Power to the people

Entrepreneurs at MIT’s Legatum Center are trying to bring clean-energy solutions to developing countries.

Egypt is not a place that lacks sunshine. But it does lack solar energy: Renewable power accounts for less than 1 percent of the energy consumed by the country’s 75 million inhabitants. Moreover, to acquire solar capacity, Egypt would have to import all the solar panels, since it currently lacks manufacturing facilities for photovoltaic cells.

Nadia Shalaby would like to change that. Shalaby is currently one of 35 fellows at MIT’s Legatum Center for Development & Entrepreneurship, which supports “bottom-up” business enterprises in the developing world. At the Legatum Center, she is spending the 2010-2011 academic year developing a business project intended to jump-start the Egyptian solar-manufacturing industry. “This land is fertile ground for solar energy,” says Shalaby, who largely grew up in Egypt. 

Building solar units in Egypt would have two large benefits, Shalaby contends. First, it would lower prices. “Otherwise you’re importing technology into a developing country which cannot afford alternative energy in the first place,” says Shalaby. “That’s just not feasible.” Shalaby estimates domestic Egyptian manufacturing could lower production costs by 50 percent, partly by eliminating the need to pay import taxes and the markups charged by global equipment makers, and partly by reducing transportation and labor costs.

Right now, she notes, in the chain of solar-equipment production, about seven companies worldwide make polysilicon, a crucial material, and 10 to 15 make wafers, a key component. About 40 to 50 firms then make finished solar cells, while hundreds of firms turn those cells into larger modules. Shalaby thinks an Egyptian manufacturer could plausibly lie in the middle of this chain, producing cells and modules.

Secondly, expanding Egypt’s manufacturing capabilities could create a virtuous cycle in which more well-educated Egyptians gain business and technology expertise, and pursue innovative projects at home, Shalaby believes. “Funding needs to be put into economic development and bottom-up projects that create jobs and move Egypt up the technology ladder,” asserts Shalaby, who has undergraduate and master’s degrees from Alexandria University in Egypt, and a PhD in computer science from Harvard.

Shalaby’s project faces enormous hurdles, however, including regulatory approval from Egypt’s challenging bureaucracy and the need for initial investment, which Shalaby suggests might have to come from a variety of private and public financing sources. “It is a complex initiative,” she allows.

Experts in the field believe the potential for solar-power production in Egypt is clear. ‘I think the logic of Nadia’s project is absolutely sound,” states Niall Henderson, head of strategy, North America Gas, at BP, citing Egypt’s abundance of sun and sand (in which silicon is found). However, he adds, “The biggest hurdle is … developing the innovative manufacturing technology” needed to compete in the industry; solar technologies are still being refined, but Egypt has no track record yet of research and development in the field.

Diversity of projects

Harnessing unused, renewable resources is a recurring theme among this year’s Legatum Fellows, some of whom are pursuing projects to turn waste into electricity in both Kenya and India, and to grow crops to produce a sustainable biodiesel business in Brazil. Other Legatum Fellows have projects in agriculture, education, health care and mobile technologies. The Legatum Center’s annual conference on entrepreneurship is taking place on Oct. 28-29.

“Our purpose is to encourage this kind of thinking,” says Iqbal Z. Quadir, the founder and director of the Legatum Center, and the founder of Grameenphone, the firm that introduced widespread mobile-phone access in Bangladesh. “A lot of technologies in the world were unusual in the beginning, and became standard. That’s the beauty of bottom-up entrepreneurship and innovations. I just hope the fellows have the tenacity they need.”

Another Legatum Fellow this year, Le Yan, a first-year MBA student at the MIT Sloan School of Management who previously worked at GE Wind, has identified a direct way to produce more clean power by making sure wind turbines actually work; his project focuses on China. Equipment failures, Yan says, are a serious issue for wind farms. Turbines have gear boxes that develop lubrication or temperature-monitoring problems, and their frequency converters are prone to troubles. In some cases, Yan says, “the average is one fault per turbine per week.”

The American Wind Energy Association, a trade group, says equipment problems disable turbines 2 percent of the time in the United States. Yan believes that GE’s turbines are available about 97 percent of the time, but that some manufacturers worldwide produce machines with availability rates ranging from 60 to 80 percent.

When turbines do break, they are hard to fix; the faulty equipment may rest hundreds of feet off the ground, so wind-turbine repair may be a specialty in growing demand. Meanwhile, China’s push to produce renewable energy has created a sizable number of wind farms needing maintenance, says Yan, who is from China, and has a PhD in mechanical engineering from the University of California, Irvine.

Certainly wind-power producers have room to lower their expenses. “We estimate annual maintenance costs at about 5 to 15 percent of total plant costs,” says Christopher Namovicz, a renewable-power expert at the Energy Information Administration. Yan estimates that those expenses are closer to a quarter of total costs in China, making turbine repair in China a $30 million to $40 million market with rapid growth and no independent firms providing the service. In all, Yan thinks he can turn a profit and, like Shalaby, spread clean-energy expertise across the globe.  

“China has an almost infinite need for energy, and frankly the world would be better off if much of that need goes in the direction of wind power,” says Quadir.

There is just one more thing Yan thinks he needs to make his business viable: a good opportunity. In what could be a credo for his Legatum colleagues, Yan says, “The biggest challenge for me is just starting — building a name and showing people my work.”

Topics: Africa, Business, China, Energy, Entrepreneurship, Global, Legatum Center, Solar, Wind

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