Financing solar projects in emerging markets
Founded by Markus Schwaninger and Martin Baart three years after they met at a solar conference in Kenya, ecoligo is a solar utility that provides low cost electricity to businesses and industries in emerging markets. We asked Martin Baart about the energy problems that emerging markets are facing and the solution he and his partner found to help solve them.
Hello Martin and thank you for your time today. Can you tell us where did the idea for ecoligo come from?
Markus and myself were active for some years already when we met. Markus supported the German development cooperation GIZ in its duty to engage with German companies entering markets in Sub-Saharan Africa, and I was working for a company that was active in the project development of solar PV projects in these regions. We discussed these projects at the conference and afterwards both realised the tremendous potential of solar projects in the region.
Markus saw that many companies entered these markets with pilot projects that often received grants and that after these initial projects, they failed to implement further projects. On the other hand I was trying to find investors for our projects — a task that was bound to be difficult, as the financing did not match the projects in terms of return expectation, volume and duration of the finance. Also, we both saw many projects fail after 2–3 years of operation, as no one took care of the maintenance.
Markus and I realised that a financing solution that matches projects, combined with a model where operation and maintenance are covered, was the solution the market needed.
In emerging markets, what are the main energy and power supply problems local businesses face? And how does ecoligo help solve these problems?
Businesses in emerging markets really face two main problems: Firstly, the energy supply by the utility is often not sufficient in terms of capacity. The underserved market faces energy shortages mostly affecting the operations of the business through blackouts. In some severe cases, enterprises also face scheduled outages, also known as rolling blackouts or load shedding, where the utility is announcing planned power cuts.
The second problem the economy is facing is that energy costs are high in absolute terms, but also as a percentage of the overall operational cost of a business. Often being the highest single cost item, businesses strive to lower their energy cost in a fight over competitiveness.
In which countries do you see the most potential right now for ecoligo?
The most potential for ecoligo is in countries that are in the so called “sunbelt region”. This includes all Sub-Saharan Africa, plus South-East Asia and the Caribbean. The obvious reason is that here the sunshine is significantly higher than in other regions of the world. In addition, the customers of ecoligo — commercial and industrial businesses based in these countries — are facing rather high energy costs. This combination makes ecoligo’s business model attractive.
Our current focus countries are Ghana, Kenya and Tanzania, as Markus and I have large networks in the industry here. However, we do pursue opportunities globally.
What are your latest successes?
We just recently financed two solar projects for Penta Flowers in Kenya. They will be built in the coming weeks, ensuring a smooth operation and secure supply of sustainable energy to the flower farm after successful construction. The next projects in Ghana will follow soon.
Interview by Anne-Sophie Garrigou