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Solar Savings

Hybrid Power systems can help off grid customers cut back on their electricity bills.

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Daniel Zywietz had become bored of waiting for the solar revolution to come along so he decided to take matters into his own hands. He quit his consulting job in Dubai and launched himself into a new venture targeting the market for off grid temporary solar hybrid power.

“I had enough of giving other people advice, particularly governments, on what to do in renewable energy,” he says. “I felt that it was going relatively slowly, certainly less was happening than many people had hoped for, including myself.

“So I left and together with an American investment group looked for alternatives in the renewable energy sector, and the area with the most promise was off grid power, where people were willing to pay much more for their electricity than the on grid electricity price.”

Dubai Electricity and Water Authority (DEWA) currently charges 44.5 fils per kWh of electricity and Abu Dhabi Water and Electricity Authority (ADWEA) charges 30 fils/kWh. When Enerwhere started up two years ago the oil price was at $120 per barrel and off grid customers were paying between 150-200 fils/kWh to generate electricity using a diesel genset. Replacing expensive diesel with solar power seemed like the obvious place to start for the new outfit.

Enerwhere effectively sets up mini grids using a combination of solar photovoltaic modules with a diesel generator or batteries, and acts as a utility by selling power on a per kWh basis to clients. Though Enerwhere currently operates principally in the construction sector, solar hybrid power has the potential to work just as well in other industrial sectors as well as the tourism industry.

In 2013 it installed its first plant on the World Islands off Dubai and then in the middle of 2014 signed a contract to provide 5MW of power to aircondition a labour camp with 8,000 workers on Saadiyat Island in Abu Dhabi. For its efforts Enerwhere won “Project of the Year” at the Middle East Solar Industry Association (MESIA) awards in December.

The company has since expanded that project to 7MW, including a 350 kW solar array, and now has a total of eight sites under its belt with three to four more in the pipeline. Projects can range from 25-50 kWs for a small construction site office to 5-10MW for a labour camp.

Zywietz quickly realised that customers were not willing to sign long-term contracts because they believed they would eventually be connected to the grid.

“Most companies will ask you to sign a 20-year contract because that’s how long the solar equipment lasts but we have transportable equipment,” he says. “We can do this on a one to three year contract and if you get a grid connection we can take the equipment, put it back in a container and ship it somewhere else.

“We can do shorter contracts in exceptional circumstances but we have some minor set up costs so shorter than a year is a little bit difficult. Then obviously the longer the contract duration, the lower the price for the customer, which makes it more attractive.”

Enerwhere’s other unique selling point is that it provides its service on a fully financed basis. The customer receives a monthly electricity bill, just as it would if it were buying power from the grid, and doesn’t need to make any upfront investment. This is important because solar is a very capital intensive industry, Zywietz says.

Changing economics

Oil prices have more than halved over the past year to their current level of around $50 per barrel. Though this has clearly affected the economics of off grid solar hybrid power projects, the impact has been at least partly mitigated by the fall in the price of solar equipment.

“Between the input cost on the component side and our own engineering improvements, we are able to match the decrease in oil prices so that we can still offer savings to customers, even at half the oil price we had a year ago,” Zywietz says.

“Module efficiencies are going up and solar costs are coming down by a couple of percentage points every year. For the foreseeable future I think it’s fair to say that solar prices will fall,” he adds. “The oil price is anyone’s guess but it’s going to remain volatile because of political and economic factors. So in many ways solar has the advantage of being able to offer you a stable price.”

Zywietz says many customers are looking to cut back on the use of their diesel generators as much as they can. The solar component can be used to charge batteries during the day which can then be used to power the facilities at night. But while battery technology is advancing rapidly and costs are coming down all the time, it hasn’t reached a level where energy storage is viable in projects at the larger end of the scale.

“The first thing customers say when they walk through the door is ‘Can you give me a solar/battery system?’ Well of course we can. There’s no technical reason why we can’t but the battery is still two to three times the cost of the solar equipment.

“But the cost of batteries is falling. Whereas five years ago solar battery systems made sense for mainly small systems of up to 5kW, today they make sense for systems of up to 50kW. But as prices continue to fall it could very well be in three years that we’re looking at 500kW solar battery systems.”

Zywietz compares Enerwhere’s business model to Swedish furniture giant, IKEA. Its solar systems are simple and functional, are standardised by volume and easily transported and quickly assembled on site by local labour.

A typical package consists of solar modules and a steel structure to hold them in place. It also includes an inverter to convert DC to AC current and some control and remote monitoring equipment. If necessary Enerwhere can also provide the diesel generators.

The quality and the efficiency of the genset is less of a brand by brand but a model by model question, Zywietz says. One brand might be better at producing gensets of a certain size and not so good at others. However Enerwhere makes sure to test each genset rigourously.

“Since we are the ones that rent the generators and pay for the diesel, we make sure to test them and check their efficiency. We bring it all together in Jebel Ali and package it just like IKEA would.”

Broadening Horizons

Earlier this year Enerwhere secured a $10mn investment to finance the expansion of its fleet of mobile solar systems. The cash will allow the company to add around 10MW of capacity.

“This is a very capital intensive business. Prices of equipment are falling but nevertheless the investment on a capacity basis is many times more than a diesel generator,” Zywietz says. “The investment gives us some firepower and allows us to expand in the UAE. We’re in talks with several other parties for similar deals with a focus on Africa.”

Though the UAE market still holds plenty of potential, Zywietz sees Africa as a huge opportunity. The numbers are difficult to estimate with any accuracy, but he thinks the current market for off grid diesel generators in Africa could be around 10,000MW compared to a few hundred megawatts in the UAE.

“We always designed this system to be able to go into a container and to go anywhere in the world. Then we realised the UAE market was a little larger than we’d originally estimated so we spent more time here and less in Africa in the first three or four years.

“But since diesel prices here are much lower than in Africa, replacing diesel in Africa is potentially much more profitable.

“We’ve started development there in several countries such as Nigeria, Ethiopia and Zimbabwe and we’re hoping to sign our first deal soon.”

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