Virunga Power

EXPLORING INNOVATION IN AFRICAN GREEN ENERGY GENERATION AND DISTRIBUTION

VIRUNGA POWER

Rural Electrification at Utility Scale Virunga Power Founder and CEO Brian Kelly talks to us about designing for scale and innovation in the African energy sector Writer: Marcus Kääpä | Project Manager: David Knott

T

he economic growth of much of the African continent hinges on reliable access to affordable power.

Large swaths of Africa, especially its rural areas, are woefully underserved by the basic utilities required for sustained economic growth and development. Electricity is one of these. Recent decades have witnessed an ongoing campaign by African leaders, international development banks, and the donor community to improve electrification rates. Their efforts, coupled with a more recent push by new ventures deploying solar home systems and other micro utility solutions, have resulted in progress.

However, the cost and inefficiency of extending national utilities to rural communities paired with the relative unaffordability of subscale solutions leave serious gaps for alternative longterm solutions.

Enter Virunga Power. Named after the impressive range of volcanic mountains that stretches across the border regions of Uganda, Rwanda, and the Democratic Republic of 2 | Africa Outlook issue 87

Congo, Virunga Power’s vision is to become Africa’s first rural utility that operates at scale. Over the last 10 years, Virunga Power has been developing megawatt-scale run of river hydropower projects and rural distribution grids across East and Southern Africa.

“There remains a significant need for energy in rural areas.

Affordable and reliable energy is essential for sustained economic growth, improvements in health and education, and greater rural industrialisation,” Brian Kelly, Founder and CEO, tells us.

Prior to starting Virunga Power, Kelly worked to finance the rapidly growing power generation sectors across Asia. This experience showed him how important infrastructure is to improving lives and livelihoods in emerging economies and informed his vision for Virunga.

“I spent much of my 20s as an investment banker advising large Chinese and Indian utilities on acquisitions of infrastructure assets and utilities in Asia and beyond. That

work gave me an understanding of how important scale and proper financing are to the viability of infrastructure projects,” he says.

After several years in this role, Kelly felt it was time to apply his experience in another part of the world.

“I had always wanted to be an entrepreneur. My banking work gave me exposure to the tail end of the electrification push in Asia and an up-close view of the impact infrastructure can have in improving lives. With Africa looking to move towards universal electrification, I saw an opportunity to try to meet the needs of African communities,” he continues.

“Providing reliable energy to a rural area at a reasonable price will stimulate development and productivity. Producers will produce more and consumers will consume more. Markets and entrepreneurial opportunities will expand. That is how it played out in Europe, America, Asia, and elsewhere over the past 100 years, and there is no reason that cannot be the case in Africa as well.”

ENERGY & UTILITIES

In 2011, Kelly founded Virunga Power with the intention of putting his idea to the test. “From the beginning we committed to building a solution to provide reliable, clean, and affordable energy. We did not want to be charging people $1/kWh or more. You can’t drive local growth in a globalised world with electricity costs that high.

It took a long time to understand the different technologies, markets, regulatory environments, and industry players, but we are confident our diligence and persistence will pay dividends for Virunga and its customers,” Kelly says.

THE “GOLDILOCKS” SCALE FOR RURAL POWER DISTRIBUTION

AN ANSWER TO MANY CHALLENGES

• Megawatt scale projects are large enough to attract infrastructure investors to provide loans for project construction at long tenors and relatively low interest rates, allowing for affordable end-user tariffs.

Virunga’s technology of choice is run of river hydropower, a renewable and environmentally friendly source of electricity.

Used throughout the world for over 100 years, it relies on the energy contained in the small to medium sized rivers and streams that are abundant in the rural areas of East and Southern Africa. Because bringing a

According to Kelly, extending centralised power grids into rural areas entails huge upfront costs, and network redundancies, presenting challenging economics for national utilities. On the other hand, household level power generation (i.e. solar home systems), while rapid to deploy, ignores potential economies of scale and is expensive for the consumer.

For much of rural Africa, the “just right” solution is megawatt-scale utilities of one to 20 MW capacity, serving tens or hundreds of thousands of customers. Here’s why: • Distributed mini-utilities avoid the wait for expensive, governmentfunded transmission projects to bring the grid closer to rural communities. By generating and distributing power on a local basis, rural households can have access to energy sooner and more reliably.

• Most of the energy can be distributed and fully consumed with lower voltage networks that connect rural farming communities and towns.

• Fully renewable, baseload generation from hydropower can be counted on at all hours of the day, making commercial and industrial use more viable, and can be supplemented by intermittent sources and storage

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VIRUNGA POWER

SMEC SMEC has a strong partnership with Virunga Power International, having developed two run-of-river hydropower plants of four to six MW each, located in Western and Central Kenya respectively (Sakhala and Mathioya-Kirogori SmallHydropower Projects).

SMEC’s versatility, technical expertise and innovative, solutions-led approach has enabled it to become a leader in the hydropower sector in Africa, delivering projects in Kenya, Uganda, Sudan, Rwanda, Malawi, Zambia and Tanzania. SMEC supports clients to execute projects as small as 0.5MW to projects over 2,400MW in capacity, while offering reliable and quality work outcomes.

LOOKING AHEAD “We are excited about the future. Years of hard work by the team have produced a pipeline of high-quality projects at various stages of planning and development.

Recent successes validate the model. Zengamina Power, our subsidiary which provides power to approximately 5,000 people in northwest Zambia, is performing well. At an average usage of 100kWh per month, our customers use 30 to 50 times more power than their rural African peers. They can afford to use that much power due to our low rates and have built their lives around doing so.”

– Josiah Brand, Chief Operations Officer Eng. Dido Lumanyika, Virunga’s Head of Utility Operations, is no stranger to megawatt scale generation and distribution projects. Having worked as an Asset Manager and T&D Planner for Duke Energy and FirstEnergy, large US-based utilities, he knows the benefits of scale. He also knows how to translate that knowledge and experience into productivity in the rural African context. Prior to joining Virunga, Eng. Lumanyika was the General Manager of the West Nile Rural Electrification Company, a vertically integrated utility that provides electricity to approximately 20,000 people in Northwestern Uganda.

“I am excited to be part of the Virunga team. I have a passion for hydropower and electrification, and we are combining the two to add value, enable economic productivity, and make a positive impact on the lives of our customers.”

– Eng. Dido Lumanyika

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www.smec.com

project online requires significant development time, capital, and engineering expertise, most other private developers focus on technologies like solar and wind.

“For Virunga, run of river hydropower provides rural communities a very cost-effective source of electricity. Intermittent power sources (e.g. solar or wind) must rely on oversized battery or diesel backup to reliably serve communities,” Kelly says. “While battery storage costs are coming down and can be useful and costcompetitive solutions in developed markets over short periods of time, storing power for days at a time, which can be necessary for rural, off-grid applications can be extremely expensive on a per kilowatt hour basis (US$1 and up) and typically supports only low intensity uses such as lighting, cell phone charging, and domestic appliances.

ENERGY & UTILITIES

Through our specialist expertise we’re challenging boundaries to deliver advanced energy infrastructure solutions With over 1300 employees working across 25 countries in Africa, SMEC provides innovative and sustainable solutions in the hydropower and energy sectors. Our specialists have delivered more than 50 hydropower and dam projects and 6000 MW hydropower studies throughout Africa.

Learn more about our capabilities at www.smec.com

Press Ad_East-West Africa_90x160mm.indd 2

18/11/20 5:17 pm

Atacama Consulting is a leading Environmental and Social Advisory firm based in Uganda, East Africa.

We are glad to have supported Virunga Power as their international Environmental and Social Impact Assessment (ESIA) consultant for its hydropower projects in Southern Tanzania. The assignments were undertaken in conformity with the International Finance Corporation’s (IFC’s) Environmental and Social Performance Standards.

“Zengamina Power, our subsidiary which provides power to approximately 5,000 people in northwest Zambia, is performing well”

Plot 22B, Lower Naguru East Road, Naguru | P.O. Box 12130, Kampala - Uganda, East Africa Tel: +256-751-090752 | admin@atacama.co.ug | www.atacama.co.ug

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VIRUNGA POWER

“Providing reliable energy to a rural area at a reasonable price will stimulate development and productivity”

“At the right scale, Virunga can deliver power to customers for between US$0.20 and US$0.30 / kWh and for 24 hours a day, 365 days a year. If we are successful, rural African communities will have electricity at a price and quality comparable to cities and on par with costs in many developed markets.

“Regional governments embrace the goal of providing electricity and other basic utilities to rural areas.

Electrification can be transformative, improving the quality of life, creating economic opportunities and stemming rural-to-urban migration.”

Currently, Virunga Power is working on multiple projects across East and Southern African countries.

“Virunga partners with local developers and operators to improve their facilities and grow the customer base. The data we collect enables us to refine our model. Five years from now, we hope to be working with governments across the region on larger rural utility concessions that will supplement the national utilities in areas that are hard to reach and reliably supply,” Kelly says.

“As the company strives to serve an additional 40,000 people in northwest Zambia and tens of thousands more elsewhere in its initial growth phase, continued success will require input from all. Strong and durable partnerships are incredibly important for us.

“Because the types of projects we are building and operating have analogues throughout the world, Virunga taps engineering firms, consulting professionals, and equipment suppliers with global knowledge and experience. Blending the latest improvements in technology around smart grids and metering, mobile payment systems, solar hybridisation potential, and flexible energy storage options with centuriesold hydropower principles can bring the lowest cost and most efficient power supply to rural communities.

ENERGY & UTILITIES

Q: WHAT DOES YOUR PROJECT PIPELINE LOOK LIKE? Josiah Brand: “Over the years we have focused on building diversity and resiliency into our pipeline by developing different style projects across multiple countries. This reduces the risk that a short-sighted political or policy change in one country damages our long-term prospects as a company.

“More specifically, over the next 12 to 18 months we have plans to add several thousand customers to our operation in northwest Zambia and also aim to reach financial close and start construction on approximately 20MW of generation projects in Kenya and Burundi.

“Beyond that is tough to predict, but we have a stable of projects in those countries as well as Zambia and Tanzania that we will push forward when the market dynamics are right.”

Our best partners and suppliers help us design solutions with the consumer’s interests in mind.”

Looking ahead, Virunga will continue to demonstrate that localised energy generation is a necessary and beneficial complement to the traditional centralised model.

The company also seeks to take advantage of the fresh opportunity rural African areas provide – that of simpler integration and implementation of innovative green energy production techniques inherently available in the rural environment.

“Some believe that solar and battery alone can solve Africa’s power needs, much as other markets are shifting away from their reliance on fossil fuels, but the reality is that there must be a reliable grid to serve as a base for that transition,” Kelly says.

“In Africa there is a way to adopt the best of both worlds, incorporating solar into localized distribution grids and captive industrial supply while utilising other renewable sources such as small hydro as a baseload supply.

If planned from the beginning, it can help reduce costs and optimise yearround output. We are confident that a

healthy mix of distributed generation sources at megawatt scale will enable the best outcomes for hundreds of thousands of our customers.”

The CEO ends with the reinforcement of Virunga’s company mission, an aim that encompasses each of its past and current projects.

“We must envision the ultimate goal, which is a fully integrated and reliable series of grids powered by a variety of localised, sustainable energy sources.

The continent’s long-term growth will not be driven solely by centralized fossil fuel power stations with transmission systems stretched over vast distances. Virunga is attempting to model in Africa what the developed world is only starting to realise about power supply: the most sustainable solutions are often local.”

VIRUNGA POWER info@virungapower.com www.virungapower.com

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