Q&A: CrossBoundary Energy bets on Africa’s major power consumers with renewables

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The technologies to enable the electrification of everything are already here, and costs are coming down fast. Now, renewables are cheaper than almost all other power sources, and even battery energy storage is expected to become more competitive as costs continue to flatten, Pieter Joubert said in an interview with Renewables Rising.

• CrossBoundary Energy (CBE) is positioning itself to capture Africa’s commercial and industrial (C&I) market, which represents about 70% of the continent’s electricity demand, according to Pieter Joubert.

• Mr. Joubert is the President and Chief Investment Officer of CBE, where he oversees management, investor relations, fundraising, and strategy. He also co-founded the company in 2014 with Matthew Tilleard.

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Q: Could you share CrossBoundary Energy's current portfolio and any strategic shifts made in the last two years?

Pieter Joubert: Our asset base operating or under construction is a bit over US$340 million. That's around 250 MW of solar PV, and then around 550 MWh of battery energy storage. This is part of a portfolio of around $700 million worth of projects that have been awarded to us, and it has been growing quickly over recent years.

Over the past two to three years, our biggest shift has involved two things. First, we've built a good set of experience and a track record in designing, financing, and delivering complex off-grid, renewable energy hybrid solutions for our commercial and industrial (C&I) clients. 

The second part is an adaptation in the applications and expectations of what renewable energy can deliver.  We're seeing this with a project that we're currently delivering in the DRC for the Kamoa-Kakula mining complex. For that client, we are supplying a 100% renewable energy power supply. The client is looking for 30 MW of constant power output, and in order to provide that, we will be delivering a 233 MW PV plant and a 526 MWh battery system to supply them with 30 MW of renewable power 24/7. 

Q: What criteria do you use to choose a country for expansion, especially in risky markets?

Pieter Joubert: We've built our business to be pan-African. We've always tried to make sure that we can serve our customers wherever they are. About 70% of African electricity demand is from the C&I customer base, and we're trying to have the greatest impact in decarbonising electricity usage on the continent. To do that, we want to chase the largest energy consumers that can shift to clean power.

That means we're willing to look at any country. The factors that determine if we can provide something that is competitive or beneficial depend on a few factors. Firstly, the regulatory environment. Some markets do not allow Power Purchase Agreements (PPA) due to monopolistic energy regimes. We work proactively with our regulatory team, regulators and utilities to encourage the adoption of distributed renewable energy regulations.

The other key driver is energy costs. There are some markets where the tariffs for grid-supplied energy are below cost-reflective levels, making it difficult for renewable energy to compete.

Political stability is also crucial. While political risk insurance, like MIGA policy, can be helpful, it's challenging to enter or start a project in an unstable political environment.

The final piece is in terms of the addressable market. There is a project size threshold that we try and maintain. We wouldn't go into a new market if we didn't have the clear ability to pursue $10 million or more worth of near-term projects. 

Q: How does the new MIGA portfolio de-risking facility impact your operations and expansion across Africa, especially compared to previous project-by-project deals?

Pieter Joubert: The MIGA portfolio cover is a new product introduced last year, and it's something we are very excited about.  One of the biggest challenges, particularly for C&I  projects, was that political risk cover could be provided either by quicker, more expensive private markets of insurers out of London, or through a lengthy, more comprehensive cover with MIGA. MIGA would typically cover the riskier jurisdictions, but you'd be looking at quite lengthy due diligence and underwriting timelines. So, we couldn't use MIGA on a portfolio of 30 or 40 projects because we would have had to run 30 or 40 different applications, each of which might have lasted for a number of months.

The new portfolio cover is fantastic: it allows us to set up a long-term, repeatable relationship with MIGA. They get to understand our business, and they can then write a weighted-average risk across our portfolio, encompassing the good markets and the riskier markets, which is ideal. That allows us to more cost-effectively operate across the continent. Ultimately, this will speed up both our country entry and investment decisions, as well as our project-level due diligence and development timelines. It's a real innovation from MIGA and something we're very excited to work on with them. 

Q: How does the new MIGA facility affect your appetite for local currency PPAs, and how are you generally structuring these deals?

Pieter Joubert: That's a good question. Political risk insurance, from both MIGA and the private market, protects investors like us from currency inconvertibility or transfer restrictions. This safeguards us when we are unable to convert local currency into hard currency or repatriate it after conversion. However, this insurance does not protect against currency volatility or depreciation risk. So, while it helps reduce currency risk in the value chain, it doesn't immediately solve the challenge of being paid in local currency when the original investment was in hard currency. If a currency depreciates or fluctuates, we remain exposed to fluctuating returns.

Currently, hard currency funding is cheaper than any local currency funding solutions across Africa. The long-term answer is that, as a sector, we must continue to improve the availability and reduce the cost of local currency funding for infrastructure and energy. Across Africa, the proportion of funding from pension and insurance companies into infrastructure is under 2%. There's a real gap in encouraging domestic investors to increase their allocations to more typical levels of 5%, 10%, or even 15% into private equity and infrastructure in local currency. This will ultimately drive our ability to offer sustainable and well-priced, fully local currency PPAs.

Q: Do you use other facilities for currency hedging, such as from the World Bank or other development finance institutions?

Pieter Joubert: You can obtain short-term hedging solutions. I think the challenge here is to get the best relationship between the life of one of these renewable assets and the cost of the power from it. PPAs are typically 15 to 20 years long, and even that is shorter than the asset life. Cost-effective short-term hedging solutions are very difficult to find.

Q: Which sectors are you targeting most, and how do you see this evolving over the next five years, especially with battery energy storage?

Pieter Joubert: We've typically focused on three customer segments. The first one that we pursued was the industrial segment. We did a lot of work there with FMCG businesses, light manufacturers, and agribusinesses, and we continue to do so. Cement has become more recent. The urban industrial customer base is still looking to access renewable energy as it gets cheaper. Typically, these customers do have a grid supply, so the main driver of their decision-making is often cost and the ability to save money relative to their grid-supplied power.

Secondly, we focus on the mining sector. We began working with Rio Tinto in 2020 on a complex solar, battery, and wind project in Madagascar. This project served as an excellent example to the mining community that integrating large, complex renewables into off-grid power is both cost-effective and feasible. Since then, we've seen significant demand for renewables in the mining sector. The Kamoa-Kakula renewables project has taken this further by aiming for 100% renewable supply, up from the typical 30-60% alongside thermal. Mining has been fast-moving with substantial growth. Given the very high cost of running off-grid on diesel or heavy fuel oil, incorporating renewables has become a clear choice for both operational and greenfield mines. This is an exciting area for growth and scale, with projects typically larger than those for industrial consumers.

The final segment is telecommunications. This is a very different proposition, as we aim to help network operators and tower companies incorporate renewables across potentially thousands of sites in a given country. It's always been an obvious sector for hybridisation because the cost of off-grid diesel supply at these thousands of sites is probably the highest generation cost any business faces across the continent. We hope that declines in solar and battery costs,  technological improvements like higher wattage modules, and space-efficient lithium-ion battery systems mean the time has come to re-explore this type of commercial solution. 

I think there's even a more nascent part of that sector that is coming up slowly in Africa: the investment and deployment of additional data centres and other digital infrastructure capacity to support AI and further internet and computing infrastructure across the continent.

It's an exciting time to be in this space. We are demand-led. Our goal is to help as many customers as quickly as possible. The mining sector is very active, and telecommunications and digital infrastructure are receiving a lot of attention. The industrial sector will continue to be a steady adopter of on-site renewables. We aim to build a team and develop products and solutions that serve all three markets in parallel.

Q: Are you also interested in venturing into e-mobility, for example, to provide charging facilities?

Pieter Joubert: Here in Kenya, we've been working on pilot projects in the electric two-wheeler market, specifically electrified motorbikes. We have a pilot project with Ampersand, one of the providers, to fund and manage the renewable charging stations and infrastructure for the charging network, as well as funding swappable batteries. The cost and investment in batteries are significant. Over time, this will require infrastructure-like funding for businesses to scale the electrification of household-level battery usage, motorcycles, cars, or even heavy industrial equipment. We see this as a natural, adjacent sub-sector of the C&I space. We are working there and are very excited by these developments.

Q: How sensitive is the cost of increasing battery duration from two hours to four hours to meet a base load, and is it economical at current prices?

Pieter Joubert: The answer is always, 'it depends.' It depends on the cost the client would otherwise incur. In an off-grid context, deploying sufficient storage to push renewable energy supply up to 50, 60 per cent or more is economical. If you're comparing against diesel or heavy fuel oil generation at between 16 to 25 cents per kilowatt-hour, you can comfortably offer quite advanced solutions. If you're dealing with a grid-connected client in an industrial area in Nairobi, it's a different story. Depending on whether they are paying 12, 13, 15, or 17 shillings per kilowatt-hour, you can't quite achieve the same levels of penetration.

It's important to note that moving from 25% renewable supply to 100% is a huge leap. As I mentioned with the Kamoa-Kakula renewables project, we are providing 30 MW of power to the mine, but to do so, we have a 230 MW PV plant and a 500 MWh battery. The oversizing required to move past, say, 75% renewable supply can push up the costs.

The good news is that solar and battery costs are continually decreasing, and we expect this trend to continue. It's only a matter of time before firms like ours can offer these solutions, maintain the necessary returns for our funders to make investment decisions, and at the same time, offer customers the ability to get increasingly closer to going off-grid. The mining sector is a fascinating test case because it has high power costs, and typically ample land for large solar and battery systems. I believe we will see this as a test case over the next two to three years, with our Kamoa-Kakula renewables project leading the way.

Q: What shifts do you expect to shape the distributed energy sector for C&I in Africa, and what is CrossBoundary Energy doing to play a major role?

Pieter Joubert: In terms of the outlook, the primary shift is that the technologies poised to change the world are already here. We are very fortunate to be experiencing a unique energy transition towards the electrification of everything. We already know that renewable energy generation is significantly cheaper than almost all other power sources. The declining costs of batteries are now opening up possibilities when combining cheap generation with storage that can start to solve intermittency challenges. 

This electrification trend, by lowering the cost of doing business, manufacturing and transportation, will truly transform how the business community operates. First movers will obviously benefit fastest and deploy this into their products and services. We see this as an inherent part of the likely decentralisation of energy and electricity grids, moving beyond or supplementing the traditional models of large-scale centralised utility plants and extensive transmission and dense distribution networks. This allows for onsite, locally based generation and storage, which can in turn provide better network resiliency and support over time. That, I think, is a very exciting aspect. It won't happen overnight, but we are truly living through a once-in-a-lifetime transition with the ability to build these solutions.

I think the final piece of that, and we are seeing it across Africa now, is that the regulators and the utilities are aware of this and are catching up. It's really encouraging to see a number of regulators now coming out with distributed renewable policies, which is an acknowledgement that that trend is happening. We, as a continent, are actually very fortunate because we get to learn from the mistakes or the 'school fees' that have been paid in some of the original markets where renewable policies were established, like Germany, California, or Australia. I think we have the time, the technology, the capital, and the consumer demand to build the future now. We at CrossBoundary Energy are very excited to be doing that.