When Diesel Fuel is just not enough

Egypt’s state budget and population is bound to hit rock bottom if it continues to live off subsidized energy. A few weeks ago, Reuters reported that the “government increased the price of cooking gas cylinders sold for domestic use by 60% to 8 Egyptian pounds a bottle, and doubled it for the bigger bottles used by businesses.” Some months earlier, the government had been dropping hints about increasing the prices of electricity, and the Ministry of Electricity even openly predicted that in the summer, power will be cut from households about twice a day. It is murmured that these are spontaneous reforms demanded by the International Monetary Fund (IMF), which is in talks with the Egyptian government about a $4.8 billion loan.

With the country’s decreasing foreign reserves and state budget deficit, the government does not see another way out than to rely on the IMF. The Egyptian Center for Economic Studies stated that subsidies drained about 32% of the government’s expenditures in 2012, of which 61% were spent on energy. The main problem lies with the high amount of subsidies directed at diesel fuel. Diesel fuel is usually used for transportation means and vehicles, but also to power permanent, portable, and backup generators, irrigation pumps, corn grinders and other machines. Renowned finance and economy blog Rebel Economy published a chart showing where the money is really going:

But with the IMF-loan and the continuous lack of diesel fuel in the market, Egypt needs to pave new ways for energy generation and supply – especially when talking about agricultural and industrial usage in areas that are further away from the electricity grid.

And this is where KarmSolar comes in. In 2011, four young, passionate entrepreneurs decided to develop commercially viable solar energy solutions and become attractive to the private sector, regardless of the government’s incentives. Today, the team consists of 15 members, and already won second place in the Harvard University Business Competition 2012, alongside several other contests. Clients go to KarmSolar to get customized solutions according to their technical and economic needs.

The first solution they thought of was bringing solar-powered water pumps to agricultural areas, where electricity and diesel fuel are either expensive or hardly found – or both. “The first solar water pumping system in the world was developed in Maadi, Egypt in the 1920s. Egypt has one of the highest solar radiation levels in the world. And today, KarmSolar is the only provider of high capacity water pumping solution in the whole region,” Yumna Madi, Commercial Manager of the firm tells Egypt Business Directory. The solar panels used have a power of 57 KW installed capacity and are generating the pump and office space.

The complex is situated in Bahareyya, an area in the Western desert, far away from the electricity grid, where farms usually rely on diesel generators to pump water from deep wells. This is where KarmSolar is also building its office from on-site earth materials, designing it in a way that allows cost-effective integration of solar energy.

A client was so impressed by the idea that he contracted the company to build him a solar-powered worker’s village which will accommodate 300 people.

The problem remains: When people hear solar energy, they hear “expensive”. “After two years of research, we developed a solution that is off-grid and battery-free. We were able to replace the battery, which is the most expensive component of solar energy systems, with something called the Electronic Interface,” Madi explains. “Additionally, prices in general are going down.” The average pay-back period for the solar water pumping solution for the client is between 4- 7 years, depending on the farm conditions and the situation of the diesel subsidies.

Unlike many others, KarmSolar does not whine about how the government is not doing its part on the alternative energy front. Regardless of possible incentives or not, the organization is determined to continue its path nevertheless.

“We don’t talk about something we can do, but about something we actually did already. We’re proving that solar energy works if it is done with a conscience and applied correctly, in spite of the bad reputation that this kind of alternative energy has in Egypt,” Madi concludes.