
farmers who are willing to purchase the compost.


Biodiesel Production

Alternatively, we are also looking at growing jathropa plantations for biofuels. Farmers
near our plantations will also be invited to grow the same on an “out grower”
arrangement. Since we will be targeting marginal agricultural lands, revenues from
growing jathropa will essentially exceed the current low to no yield on such lands for the
farmers. This model has the added possibility of generating employment for the biodiesel
plant while increasing the income of the small farmers. Additional opportunities exist to
monetize the carbon offsets through jathropa propagation.

Electricity generation through biomass gasification:

For the 15% to 20% trash that will not be suitable for biogas digestion including plastics,
tires etc, we will utilize biomass gasification to generate electricity. While we would get a
better value for this through gasification to fuel, the technology isn’t as well developed.