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Tuesday, 23 March 2021

What are Egypt’s green startups up to?

What are Egypt’s green startups up to? As we did yesterday in edtech, we’re taking a look at industry-focused startups — today, folks who have environmental issues at the core of their business model. These operate in the waste and water management, solar energy, agritech and — believe it or not — e-commerce sectors.

This week, we will focus on waste management startup Tagaddod and solar heater company Shamsina. We picked those two to start with as they appear to provide simple easy solutions to environmental problems that can be applied on a small scale to the average household.

First up is waste management startup Tagaddod, which collects and exports used cooking oil (UCO) for biofuel. This type of waste can be found in every household. However, there isn’t enough UCO to cater to the high global demand, cofounder Tagaddod Nour El Assal says. This shortfall is not due to the lack of people’s love for a juicy piece of fried chicken, but rather because of the lack of a sufficient mechanism to collect UCO from factories, retailers, and households. To solve that gap, Tagaddod built Green Pan, an app that allows households to schedule UCO pickups and another one for hotels, restaurants and cafes — or Horecas for short. The company then exports the UCO to refineries abroad, where it turns into biofuel and hydrogenated vegetable oil — basically the new version of biofuel, from which other types of fuel (jet fuel, diesel, gasoline etc.) can be extracted.

Over the years, UCO has become a global commodity: Today, there are actually futures contracts for UCO. Just a few months ago, in November 2020, OilPrice reported “such a rush on used cooking oils and animal fats that some renewable refineries have reported having trouble procuring these once worthless feedstocks.” Oil and non-oil waste in MENA per household amounts to around USD 144 / year, which translates into over USD 21 bn annually, El Assal tells us. Egypt’s current used cooking oil market size stands at USD 14 mn, which is only 4% of the potential production of USD 352 mn, according to El Assal. The global used cooking oil market size is expected to reach USD 8.48 bn in 2027, according to Fortune Business Intelligence. The growth is expected to be driven by global government directives towards a more environmentally-friendly future and the increasing demand for UCO, it adds.

Households and restaurants have certain perks in mind when using Tagaddod. One of the perks of using Tagaddod as a multi-branch restaurant, for instance, is that it helps track each food outlet’s consumption of oil, providing inventory and operational data that is otherwise hard to come by. As a household, every liter of UCO handed to Tagaddod translates into incentives and small gifts.

Today, Tagaddod collects UCO from 2k businesses and 40k households, saving approximately 2k tons of emissions a month. The company is targeting reaching a roster of 1 mn households in 2024 and expanding into Africa in the near future.

Starting April 2020 (read: covid), the startup’s m-o-m oil collection growth skyrocketed on the B2C end, but dropped in B2B. On one end, household and retail factories’ output of used oil grew between 30% and 40% m-o-m, but on the other, many B2B partners suffered. Fine dining — a major source of UCO — was heavily affected by social distancing measures that came to life thanks to covid, dropping by almost half. “Between 30-40% of our B2B customer base had to shut down,” El Assal said, but September and October indicated a slight recovery as lockdown measures in Egypt were largely lifted and pandemic fatigue led many to return to normal life to some degree.

Where Tagaddod takes waste material out of homes, Shamsina wants to use renewables to bring a necessity to all households: Hot running water. Operating under the slogan “Sun for all,” the startup designs, manufactures, and delivers affordable, locally-made solar water heaters for “all Egyptians,” from energy-poor communities to energy-conscious consumers.

There is no current water heating option in Egypt that is attractive, as traditional options are plagued with health, safety and environmental concerns, Deena Moussa, founder of Shamsina, says. “50% of the population does not have access to a modern water heater; these households use kerosene lamps, gas tanks or makeshift fires instead,” Moussa explains. These options come with health and safety concerns, emitting environmentally harmful pollutants, and causing burns, dangerous levels of smoke inhalation, and pollution. Even households that use electric water heaters have seen their electricity bills go up since 2016, due to the EGP’s floatation and subsidy cuts. Moreover, electricity prices are expected to almost double over the coming four fiscal years as the government moves towards a complete elimination of subsidies.

But solar panels come with their own concern: A high initial cost, which Shamsina looks to navigate through a cross-subsidy model. Cross subsidy implies that certain customer segments are charged more for the product, in order to be able to provide lower-income customers with subsidized prices for the same acquisition. Solar water heaters are available abroad, but are too expensive when imported for lower-income households. “Our local production process helps revive industry and strengthens local know-how,” Moussa tells us. “Through a cross-subsidy model, Shamsina makes reliable solar water heaters widely accessible, reaching every corner of the country and especially those who struggle most.” At the high-end, heaters are sold for about USD 500, making it possible to sell them for about USD 100 at the low-end of the market.

So far, the company installed 25 solar heaters as prototypes and is planning to launch at the end of this year. Operating out of a workshop in Darb Al Ahmar — the district that inspired the initiative — it has received funding from Davis Projects for Peace in the US and the American non-profit organization Synergos. Currently, it is looking to raise a seed-fund round of USD 50k.

Your top climate stories for the week:

  • EGP 14 bn worth of solar-powered irrigation systems for Egyptian farmers will be financed by on-lending through the International Finance Corporation and Alexbank.
  • Almost 59k people have applied to swap their cars for new natgas models through the Finance Ministry’s website since the first phase of the government’s plan to convert or replace 1.8 mn cars went live earlier this year.
  • Car owners now only need to have owned their vehicles for two years to qualify for a replacement under the state’s natural gas transition plan, down from a minimum three years previously.

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