Virunga Power Founder and CEO Brian Kelly talks to us about designing for scale and innovation in the African energy sector.
INTRODUCTION
The 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 long-term 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 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.”
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.
AN ANSWER TO MANY CHALLENGES
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 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 cost-competitive 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.
“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 centuries-old hydropower principles can bring the lowest cost and most efficient power supply to rural communities.
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 year-round 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.”
