Energy deficiencies and unreliability are currently a feature of many African countries. This is a problem for most people, but an opportunity for some – particularly the owners of renewable energy businesses.
Addressing the question of how you can open up your own renewable energy business, Lincoln Dahl, founder of US-based African Energy, says that before embarking, there are a few fundamental considerations related to viability.
For instance, renewable energy generated on a small scale by solar or wind is almost never competitive with grid electricity.
However it may be more reliable and allow the customer to be self-reliant – if that is what is required.
It is likewise very seldom economic to sell such power into the grid, even where this is offered as a possibility.
The upshot is that often the users of this renewable energy technology – the new business’s potential customers – will be high-end businesses which demand a performance level which is superior to that of the state electricity utility. This may not be hard – for instance, in Nigeria public power is often out for months.
Renewable energy technology (which in practice means solar technology and sometimes wind) may also be viable where companies are required by government to reduce consumption by, for instance, 10%. "But, remember, these systems will never out-price the state utility power," says Dahl.
African Energy was formed by Dahl six years ago, after he had worked for Kyocera, a large international solar equipment supplier. African Energy has a major warehouse in Seattle, US. It does not hold stock in the destination countries in Africa.
It is a wholesaler of equipment and advises distributors and installers in Africa on what type of equipment to use, how to become trained in this area, and how to run their businesses.
Dahl says that his company ships out orders from Seattle on the same day, to be airfreighted to customers in Africa so that they arrive within four days. However, batteries are normally seafreighted by his (and other) companies.
What are opportunities for distributors and installers?
· Residential power systems. He recommends that this is done in a focused, limited local area.
· Small commercial power back-up or solar/wind systems. Supplying business back-up is generally better for cash flow than supplying residential, he says.
· Solar sign and security lighting. A specialist area, but often highly profitable, he says.
· Solar or wind water pumping – generally applicable for remote pumping sites, of which there are many in Africa. Often, connecting up to the national grid in these places (where this is available) is more costly than setting up a solar unit. So this will often be a business opportunity even where the national grid is working well.
· Power systems for the tourist industry and lodges.
· Small telecommunications/communications back-up, particularly in remote areas.
· Financing and back-up systems for renewable energy businesses – for instance, leasing. This business, done on a boutique basis, will often be surprisingly competitive with mainstream banks which do not have focused expertise in this area.
What does such a business require?
It requires a passion and a long-term commitment for the industry, he says.
It requires these because there are ups and downs in this industry – downs, for instance, because sometimes the national grid system will work well and this industry may slump.
It also requires some technical ability or training. A person who fixes his own car or appliances would be at an advantage; being an engineer is not required – in fact, engineers often struggle with it because they are used to bigger systems and, for instance, AC rather than DC power.
Training is available on the internet – for instance at www.sei.org . There is also copious general information on the net. Also required is a minimum amount of working capital. In Africa, he says, an installer could set up with capital of perhaps $10,000, although a wholesaler would need more. Both have to be prepared to take orders with deposits of less than 100%.
Mistakes to avoid
· Making your own solar modules. ”Generally you will not be competitive with people in supplier countries who learned from experience and manufacture at scale. However, there is opportunity for local manufacture of, for instance, racks and stands.”
· Multi-service business people – ”so-called briefcase businessmen" who will today work with rice, tomorrow with a scratch-card business, and the next day with solar energy.” They will not have enough knowledge for this specialised industry.
· Do not use your suppliers’ cash flow entirely, and do not run out of cash.
· Use good components. "Anyone can go to China and get any label on any equipment. Just because such manufacturers will do that indicates that their products are junk."
· Doing mass marketing – for instance marketing from the premise that "everyone in this country needs a solar system". This is not so! An advert in the general press will attract a huge number of enquiries, but they will not be good business prospects. "You need 1% of 1% of 1% of the people in the country … this is a niche business."
· To start, install a system at your own house. "Make mistakes and spend some money learning in practice."
· Find out who needs these systems in your country and know your customers!
· Set some targets, and if you do not get to them, change your business plan or quit the industry.
· Find a reliable supplier (like his company).
· "Just do it! Experience will tell you within six months whether it is a feasible business."
African Energy: Tel (520) 720-9475
fax (520) 720-9527;
Websites: www.africanenergy.com is the website of the wholesaler and www.backupafrica.com is used to find a local installer