About half of sub-Saharan Africa’s population today does not have access to electricity and those who do, pay on average nearly twice as much as consumers elsewhere in the world, according to the International Monetary Fund (IMF). To bridge the gap, African governments have started to seriously consider investment in renewable energy which is not only cheap but environmentally friendly. Among the renewable energy sources, solar power has emerged as the option with the greatest potential solution to briding the energy gap in Africa. Installation costs for power generated by utility-scale solar PV projects in Africa have decreased as much as 61 per cent since 2012 to as low as US$1.30 per watt, according to the Intenational Renewable Agency (IRENA). This drop in prices has been particularly pushed by the increase in the number of solar suppliers in the continent and technological advancements which are pushing production costs down. One such company that is pushing for and installing state-of-the-art solar power plants is Ofgen.
Founded in 2012 and based in Kenya’s capital Nairobi, the company currently has 7 MWp and 9.8 MWh of battery energy under management and a further pipeline of 15 MWp at various stages of development across Eastern Africa making it the market leader in the solar energy space. “Our business is purely harvesting the power of the sun and we have been in the market since 2012, with our core space being the commercial and industrial segment where we build, own, operate and sell electricity from solar,” says the firm’s Chief Executive Officer and Commercial Director, Jibril Omar during an interview with the CEO Business Africa team.
Wading into untested waters
Just like any new company wading into untested waters, it took Ofgen some time before they could see the fruit of the business. At the time of its founding, Kenya’s energy policy had not been updating, making the business environment very hostile for the company. The enactment of the Kenya energy management act and renewable energy of policy became a life savior to the company, enabling it to operate and sell electricity or build an outright purchase to their clients for anything below a megawatt.
Ofgen also had to fight for market share with far more established and well resourced multinationals. Mr Jibril is however satisfied with the progress that his company has made thus far. “we are basically in a market dominated by foreign owned companies but we have seen ourselves grow very well on the commercial and industrial space. To date, we have built close to 7 megawatts of commercial industrial solar and close to 10 megawatt hours of storage, making us one of the most successful solar company in the commercial and industrial segment,” he says.
Most solar companies in Kenya and in other parts of Africa tend to focus on community and domestic consumers, but Ofgen targeted the more difficult to crack commercial market because it offers the highest rewards. “There are different segments of consumers: the utility scale which is the 50 megawatts and normally fed to the national grid; commercial and industrial which is for industrial consumers and is mostly either grid tied or off grid and then there is for mini- grids for communities and pay-as-you-go systems like solar lanterns. Our focus is on the commercial and industrial segment which is much easier because close to 60% of the power demand supplied in the country goes to industrial customers,” he explains.
With big corprates like Swissport, Serena Hotels, Wiliamson Tea, Fairmont Hotels & Resort, BAT Kenya, GlaxoSmithkline to count just a few as their clients, Ofgen has created a name and a trackrecord for itself. Its success today was however not handed to it on a silver platter. “The first few years were not the easiest. Everybody viewed solar not as a source for commercial and industrial use but for lighting, floodlights and water pumping and we had to educate so many of our customers. And even after taking them through the process, they would pick up the idea and our proposal and put it into the tendering process and you can imagine what that means,” he explains. Jibril, a marketer by profession, however reveals that what kept the company going is its unique business set up.
“What has given us an edge over others is that we started from the energy research center at Strathmore University in Kenya, purely as an academic research work. Unlike many the other businesses which saw a business viability and went into it, ours was done purely from research and development background where we saw that this is the next phase of business, the future and so we invested into that,” says the CEO.
An affordable and sustainable source of energy
According to the CEO, 90% of their customers have indertaken solar energy investment decision based purely on cost reduction element. “Other customers would look at the element of sustainability, but for most its purely cost driven. The element of sustainability comes second.” Regardless of what drives a company to sustainability, for Ofgen its investment is mainly driven by three Ps: the planet, people and profits. Mr Jibri says that when venturing into a project, they work to ensure that it is sustainable, profitable to Ofgen and cost-daving to its clients. With its 3Ps model, Mr. Jibril emphasizes that companies can save a lot of money. Investing in solar energy is the cheapest in the renewables space beating fossil fuels, Jibril empasizes. “Solar can cut your cost by nearly upto 30% or even 40% of what you are currently paying whether you are relying on the grid or the diesel generator,” he says.
Transitioning to solar power
Transitioning to solar can be challenging to businesses who don’t know where to start. Jibril reveals to us that it is not play-and-play set up. “First, you will invite us to your facility, do a site visit and look at the viability and check your roof space, demand load, seasonality in terms of the operations, structural integrity of your facility and then from there we go back to the office and then do a design and see what we can offset for you and also do a financial modelling showing what you are going to save every month,” expalins Jibril. Although affordable and sustainable, Solar can also be very limiting as the sun does not shine for 24 hours a day. To ensure a a consistent supply of energy even when the sun sets, Ofgen offers battery storage solutions for companies needing to fully maximise their solar potential. “Since the sun shines during daytime and if you need power in the evening, you need to have solar and the battery connected. The power from the panels will feed the load and also fill the batteries and then the batteries can be used in the evening,” clarifies jibril.
Where grid energy is also unreliable, solar also comes in as a reliable backup energy instead of the emission emitting dieasel engines that most businesses have. “On the on-grid areas where the grid is very weak, we use the batteries to stabilise it instead of turning on the diesel generator even during intervals when the power is off, and that’s where the battery comes in. Batteries are used purely from the economies perspective as solar which is the cheapest, followed by the grid and then the battery storage, and lastly diesel generator. The generator is the most expensive so that is how a consumers pick their mix of energy,” says Jibril.
Improving regulatory environment to spur solar growth
Unlike a decade ago, countries in the Eastern Africa region have been improving their regulatory frameworks to enable greater adoption of renewable energy. Across the region, Mr. Jibril picks Kenya as having the best environment followed by Uganda and Rwanda. Ofgen CEO is for instance happy that new regulations in Kenya have further pushed the costs of solar inputs down, creating more incentives for more companies to join the green energy bandwagon. “The new Kenya Energy Act has given a huge boost to the solar and renewable energy industry at large by exempting taxes and duties in most of the components making it now very much affordable. The cost of equipment’s have really gone down particularly in the manufacturing countries such as the China, US, Germany, South Africa,” says Jibril.
As the regulatory environment improves, Jibril is confident that in ther near future, local manufacturing of some solar componments would be possible. The CEO reveals that there are other battery manufacturers looking Kenya as one of their major hubs because of the accessibility to the minerals in DRC for manufacturing of the storage batteries. He however believes the best thing now is to invest in the PV and generate more power. “Trying to put up a solar manufacturing plant and you are fighting with a prices in China, is not really viable at all,“ Jibril cautions. “May be we can think of others like storage batteries.”
Future plans and investment
So far, Ofgen has done well for itself. It has attracted big corporate clieants and in the in the last 4 years, expanded operations to Uganda, Rwanda, South Sudan and as far as Somalia and continues to grow within the East African markets. Its eyes are now trained on the more difficult to crack West and Southern African markets. It hopes to have a footing in these markets by the end of 2021 and is also looking to push more on storage as a business.
Solar energy being a high capital expenditure exercise, Jibril says the company is keen to get all kind of partners from the manufacturing side of the products to the financing side elements. “One of the biggest challenge is finance, getting cheaper debt. Our competitors are getting debts from Europe at a very small interest rates so we can’t compete but if we have access to cheaper or affordable funding, we would love to do that. We would love to see the company grow move to the next level so any other potential partners are always welcome,” Jibril says.