The move away from making big-ticket capital expenditure purchases to hiring equipment has transformed the information technology industry, either through software as-a-service solutions or rentals of server space in the cloud. But could the same concept work in the energy industry?
Frustrated with the lack of vision on the technology front in the energy industry, Tariq Said, 26, and Daniel Domingues, 37, decided to capitalise on their experience in installing about 250 megawatts of power and start a company focused on giving clients access to how they manage and consume clean energy.
“We are, in a way, kind of veterans in the industry but with a very maverick mentality. So, energy-as-a-service is a very tech-oriented concept that we are now trying to essentially proliferate in an industry that has been traditionally extremely technology averse,” says Mr Said.
“And that doesn’t just go for the UAE or the Middle East in terms of the energy industry but across the globe.”
The company intends to install enough capacity in the UAE and Saudi Arabia in the first quarter of next year. It plans to have a capacity in the triple-digit megawatt range in the next five years.
Sirius Energy specialises in energy as a service, which is modelled on the software-as-a-service blueprint that has worked so well for IT companies and involves the licensing of software on a monthly or yearly basis.
The Dubai start-up intends to replicate this model in the energy space and help companies cut capital expenditure costs as they look to adopt a green transition model.
“A lot of people want the milk without the cow. Now, they don’t want to have all of that overhead or asset-heavy components as part of their energy provision,” says Mr Said.
Mr Domingues said the company develops solar energy assets.
“We finance these assets and essentially make the sustainable power generated by these assets available to our clients,” says Mr Domingues.
Dubai derives 9 per cent of its energy needs from clean sources but plans to raise this to 75 per cent by 2050.
However, the plans announced so far have largely been utility-scale projects such as the Mohammed bin Rashid Solar Park, which is expected to generate 5 gigawatts of power by 2030.
Industrial companies and businesses are also being provided with incentives to develop their own blueprint for a cleaner future, with energy efficiency being one cornerstone.
Rules have also changed in recent years to allow companies with their own solar installations to sell excess power back to the grid through the Shams Dubai initiative.
Sirius Energy plans to focus on business-to-business clients such as logistics companies, metal extruders and other high energy consumers.
It will set up solar plants that generate 200 kilowatts to 300 kilowatts and occupy an area of about 2,000 square metres to 3,000 square metres.
The company operates a business model that is hinged on a steady income source after the installation of solar or hybrid assets.
The perks of its model for subscribers include access to solar power and a number of digital platforms that will help them to monitor their energy consumption.
The coronavirus pandemic has pushed the agenda for the adoption of clean energy to the forefront of government policy. Countries around the world recorded a steady decline in carbon emissions after movement restrictions were unveiled to curb the spread of the virus.
Dubai is currently studying the reduction in emissions to create a baseline for future curbs on greenhouse gases.
The emirate's carbon emissions fell by 22 per cent last year, according to the Dubai Electricity and Water Authority.
During the pandemic, several international financial institutions such as the International Monetary Fund urged states to adopt green energy policies as part of stimulus efforts to revive economies.
In the first 15 years of climate change mitigation policy, gross domestic product is expected to rise by about 0.7 per cent on average, with the transition expected to provide employment to 12 million people, the fund said in a report last month.
Japan and South Korea have become two of the latest major economies to aim for net zero emission targets by 2050.
The operations of Sirius Energy began during the pandemic and it concluded a “six-digit pre-seed funding round in June”, Mr Said says.
It intends to raise an amount in the seven-digit range in the first quarter of next year and will embark on a roadshow by the end of the year to start the process.
The company’s founders declined to name the venture capital funds that have invested in its growth so far, but said clean energy investment was a growing part of the investment universe of regional venture capital funds.
“Venture capital funds specifically targeting energy technology ... [that] is a new phenomenon that is taking hold in the region,” says Mr Said.
Family offices and large family groups in the GCC, particularly in Saudi Arabia and the UAE, have shown a lot of interest, he says.
This is making the market for funding more competitive, with venture capital funds more willing to fund clean energy companies on more flexible terms.
Mr Said says if funding for this type of asset were made available five years ago, it would have an internal rate return in the range of 15 per cent to 20 per cent.
This would have made equity financing for such an asset quite expensive, he says. Today's IRR is in the single-digit range.
IRR is what venture capitalists receive over a given investment period for the funds that they invest.
The narrative around fossil fuels has been shifting, with global investment funds such as BlackRock pledging to not pursue such types of investment in the future. This has emboldened other asset managers to jump onto the bandwagon.
“So, when I come to an investor and I guarantee a certain IRR, because this is a very safe and stable asset by nature, they jump on the opportunity to get exposure to the stack of assets,” says Mr Said.
Name: Sirius Energy
Founders: Tariq Said and Daniel Domingues
Sector: Clean energy
Funding to date: Undisclosed (pre-seed round)