Somali energy, investment opportunity

Somali Energy Investment Opportunity

An estimated 9 million Somalis survive every day without access to electricity; approximately 85% of the total population. In rural areas, energy access drops to just 4%. Somalia has one of the world’s highest electricity prices, yet one of the continent’s lowest GDP per capita rates. Total energy consumption in 2012 was estimated at 288.3 million kWh or 28.7kWh per person; just 1% of the world average, half that of Ethiopia and 19% of Kenyan per capita use.

Much of the country’s power infrastructure was destroyed during two decades of conflict. Thus, current generation capacity is privately owned and distributed, to anywhere between 250,000 and 700,000 individual connections (actual numbers vary considerably by source), through microgrids. Electricity is largely produced by diesel generators and some renewable energy. However, most of the generators and distribution equipment is old and inefficient, resulting in a low-quality electricity supply. Like all economies, Somalia requires affordable energy to power sustained growth. At present, the cost of electricity impedes the development of new industries and businesses and prevents existing businesses from expanding.

Egal Wind Farm in Somaliland.

Electricity in Figures Access

15%

Cost

Urban Population

$1/kW

4%

Somalia

Rural Population

$0.2/kW

Kenya

$0.1/kW

USA

Electrical engineers at work in Somaliland.

Why Invest in Somalia?

• Strong Demand for Affordable Electricity: The need for cheaper and reliable electricity throughout Somalia is high and growing, as evidenced by the expansion of Independent Power Providers and the establishment of microgrids in a growing number of cities. As a largely agricultural economy, demand is particularly high in the dairy and fisheries sectors.

• Solar Energy Potential: Somalia has an average 3000 hours of sunlight each year and one of the highest levels of irradiance in Africa; over 200W/m2, equaling roughly 200kW/km2. This has spawned several local startup businesses and the expansion of regional renewable energy firms in Somalia.

• Wind Energy Potential: With wind speeds close to 20 miles per hour (9 meters per second) on average, Somalia also has some of Africa’s highest potential for wind energy generation, particularly along the coastline. Wind energy generation in just four square kilometers of Somalia could produce as much as the entire Somali region currently produces with diesel and hybrid generation.

• Affordability of Renewable Energy Technologies: Renewable technologies have improved significantly over the past ten years in terms of efficiency, affordability, operability and cost of maintenance.

These improvements have spurred the emergence of renewable energy solution providers throughout the country.

• Priority Sector: The Federal Government of Somalia, in their recent 2017-2019 National Development have listed the energy sector as a priority sector; stating its importance in unleashing dynamic and sustainable economic growth through agricultural and manufacturing productivity and creating opportunities for new businesses to flourish.

• Expansion of Financial Services: The number of commercial banks and branches operating throughout the country is expanding; each looking to provide debt and/or equity investments in potentially profitable enterprises.

What are some of the Opportunities?

• Public Private Energy Partnerships: With no largescale energy production anywhere in Somalia, the opportunity exists to establish, through public private partnerships, large capacity electricity generation, particularly in the larger populations centers, such as Mogadishu, Kismayo, Hargeisa, Bossaso and Garowe.

• Investment in Existing Independent Power Providers (IPPs): Many of the existing independent power providers are seeking finance to help them expand and upgrade their generation and distribution infrastructure. With 60-65% of IPP turnover paying for diesel and losses in the distribution system of between 25-50% (4 times greater than elsewhere in Africa), modern generation and distribution infrastructure presents an opportunity for significant efficiencies.

• Establishment of New Generation Systems and Microgrids: Opportunities to establish diesel/hybrid generation infrastructure and microgrids. A survey undertaken among ten IPPs in 2016 suggested that profits of between $0.5 million and US$5 million were being earned on an annual basis.

• Small Scale Renewable Energy Infrastructure and Equipment: Entrepreneurs in the agriculture, agri-processing and manufacturing sectors, because of the high cost of electricity are constantly looking at opportunities to adopt renewable energy technologies to reduce long term operating costs. Several firms have evolved already to supply the growing demand for renewable energy products in the agricultural and fisheries sectors. Other opportunities lie in the industrial, commercial, education, healthcare and residential sectors, particularly in rural areas.

• Provision of Technical Services and Capacity Building: Major constraints that impede growth of the sector include limited technical capacity to upgrade energy infrastructure, support interconnection and the integration of hybrid systems, introduce metering and motor controllers. Opportunities lie in training and supplying a cadre of electrical engineers to support existing stakeholders, and anticipated growth in the sector.