A key role for distributed generation in energy’s futureJanuary 17, 2023
Jeremy Crane, CEO of Yellow Door Energy, talks to The Energy Year about the receptiveness to decentralised energy supply solutions in the UAE and the ease of developing such projects across the GCC. Yellow Door Energy is a provider of decentralised solar (distributed generation) and hybrid energy solutions in the Middle East, Africa and South Asia.
What was the philosophy behind the creation of Yellow Door Energy?
Our belief is that the energy transition is not solely a shift from conventional to renewable power generation but equally one from a centralised to a decentralised generation model. With the increase in energy demand across emerging markets, the traditional supply system delivered in a centralised fashion by governments will no longer be economically competitive.
That is where we come in, playing a role by providing customers electricity through solar and hybrid power generation systems to their facilities. We manage to do so at a lower cost than alternative options and with an equally reliable supply stream while significantly reducing the quantity of CO2 emissions. We install, own and operate the equipment and sign long-term agreements to supply our customers with their energy needs.
How do you assess the receptiveness to decentralised energy supply solutions in the UAE?
The UAE is leading the region in terms of renewable energy and overall sustainability commitments. It is hosting COP28 in 2023 with the aim of transforming and accelerating climate action. Moreover, it is the first country in MENA to commit to a nationwide net-zero emissions target.
Specific to power supply, the cost of power from the grid is around 20-22 fils [around USD 0.06] per kWh in Abu Dhabi and around 44 fils [USD 0.12] in Dubai. We are able to sell power to our customers for as low as 20-25 fils. Switching to our decentralised solution is clearly economically advantageous. In addition, the environmental benefits provided by our solutions also support our customers’ ESG (environmental, social and governance) and net zero mandates.
We have been working with Nestlé Middle East on their Al Maha plant, where we installed a 5.5-MW solar power generation system to supply their demand. We have a broad range of customers, including a major shopping mall chain owner, light industrial players, commercial facilities and other businesses. To date, we have signed more than 40 solar lease agreements in the country and are operating 31 solar power plants with a total capacity of 39 MW.
How would you assess the ease of developing such projects across the GCC?
The demand for distributed generation varies significantly between markets across the GCC region and is heavily dependent on regulations. In the UAE, regulations are evolving. Recently the Ministry of Energy and Infrastructure (MOEI) announced that the public utilities of the Northern Emirates and Sharjah are to issue their own distributed solar regulations.
In Abu Dhabi, the government has been spearheading utility-scale solar developments, most notably Noor Abu Dhabi, the largest single-site solar power plant in the world, with 3.2 million solar panels. In Dubai, DEWA, the public utility, has modified the distributed solar regulation (initially launched in 2015 under Shams Dubai) so that the installed capacity would be proportional to the connected load. This may limit the ability of the consumer to generate their own power, and the utility continues to act as the primary service provider.
In Bahrain and the KSA, both governments have announced national targets to achieve net-zero emissions by 2060. The Saudi Green Initiative, part of Saudi Vision 2030, aims to reduce carbon emissions by 278 million tonnes per annum and distributed generation plays a critical role in achieving the target.
Oman recently announced its net zero by 2050 commitment and is evolving its regulations to better enable distributed generation.
How relevant is your recently concluded equity raise to your expansion plans?
We have raised an additional USD 400 million of equity, enabling us to deploy more than USD 1 billion of assets together with debt. We expect a significant amount to be invested across the GCC but also towards Egypt and South Africa, with Turkey on our radar as well.
This type of financing is beneficial as our operations require a lot of funding to enable the construction of our assets.
There are various types of financing models, which all come with perks and drawbacks. You might operate under a fund which allocates a certain amount of capital for you to deploy assets over a period of time. However, this restrains your agility as a company and requires you to be sure about there being a demand in the market that you can service.
Another type would be fundraising on a project-by-project basis. However, this is very time consuming. We have chosen the conventional way of financing our operations, which basically brings capital into our balance sheet under an agreed business plan and deploys capital as projects are developed.
What technologies are you bringing along with this innovative business model?
We have a detailed monitoring system called SEAMS, which stands for Sustainable Energy Asset Management System. The SEAMS tool enables us to gather a range of data streams through sensors from the solar power plants. We monitor the combiner boxes and the inverters. We receive data on the voltage, current and temperature statistics as well as from the meteorological stations which we can access from our centralised platform. All this allows us to engage in both preventive and reactive maintenance as this monitoring system also runs models based on artificial intelligence.
We’ve also deployed a robotic cleaning system which is very effective in desert environments. Along with other proprietary methods, we are able to generate significantly more energy from our projects than a typical commercial and industrial (C&I) solar installation.
What opportunities are you looking towards in the coming years?
Our primary focus for 2023 is growing our customer base in our current markets. We are well capitalised to manage the volatile debt markets, and diversified to capitalise on new regulatory opportunities.
In recent years, we have doubled in size by many metrics on a yearly basis. We expect a similar trend for 2023 and are optimistic about opportunities ahead.