How Acacia Power is looking to back renewable energy in Somalia.

Somalia has recently become an investment destination for some very forward thinking foreign firms and many returning members of the Somali diaspora who are keen to start enterprises in the country. It’s no secret that the country faces enormous challenges in every aspect of its development and many would view its future with great trepidation.

Despite the negativity surrounding the country there are two things it does appear to have in abundance; fantastic entrepreneurial spirit and huge untapped potential for renewable energy.

I was lucky enough to speak with Abdi Hirad, entrepreneur and founder of Acacia Power who has roots in Somalia and has ambitious plans to join the small but growing band of renewable energy suppliers in the country. He explained that despite Somalia having an ideal environment for harnessing both wind and solar energy in the country, it had proven it difficult so far to truly meet this potential.

Somalia is often cited as the most favourable country in Africa in terms of wind power thanks to the fact that half the country has an average wind speed of over six metres per second. It is probably no surprise that Somalia receives a generous on average 2,900 to 3,100 hours per year of sunlight and therefore enjoys one of the highest daily averages of total solar radiation in the world. The yearly average solar radiation for Hargeisa is 6.4 kWh/m2/day.

Right now Somalia remains dependent on expensive and polluting imported diesel and petrol from neighbouring Gulf countries, plus (particularly in rural areas) traditional fuels like firewood.

Somali’s also suffers from a general lack of access to electricity thanks to a decrepit war ravaged grid and ancient generators, as a result roughly only 30% of Somali’s can use electricity. Even those lucky enough to get access have problems when you consider electricity is unreliable with power cuts a regular occurrence, not to mention very expensive with rates between $0.80 and $1.50 a kilowatt hour, compared to around $0.10 a kilowatt hour in neighbouring Kenya.

All this should make the increasing use of renewable technology a must, particularly as the price of technology has fallen and its efficiency has increased. Abdi foresaw the potential and demand for renewables and set up Acacia Power to help fill the gap but his experiences demonstrated how difficult it is to install wind and solar technology in Somalia.

Abdi explained to me that the lack of governance in Somalia made it potentially very dangerous to install equipment. The lack of property rights along with the fact that other local energy suppliers who view you as unfair competition may then threaten you or your equipment with armed weapons is a major disincentive to all but the most determined outside investors.

In order to sidestep any problems like this Acacia Power have opted to work with local businesses, which has the added potential benefit of creating an empowered local partner who are more likely achieve faster installations thanks to their connections.

The country also lacks a conventional banking system, instead largely using the traditional hawala system of transferring large funds around the Arab world and beyond, although the system is highly reliable it makes life difficult for international investors who prefer the security of a banking system.

This gap has created openings for organisations like Shuraako – who help provide finance for renewable energy, partnering with the likes of Golis Energy to help install solar panels and wind turbines, but also to assist in providing credit to businesses and households who cannot afford the high capital cost of renewable technology, but with the option to pay it off over several years it can become much more affordable, particularly when user’s fuel bills drop at the same time as they no longer need overpriced generators.

Even if the wind turbines can be paid for and safely installed there is another issue, namely that the large size of most turbines makes it impossible to lift off the docks in Mogadishu as the port lacks the cranes large enough to achieve this. To get round the problem Abdi has sourced smaller wind turbines from China which can be moved from the docks and transported around the country.

Another hurdle is the lack of skilled technicians and engineers able to install and maintain wind and solar power plants, this is compounded by the fact that few outsiders are willing to travel and reside in the country. Closing this skills gap will take forward thinking but there are local installers like Golis Energy and in time hopefully their skills will spread.

Cheap energy can power hospitals, schools and irrigation, not to mention allow businesses to drastically cut margins. The prohibitive cost of electricity makes normal business and everyday activities difficult or impossible, but access to cheap reliable power is a stimulant for new business and social activities.

In the longer term the rapid take up of renewable technology could allow Somalia to avoid the need to build an expensive infrastructure based around fossil fuels instead relying more on micro grids and small scale producers.

Renewable energy technology could work the same way many African countries rapidly took up mobile communications leapfrogging the need for expensive landlines.

Uptake of renewable technology is an opportunity to good to miss, Somalia and other frontier markets can avoid problems like widespread air pollution and the need to import expensive processed fuels as well secure a clean long term energy source.



Categories: Company Case Studies, Country Investment Analysis

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