# Business Models for the NFE Microgrid OS

> \[!info\] Current working basis — August 2026  
> **Tariff:** UEDCL Code 10.2, Q3 2026: Peak 666.5 / Shoulder 562.1 / Off-Peak 429.7 UGX/kWh. The full tariff schedule must remain a configurable model input because ERA/UEDCL rates change periodically. **Sezibwa base case:** zero export value until site eligibility, interconnection terms, and the applicable export credit are confirmed. All commercial offers should be re-run with site-specific load, tariff, capex, financing, and reliability assumptions before commitment.

# Purpose

NFE Microgrid OS needs a business model that creates durable recurring revenue while improving the economics and reliability of community energy systems. Two ownership models remain viable, but the current Sezibwa evidence suggests a clear sequencing principle: **scale first through partner-owned deployments, while using NFE-owned projects selectively where the project return and strategic value justify tying up capital.**

The operating system is the common product in both models. Ownership determines who funds the assets, carries performance risk, and receives the energy margin.

# Current evidence from Sezibwa

The Sezibwa analysis is not a universal tariff card, but it gives NFE a grounded reference case for product and commercial decisions:

<table id="bkmrk-sezibwa-evidence"><thead><tr><th>Question</th><th>Current finding</th><th>Business implication</th></tr></thead><tbody><tr><td>What should be added to the existing inverter and 8.9 kWh battery?</td><td>Solar first. Adding battery at today's price lowers NPV.</td><td>The OS should recommend marginal investments based on the assets already installed, not sell a standard hardware bundle.</td></tr><tr><td>How much solar?</td><td>**4 kWp is the low-spill efficiency sweet spot;** **5 kWp is the maximum-NPV optimum.**</td><td>The recommendation depends on the customer's objective: capital efficiency and minimal curtailment versus maximum total value.</td></tr><tr><td>What does battery arbitrage contribute?</td><td>About 22,000–40,000 UGX/month before fully pricing degradation, depending on backup reserve.</td><td>Arbitrage is incremental value from sunk hardware, not the core investment case. Dispatch must exceed marginal degradation cost and preserve the agreed reserve.</td></tr><tr><td>When does more storage pay?</td><td>At the 5 kWp anchor, the first added unit breaks even around 367,000 UGX/kWh, versus about 626,000 UGX/kWh today.</td><td>Treat battery price as a procurement trigger. Additional storage may still be justified separately for outage resilience.</td></tr><tr><td>Can surplus solar be sold?</td><td>Not assumed in the Sezibwa base case.</td><td>Use zero export value until site-specific arrangements are confirmed; show export as a separate upside scenario.</td></tr></tbody></table>

Detailed evidence: [Solar Plus Battery Economic Case](https://bookstack.nearlyfreeenergy.com/link/136), [Battery Arbitrage Economic Case](https://bookstack.nearlyfreeenergy.com/link/137), [Optimal Solar and Battery Allocation](https://bookstack.nearlyfreeenergy.com/link/138), and [Battery Price Break-Even](https://bookstack.nearlyfreeenergy.com/link/139).

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# 1. NFE-owned energy-service model

NFE finances and owns the supported microgrid assets and sells an energy and reliability service to a landlord, estate, community entity, or other contracted counterparty. The exact structure—PPA, lease, energy-service agreement, or another permitted form—must be confirmed against the applicable licensing, tariff, consumer-protection, and metering requirements.

## Assets and responsibilities

NFE funds, owns, and operates the contracted system: submeters, solar, batteries where justified, inverters, communications, and the NFE Microgrid OS control and billing layer. NFE carries financing, asset-performance, collections, maintenance, and technology-obsolescence risk.

## Revenue and value capture

- **Energy-service revenue:** contracted charges for electricity supplied or bills avoided, subject to the approved commercial structure.
- **Reliability service:** an explicit availability or backup tier rather than an assumed premium hidden inside the energy price.
- **Operating efficiency:** lower losses, better collections, solar self-consumption, reserve-aware dispatch, and tariff-aware control increase project margin.
- **Optional services:** installation, maintenance, reporting, or financing fees where separately contracted.

Optimization is not revenue by itself. It improves the margin or service quality of a contracted energy product. The commercial model should therefore distinguish customer charges from internally generated savings.

## Investment test

Approve an NFE-owned project only when the site-specific model shows acceptable NPV, IRR, downside resilience, and debt-service capacity after turnkey capex, losses, degradation, maintenance, collections, taxes, and financing. At Sezibwa, the attractive next investment is solar on hardware already owned; that result should not be generalized to a greenfield site where inverter and battery costs are not sunk.

## Best fit

- High-confidence load and collections data.
- A creditworthy counterparty or enforceable payment mechanism.
- Strong solar self-consumption and limited dependence on unconfirmed export revenue.
- A strategically important reference site or a return high enough to justify NFE capital.

## Key tradeoff

This model captures the most project economics and operational learning, but it is capital-intensive and concentrates construction, credit, regulatory, and long-term asset risk on NFE.

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# 2. Partner-owned managed-platform model

A developer, landlord, estate, community entity, or energy-service partner finances and owns the physical assets. NFE supplies the operating platform, supported controls, deployment services, and ongoing technical operations.

## Partner role

The partner funds and owns solar, batteries, submeters, inverters, communications hardware, and other site infrastructure. The partner retains asset-financing risk and receives the energy margin, subject to the commercial agreement.

## NFE role

- NFE Microgrid OS licensing and supported device integration.
- Metering, customer accounts, billing, collections data, and settlement reporting.
- Monitoring, alerts, remote operations, and performance reporting.
- Tariff-aware, forecast-aware, reserve-aware, and degradation-aware dispatch.
- Site modelling, investment recommendations, commissioning, and lifecycle support.

## NFE revenue

- **Deployment fee:** site assessment, modelling, integration, commissioning, and training.
- **Recurring platform fee:** a base site fee plus a usage driver such as connected meters, managed assets, or energy settled.
- **Managed-operations fee:** optional monitoring, dispatch, incident response, reporting, and maintenance coordination.
- **Performance component:** only where savings can be baselined and audited; use a share of verified incremental value rather than gross electricity sales.

A pure revenue share is easy to describe but difficult to govern when tariffs, load, collections, outages, and partner capex all change. A fixed recurring fee provides predictable platform revenue; a narrowly defined performance component can align incentives without making NFE responsible for every movement in the partner's electricity income.

## Hardware support and maintenance

NFE should publish a supported-hardware list and define responsibility by asset. Partner-owned equipment remains the partner's financial responsibility. NFE may provide maintenance directly or coordinate approved providers under a separate service level. Unsupported third-party assets, including generators, are excluded unless explicitly integrated and contracted.

## Key tradeoff

This model produces less revenue per site than ownership but requires much less NFE capital, limits balance-sheet exposure, and can scale faster across heterogeneous sites.

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# Common modelling and operating rules

1. **Keep tariffs configurable.** Store the entire time-of-use schedule, effective dates, fixed charges, taxes, and export credit separately from model logic. Re-run forecasts whenever ERA/UEDCL publishes a revision.
2. **Model the actual site.** Use interval load, outages, collections, existing assets, weather, and installed quotations. Do not transfer Sezibwa results unchanged to another microgrid.
3. **Separate sunk and new capital.** Dispatching an owned battery can create incremental value; buying another battery requires a separate investment case.
4. **Separate energy and resilience value.** Energy NPV should stand on its own. Backup reserve, outage avoidance, and service availability should be quantified and priced explicitly where possible.
5. **Use a Sezibwa-specific zero-export-value base case.** Add export value only as a documented scenario with confirmed eligibility, interconnection limits, and credit terms.
6. **Price degradation at the margin.** Arbitrage should run only when avoided tariff cost exceeds conversion losses, marginal battery wear, and the opportunity cost of reducing backup reserve.
7. **Treat second-life storage as a hypothesis.** Recycled batteries may become attractive, but require a second-life-specific techno-economic model covering acquisition, testing and grading, BMS and pack integration, safety, warranty, heterogeneous health, remaining life, and replacement.

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# Strategic recommendation

<table id="bkmrk-strategy-table"><thead><tr><th>Situation</th><th>Preferred approach</th></tr></thead><tbody><tr><td>Partner has capital and wants operating capability</td><td>Partner-owned managed platform</td></tr><tr><td>Site has strong verified economics, reliable collections, and strategic value</td><td>Consider NFE ownership after investment committee review</td></tr><tr><td>Demonstration or product-learning site</td><td>NFE-owned or co-invested, with an explicit learning budget</td></tr><tr><td>Economics depend on unconfirmed export revenue or speculative battery pricing</td><td>Do not finance on the upside case; validate first</td></tr></tbody></table>

The near-term portfolio should therefore be **partner-led and platform-first**, with a small number of deliberately selected NFE-owned or co-invested sites. This builds recurring software and operations revenue, expands the data set behind the optimizer, and preserves NFE capital for projects where ownership offers exceptional return or strategic learning.

# Decisions and evidence still required

1. Define the minimum recurring platform fee and its pricing driver: site, meter, managed asset, or energy settled.
2. Define a measurable baseline and audit method before offering performance-based fees.
3. Set NFE-owned project hurdle rates, concentration limits, credit requirements, and downside tests.
4. Confirm the permitted contracting and electricity-resale structures for each customer segment.
5. Publish supported hardware, warranty boundaries, maintenance responsibility, and service levels.
6. Build the second-life-specific techno-economic model before presenting recycled batteries as a validated strategy.
7. Turn the current optimizer into a repeatable site proposal that reports energy value, resilience value, capex, financing, NPV, IRR, payback, tariff sensitivity, and export sensitivity separately.