Energy Efficiency and Affordable Housing in South Africa

Ideas on Energy is excited to welcome its first guest blogger, Elizabeth Ngoye.  Elizabeth works with E+Co, a fantastic organization that for the last 15 years has been investing in companies in the developing world that are finding innovative ways to provide clean and affordable energy.   E+Co’s outstanding work has been internationally recognized and recently they were declared a finalist for the Zayed Future Energy Prize.  Elizabeth brings us a great success story from Africa about how one company that E+Co works with is helping make affordable housing more affordable by addressing energy efficiency.

The South African government has recently made affordable housing a priority. City governments are each building between 10,000 and 20,000 new low cost houses per year but few of these housing programs address the energy challenges that residents of these new homes will face. Energy use (mostly cooking and water heating) represents up to 35% of monthly household expenditures.

Solar water heating is a well-established technology in the Republic of South Africa that has the potential to address some of these challenges. Historically, solar water heaters (SWHs) in the country were mainly promoted to middle and upper income households because, due to lack of capital, low income households could not afford the high initial cost of SWHs. As a result, their main means to heat water were electric kettles and gas cookers. These technologies are not only inefficient but also expensive and environmentally unfriendly.

Atlantic Solar (Pty) Limited, a South African enterprise and E+Co investee, manufactures, retails, and installs a range of SWHs. This enterprise operates throughout South Africa through its network of dealers. Established in 1990, E+Co first invested in Atlantic Solar in May, 2007 to support the implementation of their growth strategy developed by CEO Mr. Helmut Hertzog, which is helping them to improve manufacturing and installation processes and secure qualified personnel.

The Western Cape Province of South Africa realized the need for provision of efficient heating systems for its Low Cost Housing Project in order to ensure household savings. In 2007, Atlantic Solar won a contract to supply and install 1,000 solar water heaters in several low cost housing areas in the Western Cape Province. The project was implemented jointly with the local communities who were required to assign the systems to beneficiaries with a focus on the elderly, people with medical challenges, and single mothers.

In February 2010, I had an opportunity to visit the Atlantic Solar installation in my capacity as E+Co East and Southern Africa Monitoring and Evaluation Officer. I conducted a site visit along with Mr. Helmut and Atlantic Solar’s Head of Installations to low cost houses in Nyanga community, Cape Town. We met with the Ward Councilor for Ward 37, who was very grateful for the project’s positive impact on the people of his district. “The project has improved lives through improved water heating systems and shelter. The major impact has been reduced electricity bills in households, and hence income savings.” The Councilor informed our team that he would like a scale-up of the pilot phase to ensure increased impact. “Those who live in the Nyanga community are among the poorest of the poor, and hence need more support from the government to increase access to clean and low cost energy technologies,” he added.

A household survey by Kakaza Trade Company within the Nyanga community revealed that the project has significantly changed the lifestyles of the beneficiaries. Boniswe Mhlanga (91) is an elderly woman heading a family of five people. Boniswe says she is very happy with the system as she no longer spends much on electricity for water heating. Due to the installation of an 80L solar water system on the roof, her electricity bill has gone down to 50 Rands from 150 Rands per month (equivalent to US $ 6.77 from US $ 20.33). Other community members shared similar stories about the installation of SWH in their homes.

In addition to the benefits that have been realized by end users, Mr. Hertzog indicated that Atlantic Solar has been able to use the profits from the project to expand their operations and develop new capabilities. The company has been able to acquire additional factory space and enough new installation tool sets to send five installation teams on the road. They have also bought two 5kVa generators, enabling them to work in remote areas with no access to electricity.

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Africa, Energy, and Me

I finally landed in Nairobi last night after about 20 hours of travel. I am mostly here for a family vacation but am hoping to be able to do some general observation and research about how people use energy here, especially off the grid. I’ve already had the opportunity to talk to one Kenyan today about how people in the slums, where about 70% of Nairobi’s population live, get access to electricity.

This man told me that the most common thing was for people to install solar panels on the top of their houses. He comes from the north of the country and was planning on doing the same thing for his family home there. It was going to cost him about 20,000 Kenyan shilling (about $250 U.S.) for the panels and an additional 15,000 shilling ($190 U.S.) for wiring in his home, a battery to store the energy, and the labor to install it all. People get loans for this from their employers, who automatically deduct it from wages or occasionally from banks if you can prove you have the steady income to pay it back. From this setup you can power a TV, radio, some lights, and charge your cell phone but you can’t run a fridge or stove. For those items you need a stronger more steady current. A few people in these areas are able to run diesel generators but those are considered pretty expensive and beyond the means of most individuals.

Tomorrow I head off on a safari so I may not be able to get reliable enough internet to post on a regular basis for the next few weeks.  I’m coming back through Nairobi on January 14 before heading home.   Does anybody have suggestions for organizations in the city addressing energy poverty that I should check out?

Russia Gets Serious About Energy Security

Russian President Dmitry Medvedev recently announced plans for Russia to develop an energy security doctrine.  Speaking at a Security Council meeting at the Kremlin, the President articulated a surprisingly progressive vision regarding how Russia should approach both its internal energy issues and the role its energy sector should play in the global economy.  Although it is sometimes unclear whether the President is defining policy in Russia or if other centers of power such as Prime Minister Putin are actually calling the shots, it is worth looking in some detail at how Medvedev sees the future of energy in Russia.

Despite the fact that the Russian energy sector accounts for approximately 12% of global oil and coal supply and nearly 25% of global gas supply, the President was concerned with poor management of energy resources for Russian consumers and industry.  In particular, he noted that natural gas is being used in places where coal or oil could be used just as efficiently leading to rapid depletion of gas resources.  He gave as an example gas pipelines being built to villages in remote areas with just a few houses.  He also complained of low levels of energy efficiency in machines used by both consumers and industry.

The President envisions alternative energy being a big part of Russia’s energy future.  He singled out hydropower as having a particularly important role to play.  Also key are upgrades to existing electrical generation and distribution networks that could be made compatible with the networks of other countries which he noted, “may be to our advantage and profit.”  Setting up smart grids, utilizing nanomaterials, and investing more in research and development were important parts of the vision.

Medvedev knows that this speech will be read by people in countries that are current or future customers for Russian gas.  He reassuringly stated that “We have repeatedly said that Russia is not interested in a high monopolistic energy price; what we want is price stability and fluctuation predictability, in other words, reasonable price,” although consumers in countries such as Belarus and Georgia might be a bit skeptical of these sentiments.  Russia has in the past been very willing to use gas supplies as an instrument of power and that seems unlikely to change anytime in the new future.  He also noted that Russia would be deepening its relationship with gas customers in Asia.  “New forms of international energy cooperation should be developed. This does not apply only to Europe, where we have trodden all the paths and know the situation inside out, but also to a large extent to the Asia-Pacific region.”

All of these ideas sound like a sensible approach to energy issues in Russia although the devil is always in the details.  The energy sector is responsible for over 30% of Russian GDP so getting energy policy right is hugely important for Russia domestically as well as more broadly for Europe and Asia.  Ideas on Energy will be following the development of this doctrine and whether we see any actually changes in the energy sector as a response to what is developed.  I would be interested to hear from readers what other major issues you would want to see Russia address in its energy security doctrine?

 

Are Biofuels Really Better for the Environment?

The final weeks of 2010 have seen a flood of attention directed towards biofuels.  NPR had a three part series highlighting some of the challenges of ethanol including how it raises food prices, although many people would describe U.S. support for ethanol as more about agricultural policy than energy policy.  Biofuel company LS9 raised about $30 million in new funding and Pike Research released a report predicting a 20% increase over the next six years in biomass related capital investment, which includes biofuel and energy products.

Probably the most significant announcement however was that the European Commission (EC) is looking at reevaluating the environmental benefits of biofuels over conventional sources of energy for transportation.  In a report issued last week the Commission took a close look at what it refers to as the effects of indirect land use change.  The basic concept is that as agricultural land in some areas is converted to fuel oriented crops new land will be needed for food production.  The clearing of new land has a carbon impact and depending on where the new land comes from, for example if someone cuts down rainforest in Indonesia in order to create new agricultural areas, the negative carbon impact of opening food production in new areas could substantially offset the positive effects of using biodiesel.

The EC adopted two connected goals in 2009 of a 10% share for renewable energy in the transport sector and a 6% reduction in the greenhouse gas intensity of fuels used in transport.  This study throws into question the degree to which biofuels should be the renewable energy source of choice to help meet the greenhouse gas reduction goal for the transport sector.  Surprisingly, the report makes no mention of third generation biofuels from algae, which are supposed to be able to generate 30 times as much energy per acre as land crops, as a possible way to minimize these land use challenges.  Perhaps this will be addressed in the six month impact assessment the EC is planning as a follow on to this study in order to figure out whether it needs to change its renewable energy and fuel quality directives.  It will be interesting to see whether this report or any follow on assessments have an impact on how other countries incorporate biofuels into their energy policy planning.

 

Financing Problems and the New Energy Revolution

No matter how good your cleantech idea is, without money you are not going to be able to turn your dream of using expired milk to power your car into a reality.  The financing system is broken for most businesses right now but innovative ideas in the energy space face their own special set of hurdles.  A lot of electronic ink has been spilled this year trying to explain and come up with possible solutions to the cleantech financing problem and I thought this would be a good time for a review of some of the better ideas from 2010 in this area.

The Valley of Death: The Wall Street Journal, Bloomberg New Energy Finance, and numerous blogs have all been writing about the financing “valley of death” facing cleantech startups.   The basic idea is that VCs are reasonably good at funding high risk technology ventures between a few million and a few tens of millions of dollars but when it comes time to scale up for a large scale demonstration or manufacturing facility VCs usually aren’t able to invest the $100s of millions needed to take the company to the next level.   Banks won’t lend to businesses that are as risky as many of these companies and the whole IPO system is currently broken.  Many Silicon Valley VCs that thought investing in cleantech would be akin to investing in online tech companies are now realizing that both the expertise needed and the exit scenarios for these companies are significantly different from what they had experience with in the past and are now pulling back from the sector.  So how can cleantech startups make it to the other side of the financing valley?

Government vs. Market Solutions: There is a debate about the degree to which government should get involved vs. letting the market place resolve this financing gap.  The Fiscal Times has a good story about the ways that the U.S. government is trying to help cleantech companies get access to capital.  Included in the stimulus package is funding for loan guarantees that, although they do not provide money directly to energy focused startups, makes it possible for them to get money from other sources.  Tesla probably would not have been able to undertake its IPO without a $465 million loan guarantee from the Department of Energy.   The government can also make investments in alternative energy more valuable through policy decisions that incentivize or mandate the use of clean energy sources.

The main market solution available in the absence of a functioning IPO system or bank lending is acquisition of startups by larger energy companies.  However, there aren’t many established market leaders in the cleantech space that can serve an Apple or Facebook like function of scooping up promising young upstarts.  The obvious candidates with deep pockets and an appetite for acquisitions are the big oil companies like ExxonMobil and Chevron but some people argue that they are mainly interested in alternative energy for public relation reasons and have little interest in going all the way with new technologies that will interrupt their existing business models.  Utilities make sense as buyers for certain kinds of new technologies although entrepreneurs and investors are often disappointed when they pay a small multiple of what is referred to as EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), which is how normal businesses are valued, rather than the much higher valuations given to tech startups based on what a revolutionary idea might be worth.

Revolutionary Technologies: Serial entrepreneur and influential cleantech investor Vinod Kholsa has an article in the December issue of Foreign Policy arguing for increased investment in revolutionary technologies.  He thinks that investing too much in today’s technologies that are an incremental improvement in terms of efficiency will leave us with an overhang of large scale infrastructure that will not be a significant enough improvement to stave off serious climate change.  Therefore, we should hold off on large scale changes of infrastructure and have governments invest more in swing for the fences ideas through entities like the Advanced Research Projects Agency – Energy.  Coming from anyone else I would think this idea an excuse for inaction in the near term but Kholsa has a record that can’t be ignored of effectively pushing the envelope on innovation.

Financing and Solutions to Energy Poverty: Looking at the financing challenge from a completely different angle The New York Times has a great Christmas Day article about energy poverty in Africa.  Although a significant market is developing for renewable energy solutions that can help people that are off the main power grid, one of the big constraints is that African companies cannot get the finance to develop new products in this area or import existing products in large quantities from other countries.  The Times notes that “a $300 million solar project is much easier to finance and monitor than 10 million home-scale solar systems in mud huts spread across a continent.”   The business model for off the grid power renewable energy in developing countries is still being developed and this is an issue Ideas on Energy will be following closely.

So as we go into the new year, what are your predictions for what is going to happen in cleantech finance?  Will we see more IPOs?  Will bank lending unfreeze for the sector?  Will the big energy companies swallow all the smaller players? Or will we become more reliant on government assistance and policy?  Whatever happens, 2011 in going to be a big year for new ideas in the energy sector and entrepreneurs are going to be looking for new ways to get money to turn those dreams into our new energy future.

Gas Pipelines, Weak States, and Enemies Coming Together

The Turkmenistan, Afghanistan, Pakistan, and India (TAPI) pipeline has been the subject of intense international politicking. The U.S. is trying to promote the $7.6 TAPI proposal as an alternative to Iran’s vision for a line originating in its own borders and going through Pakistan and India. Both the U.S. and India are trying to promote their plans as “peace pipelines” that will bring warring states closer. U.S. State Department Spokesman P.J. Crowley recently noted in his daily press briefing, “TAPI’s route may serve as a stabilizing corridor, linking neighbors together in economic growth and prosperity.”

Yet despite the focus on international politics it is ultimately domestic politics in Afghanistan that will determine whether the TAPI pipeline is even feasible. Unlike in authoritarian Turkmenistan where the President saying the pipeline will take a certain route is enough to make the population accept it Afghanistan is a weak state where the power of the government barely extends outside of Kabul. The proposed route goes through Kandahar, the heartland of the Taliban, and local communities will need to be convinced that allowing the pipeline to go through their areas will ultimately provide some sort of benefit.

One insurgent group seems to have already bought into the vision of a pipeline through Afghanistan. Hezb-i-Islami Gulbuddin (HiG) recently announced its support for the pipeline and even offered to provide security along the route. The HiG leadership has been in negotiations with the Karzai government over the past year and some analysts think this may be a bid to make itself appear a responsible actor if it is invited into the government. Or it may be an attempt to get more money to fund continued fighting as its members would expect payment for providing security along the route.

It will be interesting to see whether the TAPI pipeline, if it goes forward, ends up promoting stability or continued conflict both regionally and inside of Afghanistan. I wouldn’t be surprised if it ended up doing both. There is something ironic thinking about the U.S. and an insurgent group both working to promote the same project.

For a view from another part of the world on how a pipeline might bring enemies together check out Mary Stonaker’s piece in the Journal of Energy Security about how the Arab Gas Pipeline might serve as a diplomatic tool to bring Israel closer to Syria and Lebanon.

An Energy Prize From the Middle East

Competitions with cash prizes are increasingly being seen by philanthropies, businesses, and governments as a way to spur innovation towards social goals.  This trend is moving out of the U.S. and Europe to other parts of the world.  Today the Zayed Future Energy Prize, based in Abu Dhabi, has announced the top six finalists to compete for the 2011 Prize.  It might seem strange that an oil rich state in the Gulf is focused on promoting alternative energy but Abu Dhabi has been particularly forward looking in thinking about the future of energy.  Abu Dhabi is home to Masdar City, a $22 billion planned community that is aiming to be carbon neutral and serve as a hub for renewable energy and clean technology companies.

According to the organization’s website, “This annual award celebrates achievements that reflect innovation, long-term vision and leadership in renewable energy and sustainability.”  The winner will receive $1.5 million and two runner ups will get $350,000.  The finalists are:

Amory B. Lovins, the Chairman and Chief Scientist of the Rocky Mountain Institute in Colorado, for his work on “integrative design” for energy efficient buildings. Lovins describes “integrative design” as a powerful and globally applicable new tool for shifting rapidly from oil and coal to efficiency and renewables.

Barefoot College, the only fully solar electrified College in India, for training woman in rural areas to contribute to solar energy development. The college believes the very poor have every right to have access to, control, and manage and own the most sophisticated of technologies to improve their own lives.

E+Co, an investment company based in New Jersey, for its pioneering clean energy investments in the developing world. E+Co supports and invests in small and growing clean energy enterprises in developing countries that impact climate change and energy poverty.

First Solar, solar modules manufacturer based in Arizona, for its commitment to solar energy and the development of more efficient thin film solar modules. First Solar has developed an innovative photovoltaic technology focused on affordability as well as sustainability and is the preferred module supplier for major PV projects globally.

Terry Tamminen, CEO and Founder of 7th Generation Advisors, for his work in developing renewable energy solutions in California. For more than 20 years, Tamminen has developed, implemented and replicated effective renewable and sustainable energy solutions by using California as a proof-of-concept model, then scaling up to larger markets within the US and internationally.

Vestas, a Danish manufacturer of wind turbine technology for its work to bring clean energy to developing countries. For over 30 years, Vestas has been introducing innovative ideas to promote clean, renewable wind power as one of the world’s mainstream power solutions. They are relentlessly committed to establishing wind as a large-scale, sustainable alternative to oil and gas.

Finalists Announced For Prize To Reduce Energy Needed to Provide Water

Imagine H2O is running a great competition for startups that will reduce the amount of energy needed to move and treat water and waste water.  Dealing with energy and water issues in an interconnected way is vital to solving problems in both areas.  During congressional testimony last year on the nexus of energy and water it was noted that “nationwide, water and wastewater treatment and distribution combined require about 3% of the nation’s electricity. In California, where water is moved hundreds of miles across two mountain ranges, water is responsible for approximately 15% of the state’s total electricity consumption.” Conversely, because of the water required for the production of electricity, “Most Americans do not realize that they use more water turning on lights and running appliances each day than they do directly through washing their clothes and watering their lawns.”

Winners of the prize will receive $100,000 in cash, business and legal support, and access to a network of partners, customers and financiers to help bring their ideas to market. The organization recently announced the finalists for the 2010 prize. They are as follows:

Agua Via develops a 1-atomic layer thick nanotech membrane that enables desalination at a 66% energy reduction and 50% cost reduction, providing energy-efficient purification and wastewater remediation.

BlackGold Biofuels – Recovers energy from wastewater streams, creating lucrative renewable energy assets from pollution liabilities.

FogBusters Inc. – Treats petroleum, biofuel and food processing wastewater “better, faster, cheaper, cleaner and greener” while capturing the FOG (fat, oil and grease) to make into biodiesel.

Hydrovolts – Makes portable floating turbines that make renewable energy and clean water from an untapped global resource of hydrokinetic energy in water canals.

mOasis (no website publicly available yet) – Harnesses water on any land in the world so that plants grow and the planet can restore its ability to sustain life.

NLine Energy, Inc. – Converts wasted energy found in water transmission and distribution systems into renewable energy.

Pilus Energy – Harnesses genetically enhanced bacteria in scalable electrogenic bioreactor and harvests the electricity and biogases from their metabolism of organics like those found in wastewater.

Puralytics – Solves critical water contamination problems with environmentally superior products.

Solar-Machines – Innovative, non-PV based technology directly and efficiently converts solar energy into mechanical work for water pumping applications.

Water Resources Management Co. (WRMC) – Helps water utilities realize the full benefits of their investments in advanced meter reading, system control and asset management.

The U.S. Military is a Bunch of Green Loving Tree Hugging Hippies

Ok that might be a bit of an exaggeration, but Tom Friedman makes a strong case in today’s New York Times that the U.S. Military is leading the way in developing and deploying green technologies. Small economy cars start looking more attractive than an SUV to the average American consumer when gas goes above $4.00 a barrel but the military is even more heavily incentivized to think about cutting its fuel consumption since in Afghanistan it pays about $400 per gallon, has one person killed or wounded per 24 fuel convoys it runs, and spends about $100,000 per person per year in fuel costs. A $10 increase in the price of a barrel of oil raises fuel costs for the Air Force by about $600 million. Friedman discusses a number of efforts to replace conventional fuels with biofuels for trucks, planes, and ships.

The view from inside the Pentagon isn’t quite as simple as Friedman makes it out to be. In an email from a Pentagon official published by The Danger Room blog, the official notes that even if the army powered all of its Humvees with maple syrup rather than gas they would still need a supply chain to get the maple syrup from where it is produced out into the field. Additionally, there are lots of suppliers of oil out there. It may go up or down in price but it is always available from multiple sources unlike biofuels made from algae or mustard seeds. Although it is a worthwhile social goal to have the military move to less environmentally harmful alternative fuels, from a narrow security point of view the most important thing may be improving the efficiency of military fuel and power consumption overall.

That being said, it won’t be surprising if the military leads the way to the future for the civilian world in coming up with new ways to power our planes, trains, and automobiles. Although in an age where the Pentagon is seen as being a technological laggard compared to the rapid pace of change in personal computing and consumer electronics, it is important to remember that the military was the first to develop and deploy the technologies that gave us radios, satellites, and the internet. Hopefully the mad scientists at the Defense Advanced Research Project Agency can put the finishing touches on a peanut shell fueled hover craft in time for the next conflict.


State Department Announces Plans for New Bureau for Energy Issues

The State Department recently announced its first ever Quadrennial Diplomacy and Development Review (QDDR). Announced with great fanfare by Secretary Clinton, the document lays out amongst other plans Clinton’s intention to establish a new Bureau of Energy Resources in 2011. The stated purpose of the new bureau is to “bring together under a single Assistant Secretary State’s diplomatic and programmatic efforts on oil, natural gas, coal, electricity, renewable energy, transparent energy governance, strategic resources, and energy poverty.”

The QDDR talks a lot about global cooperation on energy issues, not surprising for a document written by diplomats, but what it does not directly deal with is how the new bureau will address international competition for access to resources that is taking place on a global scale. Although we tend to think of the U.S. oil and gas super majors as large players on the world stage the truth is that 88% of oil and gas reserves are controlled by state owned oil companies, mostly in the Middle East. Chinese companies are aggressively competing for access to oil and gas resources around the world and in the last year these companies accounted for one-fifth of all global deal activity in the sector. The Chinese State is offering low cost loans, tens of billions of dollars of infrastructure investment, and in some cases are alleged to be providing payments and other kinds of assistance directly to the families of officials in countries where it seeks access to natural resources. Working with non-U.S. companies that are state owned is often seen as cementing geopolitical alliances in a way that allowing privately held American energy companies access to reserves is not.

Ideas On Energy will be following the formation and activities of this new bureau closely. In the meantime, we would welcome readers’ comments on what they think the State Department should be doing overseas to better promote U.S. energy interests.