Business innovation to bring affordable electricity to energy-poor, wind-rich rural communities
“Many of the world’s most underserved citizens rely primarily on diesel generators for what power they have, which is expensive and polluting. Wind for Prosperity uses Vestas’ unique weather data processing capabilities to identify energy-poor but wind-rich areas where Vestas’ wind hybrid solutions can power social and economic growth,” says Morten Albæk, Vestas Group Senior Vice President and CMO.
Wind for Prosperity is a commercially-based business model to bring affordable and reliable electricity to rural populations that currently lack it. Anchored on wind power technology, Wind for Prosperity creates an opportunity for business, government, and financial institutions to combine their talents to improve people’s lives and generate risk-adjusted returns for private investors.
Adds Albæk, “As one of the biggest corporate initiatives to combat energy poverty and deploy green technology in developing countries, Wind for Prosperity is a triple-win — generating growth, reducing pollution, and doing both profitably.”
“Sustainable Energy for All is about public-private-partnerships,” says Kandeh Yumkella, the United Nations Secretary-General’s Special Representative and Chief Executive. “We need new and good technologies to help the energy poor access clean, reliable, affordable and modern energy services to manage their everyday lives. If good technologies can’t be financed, an energy revolution is impossible. Vestas’ Wind for Prosperity will help transform lives and communities.”
Masdar, Abu Dhabi’s renewable energy company, strongly shares the vision behind Wind for Prosperity and will focus on managing the development and construction of Wind for Prosperity projects while Vestas will focus on wind-mapping, site design, and sourcing and refurbishing wind turbines.
“Addressing the lack of access to clean, reliable and affordable energy services for billions of people is one of the world’s most critical development challenges and is becoming increasingly prominent on the international agenda,” says Mohamed Al Ramahi, Masdar’s Chief Operating Officer. “For the last 40 years, the United Arab Emirates has been committed to helping countries achieve economic growth and introducing technology that allows access to energy. Wind for Prosperity is aligned with Masdar’s mission to work on the introduction of sustainable energy solutions.”
Wind for Prosperity combines durable, factory-refurbished wind turbines with advanced diesel power generation to create hybrid systems that are well-suited to operate on mini-grids in remote locations with limited infrastructure. These Vestas turbines are easy to transport and erect; they have a proven track record and are easy to maintain.
The first Wind for Prosperity projects focus on up to 13 Kenyan communities that are home to more than 200,000 people. These projects — being planned in coordination with the Kenyan Ministry of Energy, Kenya Power and Light Company, and various government agencies — are expected to supply electricity at least 30% below the current cost of power production based on diesel only. Frontier Investment Management is actively involved in developing the Kenyan opportunity and together with Vestas is exploring potential Wind for Prosperity projects in other African countries.
Wind for Prosperity aims to install the hybrid power generation system in 100 communities reaching at least one million people in the next three years. Additional opportunities are being explored in countries such as Ethiopia, Tanzania, Yemen, Pakistan, Vietnam, and Nicaragua.
FAQ for Wind for Prosperity
Q: What is Wind for Prosperity all about?
A: Wind for Prosperity is an innovative, commercially-based business model to bring affordable and reliable electricity to rural populations that currently lack it. Anchored on a wind hybrid power system, Wind for Prosperity creates a new opportunity for business, government, and financial institutions to combine their talents to improve people’s lives and generate risk adjusted returns for private investors.
Q: Why is Wind for Prosperity relevant?
A: Upwards of 1.3 billion people across the globe currently lack access to affordable and reliable electricity – with dramatic consequences for human health, education, and economic wellbeing. But at least 50 million of those live in areas with abundant wind resources. Wind for Prosperity creates a world of new opportunities to provide clean water, healthcare, irrigation, educational opportunities, communications infrastructure, and other social and economic benefits for rural communities where such opportunities are now lacking or limited – and does so on self-sustaining commercial terms.
Q: How does it work?
A: Wind for Prosperity combines robust, factory-refurbished wind turbines with advanced diesel power generation to create hybrid systems that are well-suited for operation on mini-grids in remote locations with limited infrastructure. The turbines are easy to transport and erect; and are reliable and easy to maintain. Vestas utilizes its huge data processing capabilities to identify energy-deprived but wind-rich areas where the hybrid power generation solution can be installed.
Q: Where will the first projects be built?
A: The first Wind for Prosperity projects will center on up to 13 Kenyan communities that are home to more than 200,000 people. The projects will supply electricity at least 30% below the current cost of diesel generation; and when fully implemented, will reduce diesel fuel use by more than 2,000 tons per year. Additional opportunities are being explored in countries such as Ethiopia, Tanzania, Yemen, Pakistan, Vietnam, and Nicaragua.
Q: Why are Vestas and Masdar collaborating on Wind for Prosperity? What’s in it for each?
A: Vestas has developed the Wind for Prosperity concept and explored its feasibility over the past several years. Vestas is now launching Wind for Prosperity in collaboration with Masdar, Abu Dhabi’s renewable energy company. Masdar strongly shares the vision behind the initiative and brings a deep experience in managing the implementation of renewable energy projects in developing countries. Masdar will focus on managing the development and construction of Wind for Prosperity projects; while Vestas will focus on wind-mapping, site design, and sourcing and refurbishing wind turbines. Vestas and Masdar have agreed to work together on a few projects in the coming year and to formalize the growing collaboration over time.
Q: Who else is involved in Wind for Prosperity?
A: The Kenyan pilot projects are being jointly developed by Vestas, the pan-African renewable energy power project investor Frontier Investment Management (www.frontier.dk), and a local development partner. This group is working closely with the Kenyan Ministry of Energy, Kenya Power and Light Company, and various government agencies to prepare the first installations, expected in 2014.
Q: Are Vestas and Masdar doing this for business reasons or charity?
A: Vestas and Masdar expect Wind for Prosperity to be a sound business activity for our companies, as it will succeed only if it rests on a sound commercial basis. Vestas and Masdar expect to earn a return on their investments; and investors and suppliers should also expect to earn a reasonable return that motivates them to work towards long-term success of the initiative. Of course, Vestas and Masdar are also motivated by the positive social and economic impact of the projects.
Q: Are there other commercial benefits Vestas expects to gain from Wind for Prosperity?
A: Wind energy markets are rebounding following the post-2008 economic downturn, though in a different shape and form. Many of the biggest wind markets are stagnating, while growth shifts to emerging markets. Wind for Prosperity can help build reputation, relationships and experience in emerging markets, which require a different engagement model to open opportunities. Wind for Prosperity will also provide Vestas with access to revenue from the fast-growing after-market for refurbished turbines – a market where Vestas has an interest in ensuring that its turbines are refurbished and re-deployed in a responsible manner.
Q: Which technology will be used?
A: Wind for Prosperity will deploy cost-effective wind hybrid power systems to remote communities based on proven energy technology. Re-furbished Vestas wind turbines will provide the renewable energy. The wind turbines will operate on mini-grids and be combined with stabilization technologies that address the intermittent nature of wind power. The initial deployments will be with wind hybrid systems that use advanced diesel integration technology.
Q: Which wind turbine models will be used?
A: The two flagship models being considered are the Vestas V27-225 kw and Vestas V47-660 kw, as these turbines lend themselves well to operating in regions with limited infrastructure. They are easy to transport and erect, and are reliable and easy to maintain. There is also ample availability of these turbines in the after-market.
Q: What is your basis for concluding that Wind for Prosperity can reach at least 50 million people?
A: Wind for Prosperity targets underserved rural populations, which often rely primarily on diesel generators for what power they have, which is expensive and polluting. It also targets communities that can be well-served by wind hybrids on mini-grids as opposed to grid extensions or household solar units, for example. The estimate is calculated using Vestas wind data and IEA statistics for approximately 80 countries around the world. Vestas uses its market-leading wind simulation capabilities to estimate the share of each country’s surface area that has good wind conditions, defined as seven meters per second or above. This fraction has been applied to IEA’s estimate of the total rural population without access to electricity, assuming this population is evenly distributed across the country. Half of this population is then the Wind for Prosperity target population based on IEA’s estimate that the installation of mini-grids will be the most economically viable way to serve 50% of rural populations that don’t have access to electricity today. As an example, the Wind for Prosperity target population in Kenya is estimated at 3 million people. IEA estimates the rural population without access to electricity at 30.3 million; and Vestas estimates the surface area with wind speeds above 7 m/s at 21%. Wind hybrid power systems are thus relevant for 21% of the mini-grids that will be the preferred electrification option for 50% of 30.3 million people, or approximately 3 million people.
Q: Is 50 million really that impressive, as it is a small fraction of the 1.3 billion people without access to electricity?
A: Wind for Prosperity offers a practical technology solution and a commercially-based business model. It complements other efforts because it is relevant for remote communities that are the hardest to reach with grid infrastructure extensions. That is why this initiative has the potential to be scaled up and make an important difference. The campaign to reach universal access to sustainable energy by 2030 needs practical solutions – and that’s exactly what Wind for Prosperity offers.
Q: Why is Africa the first deployment region?
A: Africa today has the lowest per capita access to and the highest cost of electricity generation. At the same time, the continent has exceptional wind energy resources.
Q: When will the first project come online in Kenya?
A: Work is progressing with the Kenyan Ministry of Energy and Kenya Power and Light Company to finalize the plans for deploying the first sites in 2014. Work is well-progressed, and we expect that all plans and agreements will be in place within a few months.
Q: Which countries are next in line?
A: Additional opportunities are being explored in countries such as Ethiopia, Tanzania, Yemen, Pakistan, Vietnam, and Nicaragua, all of which have high-potential areas to deploy the hybrid energy solution. Also important is that public authorities in these and potentially other countries are receptive to the concept, that it can have a high impact, and that private investors can be brought onboard.
Q: How is Wind for Prosperity different from other rural electrification initiatives? Why are you confident it will succeed?
A: In the first instance, Vestas has developed a global map identifying communities where commercially-based electrification based on wind energy is feasible. This has never been done before. Vestas’ wind simulation technology enables detailed zoom-in assessments of potential communities without the need for wind measurements – this saves significant development time, effort, and resources. Second, the wind turbines particularly well-suited for these areas of limited infrastructure are only recently beginning to come onto the after-market, which makes this type of deployment feasible, both technologically and economically. Third, the Wind for Prosperity concept is commercially-based and thus more sustainable than efforts based on philanthropy, traditional development assistance or CSR motivations. It creates an opportunity for business, government, and financial institutions to combine their talents to improve people’s lives and generate risk-adjusted returns for private investors.
Q: How cheap is the Vestas wind hybrid solution? Can local communities afford to pay the rates required for the kind investor returns you envision?
A: The cost of energy will vary depending on various factors including the quality of wind resources and the cost of installation. Providing power in off-grid remote and small community settings is relatively expensive because of lack of scale and challenges involved in transportation and installation. But where wind conditions are good, the wind hybrid system will supply electricity at least 30% below the current cost of diesel generation.
Q: How can private investors/development banks/donor agencies/foundations help?
A: There are opportunities for both private investors and public or charitable funders to help deploy Wind for Prosperity systems. Where wind conditions are good and governments support introducing long-term electricity supply agreements for renewable energy, there are good opportunities for commercial investors.
Q: To what extent are you concerned about the wind turbines producing electricity at times of insufficient demand, thus weakening the investor business case for the wind hybrid system?
A: Unpredictable demand is an issue in rural communities, such that there is always a certain risk that solutions like wind and solar power will produce power in excess of demand. There is an important role here for governments, private investors, donor agencies, or foundations to invest in water pumps, desalination equipment, or other devices to make effective use of any excess power.
Q: How much has Vestas invested in bringing Wind for Prosperity to life?
A: The initiative has been funded out of Vestas’ marketing budget for new markets. Development costs are roughly in line with the cost of a regular media campaign. Wind for Prosperity constitutes a relatively small share of Vestas’ annual marketing budget. We expect this to be a successful investment commercially – adding to the bottom line in the near-term and helping to open new markets to wind energy further down the line.
Q: How is Wind for Prosperity linked to the United Nations’ “Sustainable Energy for All” program?
A: Vestas’ public commitment on Wind for Prosperity answers the United Nations’ “Sustainable Energy for All” call to action.
Q: Is Wind for Prosperity also relevant in the poorest developing countries?
A: Wind for Prosperity is relevant in many low income countries where there are rural populations with abundant wind resources but without access to electricity. There are some countries where conditions for doing business are particularly difficult and where policies do not allow for the participation of the private sector in the provision of electricity. In these settings, the model with private investors will not be viable but wind hybrid systems can still be deployed by donor funding or other public or charitable funding sources.
Q: Vestas is just beginning to show positive results from the two-year turn-around. Shouldn’t you concentrate on your core business instead of saving poor people around the world?
A: Wind for Prosperity is a cornerstone of Vestas’ strategy to open and develop new markets, and the project itself will generate small but profitable sales for Vestas, primarily through selling our combined wind-diesel solution and wind data. The concept is commercially-based and thus more sustainable than efforts based on philanthropy, traditional development assistance or CSR motivations. It creates an opportunity for business, government, and financial institutions to combine their talents to improve people’s lives and generate risk-adjusted returns for private investors. That we provide a solution with the potential to improve the lives of millions of people in developing countries is something we are proud of.
Q: How much will Vestas earn on Wind for Prosperity?
A: The agreement with Wind for Prosperity‘s investors is that Vestas will sell its wind-diesel solution and wind data on market conditions with an expected profit margin in line with what we normally see in our business.
Wind for Prosperity