CrossBoundary Energy has closed the first dedicated fund for commercial and industrial solar in Africa.
The $8 million fund, which should unlock $20 million to $30 million in projects, was formed specifically to help this emerging sector and prove out a new asset class. CrossBoundary Energy was formed by CrossBoundary, an investment and economic development consulting firm.
CrossBoundary Energy has developed SolarAfrica, a platform that allows local solar developers to offer a fully financed power-purchase agreement. Much of the focus on distributed solar in sub-Saharan Africa is in the residential and small-commercial markets, where offerings from private developers are proliferating and private money is starting to flow.
Many of the residential solar companies are focused on the people who currently live without a grid connection. Most large businesses in sub-Saharan Africa are served somewhat by the grid, and most have diesel backup power.
Self-generation accounts for about 6 percent to 12 percent of installed generation capacity in sub-Saharan Africa, mostly in the form of diesel generators. In some of the poorest countries, it's as high as 20 percent, according to the World Bank.
Businesses in the region experience an average of eight power outages a month, according to the World Bank, at a cost of about 7 percent of annual sales. With solar's costs continually improving, the technology is an increasingly attractive option for many large businesses, especially to offset diesel costs.
CrossBoundary will finance projects between 200 kilowatts and 5 megawatts. South African firm NVI Energy will provide technical oversight and asset management services for SolarAfrica.
“Until now, no one could finance it, because it’s too bitsy, but no one had a portfolio to put enough projects together to get the financing,” said Matt Tilleard, co-managing partner of CrossBoundary. “Someone had to give birth to a live chicken and get past this chicken-and-egg issue.”
The first investment by the new entity is an 858-kilowatt solar installation at the new Garden City Mall in Nairobi. It is the largest rooftop solar system in East Africa and the largest carport solar system to date.
The decision to go solar in Africa for early adopters is strictly economic. “If you’re running a business in Africa, you’re not [looking at solar] for CSR,” said Tilleard, referring to corporate social responsibility efforts.
Solar energy will not completely eliminate the need for backup generation, but it could at least make a dent. To fully replace backup power, it would take a solar-plus-storage solution. That is not a focus for CrossBoundary for this first fund, but it has already supported one project at a luxury safari lodge in Kenya that featured a 46-kilowatt solar system and lead-acid battery bank to completely take the facility off of diesel.
There are many skilled solar developers in Africa, noted Tilleard, which is why CrossBoundary Energy is just bringing the financing piece. SolarAfrica will either do direct deals and then bid out the project installation on the platform to local developers, or a developer can bring a project and price out the project using the SolarAfrica tool.
As with any region, local knowledge is key to scaling up. But there is also a demonstration and education component. “There are still a lot of misconceptions about solar,” he said. “But what is attractive about this is it’s a very exciting high-growth-potential, narrow niche.”
The financing will be available in Kenya, Rwanda and likely one other West African nation.
The goal is to deploy the $8 million in 12 to 18 months and then do another fund. “It’s exciting to say we’re the first to do this,” said Tilleard, “but that just shows how young this market is.”