Saturday, April 21, 2012

Business Ideas in Energy Sector

Often people are complaining about the high energy prices in Palestine. At the same time, you could see them as a chance for Palestine to develop fields of business, that would never be profitable in Egypt or other neighbouring countries that heavily subsidize their energy. Palestine can pioneer in building up experience in fields of energy efficiency and renewable energy. As the world energy prices are expected to rise sharply in the coming 50 years, this knowledge will be badly needed everywhere, including in those neighbouring Arab countries that will be no longer able to afford their heavy energy subsidies in the long run.

So these business models in the energy sector seem to be most feasible in the short run...

  • Energy efficiency contracting / energy performance contracting
    It's a well established business model elsewhere, but the Palestinian market seems to be unaware of it, even though with the high energy prices, and the terribly bad insulation that houses, commercial buildings and factory facilities often have, it could be surprisingly profitable, even without any subsidy scheme or donor involvement. Many investments in energy efficiency will have pay-back periods well below 5 years. The major obstacle seems to be that people (and companies) are hesitant to invest in their buildings and facilities. They like to have the cheapest investment possible into their house or commercial building, while forgetting about the running costs. This obstacle can be addressed by shifting the investment to a contractor, who will then be able to recover his investment through an energy performance contract, that will still deliver the needed energy (usually heat) to the client at a cheaper rate than diesel, electricity, or gas would cost.
  • Solar Boom through Net-Metering
    A long-awaited regulation from the Palestinian Energy Authority is in the pipeline: Net-Metering. It will allow people to feed in electricity into the network, making solar installations on private and commercial properties a profitable business model (with a 20-year loan at reasonable interest rates of 6% p.a.). Profitable, it seems to be if the Energy Authority agrees for people to feed in electricity at retail prices (around 0.53 Shekel per KWh). Instead of the retail price, the Energy Authority seems to envision a price of 0.38 Shekel, which resembles the price at which Palestine is buying electricity from Israel. This price leaves a decent profit margin for municipalities and electricity distribution companies, but unfortunately it will hinder the development of a profitable photovoltaic boom in Palestine, that would make Palestine become more energy-independent from Israel, and vastly improve Palestine's foreign trade balance. I believe we need to work on models how to satisfy the justified needs of municipalities and electricity distribution companies, while at the same time enabling a solar boom in Palestine through net-metering at retail prices.
  • Biogas from agriculture
    Biogas from landfills is part of Palestine's national energy strategy. Let's hope that this will soon materialize. Biogas from agricultural waste would be particularly of interest for large cattle farms (Al-Juneidi, Al-Jebrini, etc..), but other agricultural waste can be used as well. With the high energy prices, and the well-skilled and low-cost labour in Palestine, this business model can be profitable even on much smaller scales than elsewhere in the world.

    Possibly even biogas from housing units. Take an average apartment building with 10 appartments, the average household size of 5.8 people, you can turn the feces of 50 people into biogas, which you feed into the gas tank, and sell it back to the residents. Given the extremely high rate of newly constructed buildings in Palestine, the fermentation tank can in many occasions be built cheaply upon construction of the house, so it could be profitable in a matter of maybe one or two years..

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