Solar energy in Egypt

In the spring of 2012, the sun appears to be shining on the latest solar technology startup, KarmSolar. The company came to the foreground of Egypt’s technology stage on the laurels of Google’s blockbuster nine-month long Ebda competition. KarmSolar made it to the top 20 finalists, but lost the top prize to traffic reporting service Bey2ollak.

They’ve also been generating global buzz, winning the $11,000 (LE 66,440) first prize in the Wharton-HCT Innovation Tournament announced in May in Abu Dhabi. At the event, KarmSolar CEO Ahmed Zahran pledged to make the project commercially viable over the next 12 months.

“We believe our project will help modernize the agriculture sector and support sustainable food production by providing agriculture farms with an affordable and efficient solar energy solution,” he said.

This lofty goal may seem daring for a new entrepreneur anywhere in the world. But KarmSolar faces a unique set of challenges as a technology developer in an industry that has yet to convince investors it is not only “feel-good” technology of the future, but can also offer commercially viable and a consistently competitive product.

On a sunny day in March 2009 Ahmed Zahran was visiting a potato farm in Wadi El Natrun in northern Egypt. The farm had a diesel problem, a lot of potato waste and wanted him to look into using it to produce biogas as an alternative source of energy. But Zahran was not interested in the biogas, which he thought would be a logistical nightmare. Instead, he noticed the sun.

“I realized there was this fantastic source during the winter,” he recalls. “If you have this source during the winter, it must be amazing during the summer.”

So he went back to Cairo and did his research. He found out Egypt was strategically positioned within a solar belt with a very unique resource in terms of clarity of the weather that impacts productivity of a solar farm. “We have a very good solar resource, not just in terms of hours in a year but also the quality of the sun,” he says.

In fact, as one of the so-called Sun Belt countries, Egypt is unique in radiation ranging from 1,970–3,200 kWh/square meter/year from north to south, with the southern areas receiving more sun exposure, according to the New & Renewable Energy Authority (NREA) annual report. It also boasts some of the longest sunlight durations of 9-11 hours a day with few cloudy days annually.

When compared to other sources of renewable energy including wind energy, concentrating solar power has other advantages such as storage capacity. “Energy can be stored with higher efficiency and more cost effectiveness than electricity,” says Rawya ElShazly in her feasibility study of concentrated solar power in February 2011. The study, done in association with Cairo University and University of Kassel in Germany for her master’s thesis, examines regulatory, institution and technical feasibility aspects. It concludes that solar energy has “enormous” potential in Egypt.

As conventional sources of energy are being depleted, government agencies are increasingly exploring alternatives. Domestically, Egypt is already pursuing several solar initiatives and has even taken on the regional leadership role as a host country for Regional Center for Renewable Energy and Energy Efficiency (RCREEE).

Before coming back to Egypt and getting involved in renewable energy, Zahran was managing its carbon credit portfolio for Shell in London, making sure they were compliant with the carbon quotas.

“As fancy as it sounds, I realized that carbon trading is a big joke,” Zahran says. He was disillusioned by the false incentives of the carbon credits for the renewable energy initiatives and organizational fallacies that led to a market collapse. “The message was that you cannot do renewable energy and energy efficiency unless there was an incentive,” he says. “And I felt that those kinds of projects should be attractive on their own without the need for carbon credits.”

After recognizing Egypt’s potential and unique resource in solar, Zahran and the KarmSolar team became determined to make it efficient. “What we’re trying to do is to show the market that solar energy is not a fashion, it’s not something you do because you want to be good. Solar energy is a practical solution because it is abundant and because this is one of the best locations in the world for solar energy.”

What KarmSolar introduced and the Wharton competition recognized was an innovative model of a solar power-generated water pumping system. The company plans to spend the prize money on commercializing the pump and making off-grid irrigation available to agricultural farms in rural Egypt that are suffering from diesel shortages.

A water pumping solution that is cheaper and logistically easier using solar energy. “This region, this part of the world, is one of the biggest consumers of energy in water pumping,” Zahran explains, noting that most agricultural expansion is happening in off-grid locations in Egypt.

To make their model economical and cut down on the cost of batteries, KarmSolar made a strategic decision to replace a battery system with a water storage facility and an electronic interface developed by partner company WorldWater & Solar Technologies.

“The new system is the fraction of the cost of the cost of high-capacity solar water pumping systems” Zahran says. In addition, KarmSolar developed a software platform that would allow a farm to adapt the variability of solar power to its daily and hourly energy demands.

Xavier Auclair, a co-founder who has developed the new interface in-house, says the model could be competitive globally. “We’re not only competitive with fossil fuels, we’re even cheaper,” he says.

According to KarmSolar estimates, its solar model could save up to 60% of total cost assuming the cost of water pumping using diesel generators in 5 countries in MENA over 25 years are $24 billion (LE 144.96 billion) and the costs of water pumping using KarmSolar’s model over the same time period is $8 billion (LE 48.32 billion).

“It is a shame the region is not making use of one of its most abundant resource and keep on focusing only on the finite sources like fossil fuels,” Zahran says.

In the span of a few months, KarmSolar was able to accomplish an impressive feat: develop a new innovative model for water pumping, a growing team, and several high marks at international competitions. And they are gradually establishing clout within the industry as other startups targeting the agricultural sector and energy efficiency have reached out to KarmSolar to explore partnerships.

What remains elusive at this point in time is a committed investor who is willing to take the risk and bankroll the testing period. While many investors have approached KarmSolar, no one has signed on just yet.

So far, KarmSolar has raised about LE 500,000 through private investors and expects to break even in three years. To achieve this goal, the company would have to convince many investors who remain skeptical about entering the Egyptian market and the global solar market as a whole.

Equally important, KarmSolar will need secure large-scale farms which the company is targeting that are also willing to take on the risk and test out the new model.

Following the elections, the new president’s office will have to tackle an array of challenges and strategic priorities. Another risk amid the regulatory uncertainty for the solar market would be where on that agenda renewable energy will emerge.