Karmsolar gives solar power to the people
In Karmsolar’s office on the posh Cairene island of Zamalek the company’s mission statement, to become the most innovative off-grid solar company, hangs prominently on the wall.
CEO Ahmed Zahran believes off-grid energy generation is a way to empower people and make them independent of corrupt government systems.
“I want to convert the entire region to be off-grid. That’s how I see the market. By doing that we will empower them, making them more independent, making their businesses and their lives more in their own hands, not in the hands of dictators,” Zahran told Wamda.
“Entrepreneurship is a form of resistance. Resistance to dictatorship, corruption, to old ways of doing things, to obsolete business models.”
Zahran launched Karmsolar in 2011 to provide electricity to farmers who lived off-grid or couldn’t access state-generated power, but his idealism originates from the start of his professional career, as a financial planner for oil giant Shell in Tunisia and later in carbon trading in the London office.
“[The shift from oil to renewables] is a natural thing for people with a bit of conscience,” Zahran said. “I didn’t like my work with them. I don’t think it was ethical… They are definitely not committed to moving to renewable energy.”
A sentiment supported by a recent vote by Shell’s shareholders against an ambitious renewables plan.
Living in the sun belt
Less than 1 percent of Egypt’s electricity is produced by solar energy: a staggeringly small figure considering the sun belt country’s southern deserts receive some of the highest sunshine hours in the world.
Karmsolar has used the lack of competition to build a business that’s now expanding into both government and private larger-scale generation.
Senior business developer Farida Zaki told Wamda that when KarmSolar started off-grid solar was the only way it could be economically viable and compete with conventional power generation, as electricity subsidies and zero feed-in-tariff (FiT) - a mechanism where governments pay for privately-generated renewable energy - took away incentives for on-grid development.
Two main factors have held the development of solar back, despite an ambitious government target of 20 percent renewable energy by 2020.
Firstly, large-scale on-grid solar plants of 25-50MW are progressing slowly as government demands that all investors agree to conduct any arbitration in Egypt, rather than internationally, have caused the first phase of the FiT approval process to grind to a halt. Investors have already pulled money out of a number of projects, such as Cairo Solar's, that are already under development.
Secondly, there are still a lack of incentives to install solar panels for private use. The FiT price, launched in 2014, is low at 0.84 Egyptian pounds per kWh (US$0.09), and grid electricity is cheap due to subsidies.
Building from farm to factory
Over the years, the company has grown to almost 50 employees.
“When I started in 2012 we shared an office space, we had one big room and a corridor to work in. Then we started growing, we have a new office now in Zamalek,” Zaki said.
Karmsolar got its start in the Bahariya oasis in the Western Desert, providing farmers with solar panels to power water pumps instead of diesel generators. Through its affiliate Karmbuild it’s built on-site housing for workers from local waste material and powered with integrated solar energy.
The company’s total installed capacity at the Bahariya site is just under 1.5MW.
Over the past few years Karmsolar has been working on larger projects, significantly increasing its installed capacity. It signed a deal in June 2015 to build an on-grid 2 MW solar plant for the Red Sea resort of Sahl Hasheesh through the new FiT scheme.
Karmsolar has built a 1 MW plant for dairy producer Juhayna’s Western Desert factory, and will add another 2 MW there over the next two years. It signed an agreement to build a 10 MW plant for Tahrir Petrochemicals, planned to start in 2017, and is building two smaller stations of 75kW and 150kW for two Red Sea resorts in Marsa Alam that will be operational in August.
Karmsolar expects to announce more projects in December.
Public versus private
Zahran said the Sahl Hasheesh project did not represent a break with the off-grid vision, saying the project served “strategic purposes”.
“We have to understand and be comfortable with working with the government. Besides, we need to target on-grid in order to change it to off-grid.”
But it also makes clear the advantages of targeting off-grid rather than government projects: a year in and Karmsolar is still in the process of obtaining a temporary license for the Sahl Hasheesh plant and will need to negotiate a power purchase agreement (PPA) after that, close funding and sign a final contract.
The Juhayna project, on the other hand, was announced in October 2015, four months after the Sahl Hasheesh development, but will be operational in early August.
Ahmed Atta, business developer at energy advisory company Egypt Energy Monitor, said agriculture and resorts had the best potential for off-grid solar development.
But solar power fluctuations and expensive energy storage options caused “technical problems” for industrial customers, like the Juhayna project, and for small-scale solar power providers “there are not many options for loans”, he said.
“Hybrid solutions [combined solar and conventional generation such as diesel] might be a way out,” he told Wamda.
Zahran acknowledged both issues, saying on the latter at least that they’d signed a deal in January with Plus Leasing to offer loans to farmers for solar pump installations.
He said there was a lot of interest in the market for financing, but due to the devaluation of the Egyptian pound against the dollar in March the deal with Plus Leasing now had to be restructured and would be running in the third quarter of 2016.
As a primariy R&D company storage is a technical issue they are working on. “We exist to solve the problems that limit the process to off-grid, such as storage. It’s still a long complex process, but we are here to solve that, so that off-grid becomes the mainstream.”
There are several competitors in the market, such as SolarizEgypt, Infinity Solar Systems, Onera, Sun Infinite and Cairo Solar.
These companies do commercial and residential solar rooftop projects which are connected to the grid. Thereby, Cairo Solar and Sun Infinite are qualified for 50MW plants under the feed-in tariff scheme.
SolarizEgypt, a 2013 Egyptian startup by a group of AUC graduates, is arguably the most active competitor, and also partly targets the off-grid market. It however also eyes several on-grid projects.
These other solar providers don’t have the same aim to change the market to off-grid, but Atta said under the current lack of incentives the fastest way to make an impact on Egypt’s energy mix with solar was through large-scale on-grid solar plants.
It's the vibe
Zahran thinks differently. It may not be the fastest way he is seeking, what he is really after is creating sustainable value.
“Making money is easy. Creating value is very difficult,” he said. “When you create value, and show people how to create value, you can really immensely impact communities.”
Zahran wants to create value for his employees as well, by developing a business people want to work for because they were treated well not because of the money. Working at Karmsolar should teach employees “something valuable” rather than turn them into “company kids”, as Zahran experienced at Shell where he felt employees were forced into a certain system.
Richard Barrett, who worked at KarmSolar for two and a half years as business developer, wrote in an email that the job was “exciting, varied and challenging”, and he was “immensely proud to have been part of the company”.
“I have no doubt that... KarmSolar will continue to inspire and give confidence to other entrepreneurs to think big and challenge the status-quo with their work.”
Zahran realizes the road ahead is long, but that doesn’t deter him from what he sees as a mission, one worth his lifetime dedication. “Of course this is something that requires a lifetime to do. There is no other way.”