29 February 2016

Rwanda: Solar Energy is the Next Big Thing in Rwanda, Says Key Investor

interview

With Rwanda aiming at connecting about 70 per cent of the population to electricity by 2018, amidst slow progress in the rollout of hydro-electric power means, investors are looking at ways of providing alternative ways to increase access to power across the country.

Among these alternatives is solar energy which experts say has not been harnessed enough in the country and the continent.

The most recent investors in the area is Ignite Power who signed an agreement with the Government for the former to invest over $50 million (about Rwf37 billion) into off-grid power generation through solar energy.

The New Times Collins Mwai caught up with Angela Homsi, one of the directors of the firm for insights to their energy provision model and opportunities for local stakeholders therein.

Below are the excerpts:

How did the investment in solar energy in Rwanda come into being?

We stared out in 2012 by looking at the whole market in Rwanda and how we could connect everybody to clean power. Our ambition was clean access. We did a thorough analysis on how to achieve the ambition by 2020.

One of our directors comes from the power sector and I am an impact investor. We figured out what the right model was to bring power to people, we analyzed what the generation can be and will be and how much the grid would cost.

What comes out is that it will be very expensive to bring the on-grid power to all the people; there has to be some kind of alternative, and that alternative is solar home systems. Solar home systems are now economically viable and together with a financing model where people can pay over time, it becomes easily affordable.

We looked at how to create the best market model for Rwanda and what are the best market values today, we estimated that there are about 250,000 homes in the country that can pay for power but cannot access it.

We found that it was feasible to supply them with solar panels and batteries, they can access power and with possibilities of upgrading their solar capacities as their economics grow. We found that the missing link is the financing bit; there are many suppliers for the technology, which is increasingly becoming mature in the market.

We also found that if you are a supplier and you go to the market, you are not necessarily the best in distribution. We thought lets bridge that gap by getting the best products and then work with all the distributors to make it work on the ground, we engaged with RDB and the ministry of infrastructure back in 2012 and went on to build it.

In the end we built a special private public partnership model where we are working in collaboration. Our job is to make sure that this is the most affordable model in the world. To deliver that you need the private sector but you also need to work with the government.

Rwanda is the first country in the world that goes with the model and now we have about 5 other countries that want to implement the same model.

How is that any different from other investors in the energy sector?

We look at the sector not just as a company or with a profit motive but are dealing with a vital social good that can get people out of poverty if they get access to it. It is basic access to energy.

If you look at it that way you do consider more than just selling products. You look at the social good; you are trying to solve a problem by having a product delivery strategy. It is a product delivery model; it is a financing platform and works collaboratively with people in the private sector with the best service and quality with the best price.

Through the public private partnership, it works collaboratively with government to achieve the targets in energy access. It is a collaborative platform.

Do you have any market target as you launch?

We are talking of about 250,000 which will bring it up to about 10 per cent of the population accessing off-grid energy solutions, which is a significant contribution very fast.

We can scale up the project depending on its uptake. Eventually there could be double the population that can be connected through that means.

According to you, what has made it difficult for countries to roll out energy from hydro-electric generation?

It takes a long time to roll out the grid and it is very expensive to rollout. Beyond the generation, bringing it out to villages and connecting it to homes. We are working to satisfy all these needs with solar.

It is an investment, you have to make your return on investment, how affordable is the solution you are rolling out?

We are making payment easy through multiple means including mobile money. We have made it affordable. The way we think in products pricing is that there is need for different products and pricing in the market.

The partnership with various public and private partners, locally and outside, we were able to make sure that Rwanda has one of the cheapest access across the world for the provision of grid solar.

The price range will be somewhere between Rwf5,000 to Rwf 10,000 a month. For products that have a good specifications and right for this market. We are very familiar with affordability and our goal is to ensure it is so.

Going by numbers floated by banks, the default rate of loan products in this market is quite high, for investors looking to use a credit model, doesn't this worry you?

In order to be sure that the people who go for the product are actually delivering on it in a way that is sustainable and we do not have much default, it is slightly different from banks. If you talk of a bank loan, it is money given to someone being paid back; here it is a different package, being given to someone.

It is a product and it is a service. As long as you make sure the client is getting the right product and the right service, making sure that they are contented, they have lower incentives to default on payments.

It is also set in a way that if you cease payments, the systems stop working. We will also be in touch with clients to ensure they are having a good experience and in the event they are unhappy with something, they get to point it out.

If we can help create a credit history for our clients, we can open up more opportunities for other players in the market. America is built on credit history; it is how most of them finance their lives.

As the Sub-Saharan African rushes to leapfrog to the digital age and adopt technology, it has been at the risk of having solutions that are not relevant to their markets and end up not working in the long run. How have you made sure that Ignite Power jumps this hurdle?

We have worked with the Ministry of Infrastructure in ensuring that it works, we have tested everything, we are using suppliers who have experience in the aspect, we are not getting any donor money or grant money to finance this project, it is an investment, it means that we do not give something that works and picks up, it is our money that is being lost.

That is already an incentive to ensure that everything works according to plan.

Any opportunities for local business people and professionals in your investment?

At the core of the Ignite Power model is to work as a collaborative model to work with people on the ground. Our partners are Rwandan and people who have worked in the country for long. We are not bringing people from outside to come and seize all the opportunities.

We have energy entrepreneurs on multiple aspects including service delivery, maintenance among others. We have integrated partners to have a fully functional value chain.

Some of the project stakeholders are beneficiaries from the Agahozo Shalom Youth Village, with an idea to train them and take as many of them as possible to be involved in the project.

We will make sustainable employment opportunities for the graduates, solar will be one of the biggest employment opportunities in the near future, by training them they will be relevant across markets.

From maintenance, to fixing to design, that is where future employment will be.

It is said that solar energy has not been fully harnessed by the African continent, as one in the sector, how can we make the most of it having in mind that the sun seems to shine most in Africa?

What happened with solar is that prices went down by about 90 per cent in the last decade. That presents a massive opportunity. The issue is that one has to be smart about it so that it is not only useful when the sun is shining.

There is more value that can be added to the grid if you incorporate aspects such as storage capabilities. Where we see it in the next ten years, people will be relying on the grid less as the solar power gets cheaper, not just here, but across the world. Surprisingly is that Africa is going before other countries in the development.

Rwanda is leading the region in this aspect, what we are doing here with Ignite power is fairly new, bold and the first time on such a large scale. Other countries will learn from Rwanda.

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