Washington DC-based Centennial Generating Company is set to invest Rwf8.2 billion ($10 million) in scaling up its off-grid hybrid solar and battery storage power generation systems as it embarks on expansion in the region.

The independent power producer targets commercial and industrial customers in Rwanda and elsewhere in the region in the next three years.

This segment of the market is underserved as most off-grid solar power generation is rural based, focused on pay-as-you-go services like Ignite Solar or large utility-scale projects.

In the middle are corporate customers, in and near cities that face relatively expensive power bills and frequent power outages, adding to the costs of running businesses. Some resort to diesel generators.

Typically, the cost of generating power from diesel run generators is estimated at 0.33 (Rwf270) per kWh while solar is less than $0.12 (Rwf98) per kWh, according to industrial players.

Centennial pioneered its solar power generation and selling to the Kigali Memorial Centre in March 2016, resulting in the centre reducing diesel usage and paying lower power costs.

Affordability of solar power coupled with its reliability has generated interest from business leaders in Uganda and Rwanda.

“We are focused on 1MW projects for various hotels, commercial buildings and factories, but customers in Uganda and Rwanda have indicated an interest in more than 5MW of projects over the coming 2 to 3 years,” said David John Frenkil, founder and managing director of Centennial Generation Company, a former Infrastructure Project Finance attorney at international law firms.

According to Mr Frenkil, the average size for the projects under development is 100kW.

“We are working with private investors to fund the projects, which will require about $1 million (Rwf817 million) for every 1MW installed in the aggregate,” said Mr Frenkil.

He explained: “The purpose of Centennial is to make it easier for businesses to operate in the region. We lower power costs and stabilise power supply for our corporate customers, while offering a hassle free service.”

In Rwanda, businesses experience two-hour power outages daily while in Uganda, it is estimated at six hours, forcing businesses into the expensive environmentally unfriendly diesel generators.

The strong demand from industrial and commercial customers is explained by the hope to save on electricity bills and reduce carbon footprint. It is estimated that power costs add 40 per cent to the operational budget in East Africa.

Centennial installs, owns, operates and maintains the electricity generated from the PV solar systems, which has made solar energy more affordable than other source of electricity.

While the company has no specific tariff for the power generated, management of Centennial says clients are involved before the final price is reached.

“We conduct a power study at no upfront cost for our customer to determine their power consumption and associated expenses, and then we work with the customer to set a rate that lowers their power costs. The price we agree to with our customer depends on the consumption level of the customer but we typically offer double-digit savings,” said Frenkil.

Feed-in tariffs

But as Centennial scales up solar power generation, it remains interested in the opportunity to sell electricity to national utility off-takers.

Rwanda independent off-grid solar power producers are not heavily regulated, exposing consumers to manipulation and exploitation. But this also creates investment uncertainty in energy systems seen as crucial reducing pressure on main grid.

According to industrial players, setting feed-in tariffs to reward green energy generation is much cheaper and predictable than pumping in tax subsidies, capital grants and rebates.

Certainty in green energy tariffs in some economies has helped work as a bait, attracting investment as developers lock in better prices for longer periods.

“There is quality rooftop space that is currently available in East Africa, and it can reduce the need for new infrastructure expenditures by local and national governments through feed-in tariffs or other structures that also take into account ways to mitigate the variability of solar electrons,” suggested Mr Frenkil.

“A feed-in tariff priced below $0.13 (Rwf106) per kWh would be economical today for private investors and it would help to reduce the utility’s cost of procuring electricity,” he said.

Currently, according to industrial players, every generating company is negotiating for its own tariff with Energy Utility Development Corporation Ltd (EUDCL), with some producers charging $0.23 per kWh.

“Currently tariffs are negotiable depending on the size of the project under open book financial model agreeable by both parties,” said Robert Nyanvumba, director for energy at Ministry of Infrastructure.

Rwanda Today understands that EUDCL is reluctant to commit itself with a feed-in tariff owing to variability of the solar resource and the impact this would have on the reliability of its electric grid.

“But we can mitigate the variability of solar power through the use of battery storage that benefits both the utility’s grid, as well as the on-site host of the installation,” said Mr Frenkil.