Electron Rush: Why U.S. Renewable Energy Is Converging On Africa
Over the past decade, a generous federal tax credit, the declining price of solar panels, and the rise of “net metering” (which allows homeowners and utilities to sell surplus energy back to the grid) combined in a perfect storm to turn the U.S. solar industry into a small juggernaut. The industry gained 51,000 jobs in 2016 — more jobs than were created in the entire fossil fuel sector. The U.S. Energy Information Agency predicts utility scale solar power to grow another 44% by 2019. If solar companies are doing so well, why are they already looking for the next play? Some see even greater opportunity in Sub-Saharan Africa, where 660,000,000 people who lack reliable electricity represent the planet’s largest emerging power market.
In reality, Africa is two markets: urban populations that access over-burdened, under-maintained and poorly performing traditional grids, and rural communities, people living “beyond the grid”, in places too remote for power lines. Together, the two comprise an enormous landscape where the potential for profit, and a nascent regulatory environment, suggest a 21st century version of the Wild West.
Trey Jarrard is a 46-year old self-described “former private equity guy,” who was attracted to solar energy less for concern about greenhouse gases, than economic fundamentals. Between the cost of producing electricity and prevailing market prices, he reasoned, small power plants could be big profit centers. Jarrard founded Renewvia Energy in 2008. The company cut its teeth building turnkey projects in Georgia, South Carolina, New Hampshire, Ohio, MA, Arizona and Virginia, demonstrating internal rates of return of 20% and above.
“But that’s not sustainable,” says Jarrard. “Such profitability is not what the Federal government’s Tax Credit Incentive was designed to achieve.” In 2015, Congress extended the tax credit through 2021, but by that time Jarrard had already begun looking for markets less reliant on subsidy.
On Lake Victoria in faraway Kenya, he found a community of 5,000 people, and a government-built fish processing facility that lacked power. With a power purchase agreement for 15-kilowatts, he built his first African solar facility, a small operation that enabled fisherman to power refrigerators to preserve their catch. That led to a 50-kilowatt plant for a fish hatchery, grants from the U.S. Trade and Development Agency’s Power Africa program, and hundreds of megawatts worth of proposed projects from Kenya to Nigeria.
With electricity prices across Africa exponentially higher than in the U.S., Jarrard finds that rural electrification to be gratifying, and profitable. “Some investors like stocks and bonds or apartment buildings; ours like power plants.”
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