GREENTECH MEDIA: How One US Startup Is Making Electrification a Bankable Business in Frontier Markets

| | Comments are off for this post.

Originally published on GREENTECH MEDIA – 

Sigora International charts a path to profitably powering 136,000 people in Haiti.

There’s a reason why Sigora International, a startup headquartered in San Francisco, chose to deploy its pioneering micro-utility platform in Môle-Saint-Nicolas, a remote seaside town in northwest Haiti — the poorest region of the poorest country in the Western Hemisphere.

“Why do we do this in the northwest of Haiti? Because fire testing this technology into a place that’s difficult to deploy, that’s difficult to prove the market, that’s difficult, will basically allow us to deploy it anywhere else in the world,” Sigora’s founder and CEO Andy Bindea, told me on a trip to Haiti last summer.

“Proving this technology in Haiti basically says it’s doable anywhere else in the world,” he said.

Last month, Sigora International’s Port-au-Prince-based company, Sigora Haiti, raised $2.5 million from the Electrification Financing Initiative (ElectriFI) to expand its existing grid network of 1,000 accounts serving 5,000 people, to a network that will serve tens of thousands. The funding will also go toward the build-out of a 200-kilowatt solar array.

Once the entire first phase of the Northwest Haiti electrification project is complete, a venture budgeted at $10 million, the micro-utility will serve 27,000 accounts and 136,000 customers with 3.5 megawatts of peak solar capacity.

Rather than install solar on individual homes or focus on a single microgrid, Sigora is spearheading a micro-utility business model tailored for frontier markets. The startup is designing, installing, owning and operating a system of interconnected microgrids that’s designed to scale quickly and cost-competitively. The system is co-located with generation resources that are small enough to be installed near customers, but big enough to power homes, businesses and hospitals. Enabling it all is Sigora’s proprietary prepaid metering technology.

Sigora Haiti was founded in 2015, when Bindea and employees at his Virginia-based company, Sigora Solar, decided to electrify a small health clinic in rural Haiti. Today, Sigora Haiti serves as a premier provider of pay-as-you-go electricity and is the only private utility in the country. It’s also part of parent company Sigora International’s broader mission to deploy smart grid technology to serve the roughly 1.2 billion people around the globe who still don’t have access to modern electricity.

A port for Christopher Columbus becomes a site for pioneering technology

In November 2015, Sigora Haiti secured the exclusive right to provide electricity service for the next 25 years in Haiti’s Northwest Department, an area comprising six towns with a total population of approximately 200,000. In a country where only a quarter of the population has access to grid power — and that power is intermittent at best — Sigora’s 24/7 electricity service has been well received.

One night last year, the company lit up a town square in Môle with the Haiti versus Brazil soccer game. Sheets of wood were painted white and attached to the side of a truck to fashion a screen, and Sigora tapped into its mini-grid to power a projector. Several hundred villagers showed up to watch the game, sitting on the vestiges of colonial forts in a space that’s usually pitch black by sundown.

In the aftermath of Hurricane Matthew last fall, Sigora’s team worked quickly to ensure power was up and running for its customers. The startup also launched a fundraiser to bring water and shelter to other Haitians around the country.

“We have a personal and a corporate responsibility to help our fellow man,” Bindea said at the time.

Residents of Môle watch the Haiti vs. Brazil soccer game

Christopher Columbus landed at the site that’s now known as Môle in December 1492, on his first voyage to the Americas. France gained control of the area in the late 1600s and built up several military strongholds. Today, Môle is a small fishing village, largely stripped bare by the production and distribution of wood charcoal for heating and cooking.

Sigora Haiti’s Northwest electrification project is creating a new, cleaner source of energy that could one day displace the use of charcoal and other environmentally damaging energy sources. To date, Sigora has focused on powering lights and appliances like freezers, which has already improved healthcare, enabled businesses to grow and improved the overall quality of life in Môle.

All of these developments rely on a robust technology platform. The Northwest Haiti electrification project uses Sigora International’s proprietary prepaid metering technology to easily and reliably collect revenue electronically — overcoming a challenge that has long plagued electrification projects in developing nations. The technology also allows Sigora to monitor and control the grid remotely, and to scale up how much power customers can use over time, as more generation comes on-line.

Newer versions of the meters will be equipped with a wireless chip and the potential to connect every customer to the internet.

A new approach to clean, affordable electrification

While proving out its business model, Sigora has been powering the Haitian community of Môle-Saint-Nicolas and neighboring Presqu’île with two 100-kilowatt diesel generators and a small-scale solar project. With the new $2.5 million ElectriFI funding round, Sigora will develop its first substantial solar project and seek to add more renewable power, including wind, as the number of customers grows.

“We can build amazing solar energy and wind energy systems,” said Bindea. “But without being able to get that energy to the customers and collect revenue, those solar energy and wind projects are failed projects. They will not be financially sustainable.”

By collecting real-world consumption data before building out renewable generation, Bindea believes Sigora has built its grid on a far more financially secure foundation. This way, the company has proof that the system works and is affordable for customers.

Kids watch as Sigora delivers solar panels to the village of Presqu’île.

Some residents of Môle said they’ve been able to redirect the money they used to spend on candles and kerosene toward safe, reliable pay-as-you-go electricity from Sigora. Others are choosing to pay more for refrigeration, which has opened up new business opportunities, like making ice cream and cooling fish so they can be sold fresh, instead of salting them for preservation.

In addition to providing power, Sigora is providing jobs. Ninety-five percent of Sigora Haiti’s employees are Haitian and have been trained to build out the grid and do the final assembly of the smart meters.

In a small but meaningful gesture, when I went to buy a round of sodas for people to drink at the soccer game screening, a Sigora worker proudly insisted that he pay instead.

“We are taking a new approach to electrification in frontier markets, incorporating smart metering, prepaid electricity and renewable generation,” said Bindea. “We are proving that bringing electricity to underserved low- and lower-middle-income populations is not only highly impactful, but also attractive from a business perspective.”

“How we get electricity to the developing world is utterly essential”

Sigora is the first company to receive funding from ElectriFI, the European Commission’s Electrification Financing Initiative backed by 15 European Development Finance Institutions. The startup was selected from among 290 applications in ElectriFI’s first round of funding.

“Scaling Sigora’s model will be life-changing for tens of thousands of people,” said Frederik van den Bosch, managing director of the European Development Finance Institution Management Company that manages ElectriFI. “This is truly a triple-bottom-line business and is exactly the kind ElectriFI seeks to support.”

Improving energy access is often thought of as charity work, but while humanitarian in nature, it’s not about giveaways. Investors are increasingly viewing microgrids and distributed generation as a bankable solution to energy access issues in frontier markets. In 2015, renewable energy investment, excluding large-scale hydropower, was higher in developing nations than in developed economies for the first time ever. A quarter of all new investment in renewable energy capacity that year went to small-scale projects — amounting to some $67.4 billion.

As further evidence of this trend, Developing World Markets recently invested $60.8 million in 11 businesses deploying off-grid solar and microfinancing solutions across Latin America, Africa and Asia, including d.light, Kingo Energy and Off Grid Electric. DWM estimates the funding will enable some 200,000 families to access solar home solutions.

Clean, distributed energy solutions are uniquely suited for emerging markets, according to David Crane, senior operating executive at the private equity firm Pegasus. Crane saw this first-hand while serving as CEO at NRG Energy, which donated and installed around a dozen solar projects in Haiti during his tenure.

“Solar can serve an entire village or downsize to a single home,” he said in an interview last year, for the Empowering Haiti documentary published by GTM. “When combined with battery storage, it can provide a reliable energy resource. Solar resources also happen to be strong in places like in Haiti, and many parts of Africa and Asia.”

“On the flip side, the alternatives are bad,” he said. Large-scale fossil fuels plants require enormous upfront investments that governments in emerging markets often can’t afford to build or maintain. Transmission and distribution systems to deliver the power pose an even greater set of challenges, because they’re expensive to build and easy to steal from. Kerosene, candles, wood and traditional batteries are inefficient and costly for the consumer. And diesel generators, while effective, are vulnerable to fuel-price spikes.

What’s more, the expanded use of carbon-intensive fuels to power developing nations stands to exacerbate catastrophic climate change.

“How we get electricity to the developing world is utterly essential,” said Crane. “People talk about the population doubling or tripling between now and 2050, and almost all of that growth is in the developing world. […] If we serve those people — who deserve to have reliable electricity — the same way that we serve people in the developed world, with coal and natural gas, we’re cooked as a planet.”

Crane, who serves on the board for Sigora International, added that he believes the private sector, if pointed in the right direction, will come up with the solutions needed to deploy sustainable energy around the world, and do it cheaper and faster than any other entity. And because emerging markets are growing, while electricity growth in developed nations has plateaued, this represents an attractive business opportunity.

Next stop: Africa

For Bindea, the business opportunity is key.

Too often, development projects are installed with the best of intentions, but fall into shambles a few years later because there’s no vested interest in making sure they continue to operate. Sigora’s financial success is tied to providing power to customers 24/7. “If we don’t, we do not eat. It’s as simple as that,” said Bindea.

Sigora isn’t the only entity looking to electrify frontier markets. In Haiti, EarthSpark and the National Rural Electric Cooperative Association are also building microgrids and expanding energy access; however, they’ve adopted a nonprofit model and are supported by grants and donations. From Bindea’s perspective, nonprofits do good work, but the business model is limited.

“We cannot electrify the next 1.2 billion people with grants and donations. It just will not happen,” he said. “It needs to be a financially sustainable business model based on equity and debt. Otherwise, it will not work.”

Similar to Sigora, San Francisco-based Powerhive is building solar-powered microgrids and developing its own metering and software technology with private investment. The company then closed a $20 million Series A financing round in January 2016, but has been relatively quiet since then.

There are just a handful of companies developing and deploying prepaid metering technology to serve frontier markets, each with their own unique twist on the business concept. Given that it is early days for all companies in the space and there’s a market of 1.2 billion people to be served, “I believe we have a whole lot to gain from working together,” Bindea said.

The next opportunity for Sigora lies in Zambia, where the startup soon plans to launch a solar-powered microgrid project that will serve 1,200 people in Kanjaa. At the same time, the company will continue to refine its metering technology and make it available for broader sale around the world.

“We look forward to working with them to scale their frontier market technology and vision in Haiti and beyond,” said Quentin Antoine, investment manager at ElectriFI.

Jean-Pierre, project manager at Sigora Haiti, said his wish is to see the day when babies are no longer born in the dark.

“We fight against darkness; it’s a fight,” he said. “We want to put light everywhere that doesn’t have light. Not just in Haiti — we want to do it everywhere.”


This article was updated to reflect that Enel Green Power did not, ultimately, invest $11 million in Powerhive’s microgrid project in Kenya. That sentence has been removed.