With the reduced cost of renewable technologies and rising innovation, micro-grids are a growing opportunity in emerging markets, one which is already reducing fuel consumption, lowering emissions and driving energy access. It is an opportunity that has not been missed by Caterpillar, whose hybrid micro-grid solutions are powering mines, raw material processing plants, agricultural farming and rural villages and islands—and which became one of eight investors in Powerhive's $20 million Series A round last year. Caterpillar also invested in battery maker Fluidic Energy to co-develop fully renewable micro-grids in emerging markets, and they are working closely with two island-states Indonesia and Madagascar.
Power for All caught up with the the multinational's Microgrid Business Development Manager, Francois-Xavier Saury, to learn more about Caterpillar's upcoming plans, and why the time is now for decentralized generation.
Power for All: As one of the first multinationals to invest heavily in emerging market micro-grids, how big does Caterpillar see the market in sub-Saharan Africa, and what are your aspirations for the next 5 years?
Francois-Xavier Saury: For decades, Caterpillar has built a reliable distributed generation infrastructure around the world, including in emerging markets like Africa. Many rely on Caterpillar products and services for dependable continuous power. With hybrid micro-grids, the new opportunity is to offer reliable locally produced electricity at an affordable price for users. Consequently, the opportunity is huge. Everyone needs electricity and everyone wants affordable power. We can now provide this form of sustainable power, everywhere, all the time.
Power for All: How do you define "micro-grid" vs "mini-grid"? Are there specific load profiles, number of connections that distinguish them? Is "micro-utility" a concept that better represents the concept of this business?
Francois-Xavier Saury: We also classify some of our systems as nano-grids. Size matters more than load profiles. We would group telecom towers and rural electrification in the nano-grid basket, while micro-grids are usually larger systems able to power a mine or an industrial facility. We would define mini grids as clusters of micro-grids, and micro-utlility is one successful concept where nano-grid definitively applies.
Power for All: What is the biggest challenge to scaling mini-grids in Africa and what are the innovations most needed?
Francois-Xavier Saury: Like all infrastructure projects, securing the best financing is the biggest challenge for micro-grids. Innovation is key. PV technology and powerful controls associated with remote connectivity are definitively strong enablers. However, improvements in the energy storage cost and technologies would really be a game changer, because it would lower the cost of electricity even further.
Power for All: What are the focus markets for Caterpillar?
Francois-Xavier Saury: Rural electrification and providing affordable power to people in places like India is a focus for our micro-grid venture. What’s nice about our solution is that it is scalable to meet the needs of different locations and applications around the world. Opportunity is very diverse and everywhere, so we are excited to work in any market looking to invest in a micro-grid solution.
Power for All: How are you approaching project finance? Is it off your balance sheet, will you be working with development financiers on first loss/loan guarantees model that would allow lease-to-own models similar to solar home system, or something else?
Francois-Xavier Saury: All of the above are valid. Caterpillar is the technology provider, while Cat dealers are the system integrators and service provider. Developers are integral to the success of the business. Multiple tailored financing schemes are explored on each project as each situation is unique.
Power for All: What are the top key learnings from developed markets that can be applied to emerging markets?
Francois-Xavier Saury: The learning is that they generally don't apply! Emerging markets are all different and require a new approach. That’s why the micro-grid industry is so exciting.