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The definitive guide to solar PPAs

There’s been growing interest in solar PPAs over the past few years, and they are now much more mainstream. However, you may still have some questions about PPAs and solar finance. What are PPAs, and how can they benefit your business? We’ve put together a definitive guide to help. 

What is a solar PPA?

The term “PPA” is swung around quite a lot in the solar industry. PPA stands for “Power Purchase Agreement”, and it signifies a type of contract between an electricity generator (or Independent Power Producer – IPP) and an electricity consumer (or offtaker) – such as a commercial operation. A solar PPA is therefore a contract between a solar generator and an offtaker, stating that the generator will provide solar power and the offtaker will buy the solar power from them.

As a form of electricity, Solar PV is an easily-deployable, very safe option without any moving parts that produces electricity during light hours of the day, and therefore it often makes sense to embed the solar PV system directly into the factory, retail centre, warehouse, etc. where it will be consumed. As such, many commercial and industrial solar PPAs include the construction of an embedded generation solar facility on the site where the power will be used. In this instance, a solar PPA is a way for the customer to procure clean electricity and save on their electricity bills without deploying any CapEx, and only paying for the electricity that the system generates.

However, PPAs can also be entered into for clients where there is either too little space or too much energy demand to generate solar electricity directly on the site. In these situations, solar wheeling agreements can be entered into, which allow the purchase of solar power from a remote solar facility, such as a large solar farm, to be “wheeled” through the electricity grid and to the customer. Wheeling typically suits energy-intensive operations such as mines, smelters, data centres, and other large commercial operations.

Typically, the larger the size of the PV system, the lower the tariff. This is why solar PPAs are best suited to energy-intensive operations, where there is little chance of exporting excess energy. The most suitable size of the PV system depends on the client and type of operation, and is typically determined during a detailed feasibility process between the generator and offtaker. 

What are the benefits of a solar PPA?

There are several benefits of entering into a solar PPA, but they can be summarised into four main points:

  1. Cost saving

The major reason for entering into a solar PPA is the significant cost saving that customers tend to encounter. While grid tariffs have been increasing, the cost of solar PV components has reduced dramatically over the past 10 years, meaning that the cost per kWh of solar electricity tends to be much cheaper than power from the grid and other forms of onsite generation (diesel genset etc.). In addition, the solar PPA tariff includes all expenses relating to the solar system: upfront installation costs, part replacement, comprehensive asset insurance and ongoing operations and maintenance, meaning that the client will not have any hidden or unexpected costs over the life of the PPA.

  1. Carbon emissions reduction

Solar PV systems generate energy by converting the sun’s rays directly into electricity, forming a low-carbon, renewable energy source. A solar PPA is an easily accessible way for businesses to decrease their carbon footprint and meet their sustainability targets. 

  1. No outlay of CapEx or ongoing maintenance costs

If a customer wishes to procure their embedded solar PV facility outright, they will need to pay a supplier for the engineering, procurement and construction (EPC) of the project, which will have a large capital outlay. This is not always the best option for a business whose core operations are completely different to electricity generation, as the ongoing maintenance and performance of the plant will be their responsibility to manage. Whilst most EPC companies provide additional Operations and Maintenance services, it will be the responsibility of the client to ensure that those contracts are fully up to date and to log any issues with the service provider. 

  1. Future electricity cost perspective

Typically PPAs will have fixed tariff increases baked into the contract, ensuring that the future costs of electricity will be predictable and manageable. Historically, Eskom tariffs have risen an average of over 11% annually over the last 20 years, with a 15% increase announced in 2021. A solar PPA will have an escalation that is fixed and typically well below Eskom’s average and can be set in consultation with the client. 

How long is a solar PPA?

The main component of solar PV systems are the solar panels, with a market standard performance warranty of minimum 25 years. As such, typical PPAs range from 10 – 25 years. Although the length of the PPA is adaptable, the longer the PPA is, the lower the starting tariff will be. 

If your business is looking to procure sustainable power quickly, then the time of procurement should also be taken into consideration. For a simple solar PPA to take effect, there is typically a 5 – 6 month procurement time before the site establishment and construction, which incorporates the negotiation and signing of the commercial PPA as well as the design and licensing of the solar PV system. Here’s an example of the typical timeline of a solar PPA negotiation period:

Off-site PPAs that include a wheeling agreement may take longer to initiate because a solar generating site needs to be identified and permitted in addition to the normal PPA process. 

What’s the difference between a solar PPA and a solar lease?

Over the years, the terms “solar PPA”, “solar finance”, and “solar lease” have come to be used interchangeably, so what is the actual difference between these terms? The answer has to do with the history of energy legislation in South Africa and the allocation of risk.

Before November 2017, it was not possible in South Africa for Independent Power Producers to sell energy directly to consumers without a generation licence. As such, solar leases were utilised as a way for a private energy consumer to make use of a solar PV system by leasing the system instead of paying per unit of electricity the system generates. Then, in November 2017, an amendment to Schedule 2 of the Electricity Regulation Act allowed for private energy sale without the need for generation licence of projects less than a 1MW in size, which opened up the opportunity for Power Purchase Agreements to take effect. 

So the main difference between a solar lease and a solar PPA is contractual, and dependent on where the performance risk of the asset lies. In a solar lease, the performance risk lies with the customer or user of the solar PV system as they pay a fixed monthly fee for the system not linked to the output it generates. Whereas in a solar PPA the entire risk of the asset lies with the solar PV operator as only energy generated is paid for on a take-or-pay basis, making it a purely cost-saving mechanism for businesses.

Are there risks associated with a solar PPA?

As with any large commercial decision, the risks need to be understood up front. The main risks in entering into a PPA agreement include:

  1. The length of the contract

Whilst most business contracts are typically renewed on an annual basis, a PPA term is typically 10 years and longer to ensure the most cost effective solar tariff. As such, senior management will want to ensure that the cost and carbon savings associated with procuring clean electricity are worth the risk of entering into such a contract. This can be mitigated through various exit options including an option to purchase the system, which can be a condition of PPAs that allows the client to buy the solar PV system after a set amount of time for a periodic price that is agreed upfront, should the operational requirements of the business change.

  1. Changing operational requirements

The risk of changes to the business’ operational requirements is a standard business risk that should be considered for every new venture and/or product that is introduced, as it will have an impact on the overall efficacy of the plant or operation. If, for example, a product is no longer required and its manufacturing operation suddenly starts to use less electricity, this could impact on the cost-saving aspects of the PPA. Most PPAs are arranged on a “take-or-pay” basis, meaning that the client is responsible for paying for all the electricity that the system generates, including instances where the customer cannot take the energy not at the fault of the generator. In addition to careful business management, this risk is also mitigated through careful feasibility and design phases, which look in detail at the electricity requirements of the building or facility before suggesting the total size of the solar PV system to the client. Similarly, a PPA has a fixed tariff increase each year, meaning that electricity costs will be very predictable into the future, allowing for better business planning. 

Is a solar PPA right for my company?

Understanding if a solar PPA is the right option for your company is a decision that comes down to business management decisions around cost saving and sustainability. On cost saving, does your business have energy-intensive operation(s) around South Africa, and is a large amount of your company’s operational budget spent on electricity procurement? If so, a solar PPA is a great way to reduce electricity costs quickly, with low risk to the business, improving the profitability of your operations. Similarly, a PPA also ensures that future electricity costs are predictable, hedging against unpredictable Eskom increases.  

From a sustainability perspective, does your business have sustainability targets that require a reduction in carbon emissions or a requirement to procure renewable energy? If so, a solar PPA is a great capex-free way to reduce reliance on grid-supplied electricity, which in South Africa is highly carbon-intensive. For example, the CO2eq for South Africa’s grid is just under 1 kg per kWh, whilst solar is less than 0.01kg per kWh. From a procurement perspective, solar PV is considered 100% renewable, so the more solar PV that fuels your operation, the closer you will be to your renewable energy procurement target.

Is installing embedded solar PV in new property developments worthwhile?

Embedded solar PV generation is often retrofitted in industrial buildings due to its immense cost and carbon benefits. However, new buildings and greenfield property developments stand to benefit greatly from incorporating solar PV into their designs as well. 

According to the International Renewable Energy Agency (IRENA), the costs of solar PV modules have fallen over 90% since the end of 2009, and energy storage components show similar trends. This translates to power systems that are increasingly affordable to integrate into new developments – particularly in sunny countries like South Africa.

So is it worthwhile to integrate solar PV into the design and construction of new buildings and property developments? Absolutely. In fact, according to Architizer, a leading architecture website, incorporating PV into building design is becoming increasingly popular as the options for mounting solar modules and integrating PV into building design expand.

Installing embedded solar PV on new property developments has a host of benefits:

  • Understanding the electricity load and how large the solar PV system will be upfront helps to integrate it into the building design, ensuring that it is aesthetically pleasing and/or seamless with the architect’s vision.
  • Incorporating solar PV modules into the roof design ensures that the roof can bear the weight and prevents the need to strengthen the roof at a later date
  • Inverter or battery rooms can be incorporated into the building design, which will keep them cool and dry, allowing them to function optimally and saving maintenance costs 
  • Solar PV is much cheaper than other forms of energy, so it makes the building costs more cost efficient from the start
  • Incorporating solar PV and/or energy storage into a new development can shield it from load shedding, making the property more attractive to tenants 

Integrating solar PV design into greenfield developments has become an obvious choice because it is one of the cheapest and most reliable forms of electricity available today. Several new developments are exploiting that: DSV Park opted to implement a large-scale solar PV system into their new 140,000 m² logistics facility, incorporating a 1.3 MWp solar PV system integrated into the Park’s electricity supply, alongside on-site diesel generators that allow it to safely operate during load shedding events. 


With alarming increases in electricity tariffs and grid unpredictability and load shedding in South Africa, many like DSV are opting for cleaner power supply. Solar PV systems last 25 years, so incorporating them into building electrical design is a way of ensuring that the assets have a stable power supply way into the future.

Energy Wheeling supplies power to areas located away from the direct source of power

SOLA gets approval for largest solar PV wheeling agreement in South Africa

A flagship renewable energy project, commissioned by Amazon, is set to demonstrate the flexibility and convenience of procuring independent power through the electricity grid. The project will see 28 GWh of solar energy wheeled via Eskom’s utility grid from a solar farm in the Northern Cape to Amazon’s facilities each year.

Energy wheeling holds tremendous value in that it enables the supply of energy to urban areas from energy projects in outlying areas, such as a solar farm located in an area where the sun is most powerful and consistent. This is done through the transfer of electrical power via a utility’s distribution system. In other words, the power generated in a sunny area is distributed to an offtaker where there might be less solar resource. 

Chris Haw, SOLA’s Executive Director, explains that although the concept of wheeling energy using Eskom’s existing infrastructure has been in place since 2008, certain administrative barriers have hindered the uptake of such services. “This project, which comprises a 10 MW solar PV farm, has also received a sought-after generation license from NERSA, a milestone that other similar projects have struggled to achieve.”

SOLA will be responsible for developing the project and will build, own and operate the solar facility.

Haw explains that the NERSA process requires a signed Power Purchase Agreement and fully developed project in order to obtain approval. “This creates contractual challenges because many inputs, such as the foreign exchange rate, are still fluctuating whilst the application process is underway. The high standard of development required for submission means that NERSA are not handing out licenses to projects that won’t proceed, which is a very good thing.” 

The project aligns with the South African Government’s intent to open the electricity grid, allowing independent generators of electricity and consumers to enter into bilateral agreements to optimise the cost and sustainability of energy, which has previously been difficult to achieve. The generation license received from NERSA is one of the first granted as part of the recent allocation made for distributed electricity generation in order to plug the short-term capacity gap.

Haw says that SOLA will deliver the energy via the Transmission Network though a Wheeling Use-of-System agreement. “This Wheeling Use of System Agreement is the first of its kind and the largest solar PV wheeling arrangement in South Africa to date.”

Haw credits the company’s multi-disciplined skillset and 10-year track record of developing, financing and building solar PV projects in South Africa with overcoming the many challenges that were faced.

The SOLA Group has a history of breaking down barriers to enable renewable energy projects in South Africa. The group developed some of the county’s first IPP projects, signed the first bi-directional metering agreements with municipalities, and are responsible for innovative solar-plus-storage projects like the microgrid currently powering Robben Island.

The project will be majority black South African-owned, demonstrating a pivotal dedication to transformation in South Africa’s energy sector. Mahlako a Phahla Investments, a black women-owned and operated energy and infrastructure investment holding company will own 45% of the project.

Other investors into the project include African Infrastructure Investment Managers (AIIM), through the IDEAS Fund, one of South Africa’s largest domestic infrastructure equity funds and one of the largest investors in the country’s renewable energy landscape.

The project’s success could mean that more companies like Amazon will look to procure cleaner independent power through the grid.

“This project is the tip of the iceberg in terms of what the electricity picture in South Africa could look like,” says Haw. “Projects like this demonstrate the potential of a truly modernized electricity market where consumers can procure cleaner energy through state-owned grid lines whilst paying for their upkeep in the process,” he adds.

The project will begin construction in early 2021.

Is it possible for your business to go off-grid?

A question many businesses are asking in 2020, particularly with the onslaught of load shedding, is the possibility of going entirely off grid. This is unsurprising – grid reliability has been severely reduced over the past few years and Eskom tariffs are substantially higher than the costs of solar on an average lifetime basis. As such, many companies are looking at the possibility of severing ties with the grid and managing their energy needs independently.

Historically, solar has not been viable as an alternative primary electricity supply to the grid primarily because of its variability. Because the sun only shines during the day, the deployment of solar has often been limited to partial offset of daytime electricity demand – a solution which tends to save companies significantly on their electricity bill. But for solar to be a ‘dispatchable’, 24-hour alternative to the grid, it needs to be coupled with storage, or with other flexible sources of demand or generation, which has often made it an expensive choice.

This, however, is changing. In South Africa, overall costs of solar-plus-storage have historically compared unfavourably to most grid tariffs, limiting off-grid projects to areas with no grid access or grid capacity constraints. However, there are already several industrial and commercial grid tariff structures that make off-grid solutions a cheaper and more reliable alternative than remaining on grid, particularly for industrial operations that have high power requirements and tend to supplement their supply frequently with diesel generators to keep their electricity supply consistent.

How do you know if it is viable for your company to go off grid? One of the key questions to ask is how much your business currently relies on diesel generators. If you use them around 15 – 20% of the time, it is almost certain that a solar + storage solution will save your business money. Secondly, if your facility has large power (kVA) requirements and is on a high industrial tariff, the business case of going off grid could be advantageous.

Cost reductions and improved efficiency in energy storage technology have major implications for the future of South Africa’s power system: it means that some electricity consumers on expensive tariff structures can already choose an alternative to Eskom or their local municipality. Even those on cheaper tariffs are likely to follow as grid tariffs rise and solar and battery equipment gets cheaper.

Of course, large-scale grid defection might not be the ideal outcome for all South Africans. It will erode the economies of the national grid and increase costs for many segments of society. This is why power sector reform must urgently facilitate an efficient and equitable transition to renewable energy.

How new methods of procuring solar electricity enable more access to affordable power

Intuitively, solar-generated electricity is cheap: the sun, after all, is a free resource, and compared to fossil-based energy such as coal and gas that require constant inputs, once installed, solar PV systems harness the sun’s energy for “free”, providing years of clean energy. So why has solar taken a while to become mainstream?

This is, in part, due to the costs of setting up a solar PV system. Because whilst the solar resource itself is free, there is still an initial cost of setting up the equipment which harnesses the sun. And while electricity grid tariffs are typically made up of ‘pay-as-you-go’ charges for monthly energy and power use, a solar PV electricity generator requires an upfront investment in equipment, which is then followed by minimal operational costs and zero fuel costs. This means that whilst the overall lifetime costs of solar PV are significantly lower than equivalent grid costs, the upfront investment has historically often exceeded the available capital of electricity consumers seeking alternatives.

However, this pattern is changing. For years, businesses with sensitive balance sheets that would not have cause to justify a large capex expenditure on an asset that doesn’t relate to their core business have struggled to justify the costs of a solar PV system – even if it would result in significant cost reductions over time. For this reason, new ways of procuring solar electricity have grown, and many businesses are now choosing to buy power from independent power producers (IPPs) who own and finance the solar assets on their behalf. 

Independent Power Producers (IPPs) gained some traction in the years of South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REIPPP), which started in 2008 to see the first renewable energy integrated on to the main grid. Since 2008 a few trustworthy IPPs have stood the test of time and are able to provide Power Purchase Agreements (PPAs) that reliably smooth out the costs of a solar PV generator, making it more affordable and accessible to businesses. In addition, their owning of the solar PV asset removes the technical and operational risks that a business might face through ownership.

Several years ago, small-scale PPA agreements for typical businesses were inflexible and difficult to structure. As mentioned in the previous piece on how energy generation has changed, lower grid tariffs and higher solar equipment costs in the past reduced the financial benefit of solar for the end user. In addition to this, local solar companies were less experienced and technical risks were higher, increasing the costs of finance. Buying solar power from an IPP was akin to renting a house at above market rates, from a landlord who overpaid for the property and got an expensive bond from their bank.

But this has been fundamentally changed by the cost dynamics of the energy sector. Reputable IPPs now have the skills and experience to offer clean solar power at a substantial discount relative to the grid, even for commercial energy consumers. In addition to unlocking greater overall savings, the growing cost gap is enhancing the commercial flexibility of IPP services, and making solar electricity available to a wider pool of consumers. 
A typical PPA can now range from 5-20 years, with the most popular being somewhere around the 10 – 15 year mark. During that time, the offtaker (the company buying the power) and the IPP (the company providing the power), agree to pay for power and provide power, respectively, at an agreed tariff. It’s very similar to buying power from Eskom, except that the companies know upfront how much they’ll be spending on power – and how much that tariff will increase in the coming years. These solar procurement options enable customers with sensitive balance sheets to reduce costs immediately, without the risks of owning or running a solar PV system, and without the risks of unpredictable tariff increases over time.

How electricity generation has changed over the past 10 years – and what it bodes for our future

Alongside the global pandemic, electricity has been on many South African’s minds this year. And rightly so: South Africans can expect a 15% increase in their electricity costs from mid-2021, based on a recent court ruling which grants Eskom the right to recover operating costs through additional tariff escalations. This will mark more than a decade of average annual increases of 14%, relative to average inflation of just under 6%.

These escalations have fundamentally changed South Africa’s economy: the manufacturing and mining sectors have been particularly affected by the rising tariffs, and are doubly affected by the inconsistent supply caused by load shedding. South Africa’s electricity supply from the grid is subject to decreasing reliability, with 2020 already shaping up to be the worst on record for load shedding.

What South Africa is experiencing is not unique, but exposes the global trends that expose the high costs of maintaining an aging and centralised coal fleet. A decade ago, average Eskom tariffs were two times lower than they are today, and the costs of installing solar PV were two to three times higher. That situation is very different today: Eskom and municipal electricity tariffs are now substantially more expensive than solar PV installations on an average, lifetime cost basis. This is driving strong uptake of own-use solar generators, despite persistent policy and regulatory barriers.

This is because the electricity market has fundamentally changed over the last 10 years. The growing cost gap between the grid and solar PV means that the benefits of solar are more economically viable, even if the PV plants generate more power than required (for example on weekends, when a factory does not operate). 

For private electricity consumers, solar electricity is typically used to offset daytime electricity consumption through ‘own-use’ or ‘embedded’ generators that service the electricity needs of the facility on-site. The uptake of embedded solar generation has exploded in South Africa, particularly amongst the retail and manufacturing sectors, because of the cost savings generated by the plants. Despite this, embedded generators are largely restricted from selling power into the grid, although it is looking hopeful that this might change

The fact that solar PV is so much more affordable than Eskom’s grid is also changing the way in which solar PV is consumed by large commercial and industrial facilities. For example, some facilities choose to oversize their solar PV system relative to on-site electricity demand in order to increase morning and afternoon solar electricity production, generate more power in winter, save more diesel during load shedding, reduce peak grid demand charges, and achieve higher overall reductions in grid electricity consumption. 


Other commercial and industrial facilities are opting to oversize their solar PV systems and store the excess affordable power in battery banks – something that, 10 years ago, would have been ludicrously expensive. However, with Eskom’s tariffs increasing the way they are, and with the reduction in the costs of energy storage components, the business case is starting to emerge. The advancement in electricity generation technology gives businesses more flexibility and options when it comes to their energy choices. Own-use solar – whether on or off grid – is an affordable and, by now, well-used option.

Load Shedding Solutions for Your Business

Load Shedding, unfortunately, has become a norm in South Africa. Even though load shedding takes place to stop the entire country from experiencing a permanent blackout (by the collapsing of the whole electricity supply grid), load shedding still has major negative effects on the economy in South Africa. 

Several reports now estimate that South Africa will experience severe load shedding for at least two more years. The frequency of load shedding, even during COVID 19’s economic standstill, indicates just how fragile Eskom’s fleet has become, and businesses have to find a solution to remain operational. The positive news is that a plethora of technology now exists which can help your business to find a solution to ending the nightmare of operational disturbances.

The causes of load shedding 

Load shedding happens when there is not enough electricity available to meet the demand of all customers. In order to maintain grid stability, the electricity utility supplier will interrupt the energy supply to certain areas on a rotational basis.  The winter-months are prone to load shedding, as it can be  caused by the higher demand for electricity during cold weather, which causes the power station stations to be overloaded and  struggle to  keep up with generating the needed electricity capacity.

According to Eskom and government officials, the solution is a capacity problem, requiring the construction of additional power stations and generators. However, the procurement of additional national capacity could be a lengthy process. In the meantime, there are alternative electricity solutions to help businesses during load shedding.

Various methods can be used to minimise the impact of load shedding, and below we suggest a few solutions businesses can use to see their operational disturbances be minimised. 

Solutions to load shedding

1. Uninterruptible power supply systems (UPS systems) 

A UPS is an electrical apparatus that provides emergency power to a load when the main power supply or utility power fails.

A UPS is the bare minimum when it comes to business operational management, as it allows for the safe, orderly shutdown of computers and connected equipment. The size and design of a UPS will determine how long it will supply power.

A UPS will only work if power banks are fully charged and on standby when needed. Unfortunately these are short term solutions, due to the fact that the power banks may run out of power before the electricity comes back on. This means that, once the UPS’s reserve has been depleted, there is no alternative supply of power, which might negatively impact productivity and affect day to day operating of the business.

2. Backup generator  

Many businesses have turned to backup generators to ensure the continuous supply of power. Generators typically use diesel or gas, and convert mechanical energy into electrical energy as the output. 

Gas generators can be used for residential emergency power supply and can last about 2 to 3 hours,  which may not be ideal for a business function. Diesel generators, on the other hand, can run for 20 – 30 hours, depending on their capacity.

However, with the ever increasing price of fuel, running a generator can become prohibitively expensive. The lifespan of a generator depends on its run hours – a generator that is used infrequently could last around 20 years. In a scenario of increased and consistent load shedding, generators may need to be replaced more frequently. 

In addition, it is important to consider the noise and fumes that a generator might emit, which can be an additional frustration to an already stressful working environment. 

Diesel generators on Robben Island

3. Grid-tied PV Solar system 

A solar PV system is composed of solar modules combined with an inverter and other electrical and mechanical hardware that use energy from the sun to generate electricity. PV systems can vary greatly in size, from small rooftop or portable systems to massive utility-scale generation plants. In South Africa, which has fantastic irradiation, solar PV tends to be the most affordable kind of power to generate.

However, typical solar PV systems are grid-tied, meaning that they would go down during load shedding. This is because, although the sun may continue to shine during a power outage, the inverters will automatically switch off in the event of a grid outage. An inverter is required for solar PV systems in South Africa, to convert the DC power generated by the modules to AC power, which is used in buildings and commercial operations. Inverters are designed to switch off in the event of a power outage, to ensure the safety of personnel that could be working on the grid during an outage.

Luckily, a simple “workaround” can ensure that during the day, a solar PV system can still remain operational during a power outage. As we explained in our previous post about load shedding, installing hardware and a simple generator/UPS system can ensure that inverters remain on during outages, and the solar PV system can continue to generate low-cost power during this time. Several SOLA customers have used this technology, such as Old Mutual Park. 

Old Mutual Solar Carport

Installing a solar PV system is a great cost effective way to get your business not having to deal with the crisis of load shedding in South Africa.

4. Off-grid solar PV system

An off-grid solar PV and battery system, also known as a stand-alone power system (SAPS), or solar PV microgrid, works by balancing several electricity sources, such as solar PV and batteries. Solar PV microgrids work by generating electricity from solar modules and using them to charge a battery via a charger controller.

An off-grid system works independently of a utility grid , which makes it an independent power generation source, ideal for remote or rural areas, such as the microgrid in Clanwilliam’s Cedar mill Mall.  However, with increased load shedding, this form of electricity generation is starting to make financial sense in urban areas too.

Although many companies may be reluctant to move off-grid,  solar PV microgrids are becoming the most long-term and cost effective solution for permanent power supply in South Africa. 

Cedar Mill Mall Solar PV Microgrid

Conclusion

With the prospect of load shedding being around for at least another three years, considering viable alternative sources of power is important for business. With the rising tariffs and other issues at Eskom, companies need to seek out the best alternative power generation options for their businesses. 

Now that we are ready to “reopen” our economy after the COVID 19 lockdown, load shedding will be a reality for many businesses. The good news is that there are lots of options for business owners to ensure continuous power – whether through a  UPS system, backup generators or solar PV systems. The options are there to help ease your mind with the effect that load shedding has caused to businesses.

How Solar Power Systems Can Help Your Business?

Solar power systems are not only relevant to governments and large utilities looking to procure solar power, but to commercial and industrial businesses too. Currently, solar PV systems are the cheapest form of available power, and prices are continuing to drop. It is no wonder that businesses are keen to get on the solar trend. But how, specifically, can industrial businesses benefit from solar power systems? 

Solar power systems can assist businesses - ABInbev

Solar power systems reduce operating costs

The first and most obvious advantage of installing a solar power system is cost saving. Because solar is such an affordable form of electricity, it is an easy way to reduce operating costs dramatically, particularly for industrial businesses that have consistent loads or run 7 days a week. Two factors make solar PV a good investment for industrial businesses: they instantly reduce operating costs, and the great solar irradiance in South Africa means that they can produce a substantial amount of energy.

How much will a solar PV system save industrial businesses? This largely depends on the type of business, times of power use, and other factors that may influence the cost of the solar electricity generated. For an estimation of how much your business could save with a solar solution, get in touch with us for a free analysis of your electricity tariff. 

Solar Power Systems - Alrode Brewery in Alberton - industrial solar power system

Solar power systems can reduce diesel costs during load shedding and other power outages

Whilst most solar power systems are grid-tied, meaning that they do not operate during load shedding or other power outages, solar PV can greatly reduce the cost of diesel that might be required for backup power during an outage such as load shedding if this is taken into account whilst designing the system. 

Solar PV systems continue to generate power as long as it is light – and this applies to periods of load shedding during the day. However, solar inverters are designed to switch off during a grid outage, which serves as a safety mechanism for personnel that might be working on transmission lines during outages. However, this does not mean that large buildings with solar PV systems do not have options for load shedding. With careful engineering, It is possible to replicate a fake grid-tied scenario to “trick” the solar inverters into staying on. 

In order to retrofit a grid-tied solar system to operate during load shedding, two essential steps need to be taken. Firstly, the system needs to be isolated from the grid to prevent any exporting of power that could affect the safety of maintenance personnel. Secondly, a voltage forming source is required, in order to provide a reference voltage and frequency to the solar inverter. With these mechanisms in place, a solar PV system can continue to function seamlessly during load shedding, and thus reduce the costs of diesel and extend the life of on-site generators greatly. 

When does it make sense to go entirely off grid? If your business has a weak grid connection and thus has inadequate kVA supply, or it uses diesel roughly 20% of the time, it might be worthwhile to look at the cost-benefits of installing a solar PV microgrid with batteries. 

Solar power systems reduce carbon emissions

It goes without saying, but supplementing your business’s electricity supply with solar power is a great way to cut down on carbon emissions. In South Africa, the Carbon Tax was gazetted on 1 June 2019 – meaning that companies will have to take their carbon emissions into account when filing for their tax returns. According to the South African Revenue Service (SARS), the first phase of the carbon tax is R120 per ton of carbon dioxide equivalent emissions, which will increase annually by inflation plus 2% until 2022. 

There is a minimum threshold for emissions allowances in order to allow for businesses to transition to cleaner energy and invest in energy efficiency projects, but in general the carbon tax is here to stay – and if avoided, could save the business from tax expenses. 

In addition many large companies are heeding their stakeholders’ requests to be more responsible in the way that they do business. Global support of sustainable business practices have increased dramatically over the last few years, particularly in the manufacturing sector. In response to global consumer trends, a group of multinational corporations established the RE100 as a commitment  to going 100% renewable energy. One signatory of the RE100 is AB InBev, who recently entered into a multi-tiered Power Purchase Agreement with SOLA to supply their South African Breweries with 8.7 MW solar power systems. For them, the commitment to renewable energy is a no brainer – both in terms of cost savings and their sustainability commitments. 

Solar Power Systems - AB Inbev

By giving you a better overview, solar power systems can increase operational efficiency

Solar power systems are not only a way to reduce operational costs and lower carbon emissions, but they also provide an opportunity for businesses to evaluate and improve on their energy consumption habits. In order to correctly size a solar PV system, it is important to examine the load of the building, and with this will come insights into your energy consumption patterns. Is it possible to run some of the plant during the day when solar PV is at its cheapest? Are there additional energy efficiency measures that could assist with bringing your load during peak hours down? By encouraging a monthly overview of a business’s energy consumption, solar power systems can help to further energy savings even more. 

Solar power carport systems can provide cool, protected parking

Whilst many businesses in South Africa have ample roof space for housing solar power systems, solar power systems are perfect additions to parking lots and convert them into shady, protected carports. Solar carports are very similar to ground-mounted solar systems, but they have the added advantage of not requiring any additional land if a parking lot exists. What is more, because of global demand, these systems are becoming increasingly affordable. The solar carport at Old Mutual head office is an example of how a solar power systems can utilise existing space to create savings for businesses. 

Solar Power Systems - Alrode Brewery in Alberton - industrial solar power system

AB InBev bolster breweries with 8.7 MW renewable energy from SOLA

Renewable energy solutions are a quick and efficient way for South Africa to reduce energy demand on Eskom’s constrained grid, and solutions are being supported by businesses who see the value of embedded electricity solutions for their supply chains. 

This is according to Chris Haw, Chairperson of the SOLA Group, who in 2018 signed seven multi-tiered Power Purchase Agreements (PPA) with AB InBev Africa that are seeing large solar power plants built across seven major breweries in South Africa.

The Power Purchase Agreements will total around 8.7 MW DC capacity. Of this, 2.6 MW have already reached practical completion with the remaining projects in advanced stages of construction.

“Not only is solar a viable and cost-effective option for us, it aligns to our global sustainability strategy, which entails going 100% renewable by 2025,” says Taryn Rosekilly, Vice President of Procurement and Sustainability at SAB and AB InBev Africa.

ABin Bev Breweries will now be powered with solar energy

The bold step taken by AB InBev Africa highlights the private sector’s strong drive towards reducing carbon emissions and procuring renewable energy solutions.

Gugulethu Nogaya, the Renewable Energy Procurement Manager at AB InBev Africa explains that “procuring renewable energy is part of our sustainability objectives set at a global level. Our global renewable energy commitment is to ensure that 50% of our purchased electricity will come from renewable energy sources by 2020, and 100% by 2025”. 

Nogaya points out that the company has achieved its 50 % target ahead of schedule. “We are currently on track to achieve our 100 % target, with the PPA being an instrumental first step in ensuring our African business is on track to achieve the 2025 ambition.”  

Nogaya adds that “in order to meet the AB InBev 100 % target in South Africa, it will require solar renewable energy facilities to the total of 191 MW.” 

Jonathan Skeen, Gauteng MD and Gugulethu Nogaya, Renewable Energy Procurement Manager, at the launch of AB InBev's renewable electricity and electric truck launch

According to the International Energy Agency, distributed solar PV systems in homes and Commercial and Industrial buildings have almost tripled since 2014. It predicts that distributed energy will grow as much as onshore wind by 2024, making up half of all new solar PV capacity. 

This is likely due to the flexibility and affordability of PV plants compared to other forms of energy generation. The rollout of large-scale solar PV systems takes much less time than other generation technologies. 

There is also a greater demand and expectation that businesses take more responsibility for the way in which they operate. Providing renewable energy allows businesses to meet their sustainability targets whilst taking pressure off of Eskom’s load.

The PPA between AB InBev Africa and the SOLA Group is allowing solar PV to be rolled out without AB InBev incurring capital costs. Instead, the company will purchase its power requirement directly from SOLA, with the remainder coming from Eskom and local municipalities. 

In 2019, SOLA secured R400 M with partners from African Infrastructure Investment Managers (AIIM) and Nedbank in order to fund projects such as the AB InBev Africa solar facilities.

“Embedded electricity generation – particularly solar PV – can quickly address Eskom’s supply shortfall,” states Haw. “For large Commercial and Industrial companies, procuring renewable power enables saving costs whilst also reducing their carbon footprints.” 

The solar PV plants for AB InBev Africa span across seven different sites in various areas of the country, including the Western Cape, Limpopo, Gauteng, KwaZulu-Natal and the Eastern Cape. 

“Combined, the plants will consist of over 23 000 solar panels. The construction of the projects will create 175 jobs, in addition to SOLA’s 56 permanent positions,” points out Haw. 

AB InBev Africa is one of the largest industrial business in South Africa, making the conversion of their sites to solar significant. “The PV systems will produce close to 14 GWh of electricity per year – the equivalent of taking over 2000 cars off the roads. This is exactly the type of clean energy procurement that we need to see more companies committing to,” concludes Haw. 

Industrial solar installations – dos and don’ts for facilities managers

If you run an industrial facility you’ll be well aware of the benefits of grid-tied solar PV solutions. Running cheaper and more efficiently than utility-provided power (such as Eskom), solar PV provides substantial savings for industrial facilities as a source of reliable alternative power. However, there are many solar companies purporting the benefits of solar power, and not all facilities managers are able to discern the best option for their facility. The below guide highlights 5 dos and don’ts for facilities managers to ensure that the procurement of solar is an effortless one.

Do: Practice due diligence when procuring solar PV.

Procuring solar PV is a 25 year decision. If chosen correctly, solar PV can provide 25 years of affordable and clean energy to your industrial plant. As such, it is important that the procurement process is done thoroughly and due diligence is practiced. It can be easy to rush into buying solar – particularly when the savings look promising. However, practicing due diligence when procuring solar will pay off in the long run. Start by asking a few simple questions about the solar PV procurement.

  • What is the objective of the PV system? If you are using it to save money, are you looking to make operational savings through a Power Purchase Agreement, or add value to your building through acquiring a solar asset? Perhaps a bit of both?
  • If you are looking to buy a solar system outright, do you have sufficient finance to do this? Is a PPA a better option for your business?
  • What is your typical energy load, and how much of it occurs during the day? Setting up metering can really help in determining what the right sized solar PV system would look like. 
  • Where would you place the solar PV system? Although wheeling arrangements allow power to be generated in a remote solar PV facility, the majority of small-scale embedded generation (SSEG) occurs on site. Having either a stable roof or a suitable piece of land is an important consideration when writing up your request for solar quotation.

Do: Get a reputable company to carry out your industrial solar installation

The most important part of your decision will be based on getting a reputable company to build the industrial solar installation. This means choosing a company with a solid track record of solar projects, particularly in industrial facilities. The chosen company should be able to get good prices on high-quality solar components such as modules; design efficiently and thoroughly, and carry out construction safely and within the budget and timeline. 

If you’re opting for a solar PPA option – where you don’t own the solar PV facility but simply buy the energy that it generates – you’ll want to ensure that the company you choose has sufficient available finance to build and maintain the system. Making sure that the company has credentials to stick around for the full term of the PPA is important.  Make sure that the solar PV service provider can meet basic requirements, such as:

  • Design credentials. Does the company have the relevant design experience and credentials to effectively design a PV system for your site? 
  • Adherence to minimum standards. In South Africa, this includes adherence to all relevant SANS codes, and ensuring that items such as wind load calculations are carried out according to SANS standards
  • Compliance with Municipal and National electricity standards municipal/eskom standards, including carrying out the relevant application processes to ensure that the PV system is legally compliant (such as Small Scale Embedded Generation (SSEG) applications)
  • Ensuring that a Practicing Engineer (Pr. Eng) is able to sign off on the system design and construction, yield estimation accuracy, 
  • Qualified site supervision, and construction that complies with all Occupational Health and Safety standards
Industrial Solar Installations SOLA

Do: Compare Apples with Apples

Getting comparative quotes is always recommended: it helps you to compare different solar PV companies and pricing, which helps to make a better decision. However, make sure to compare apples with apples when comparing quotes. It is important to consider that different PV companies structure their pricing in different ways, so be sure you understand exactly what each company is offering before comparing their pricing. 

When comparing proposals from various companies, consider the following: 

  • Equipment selection: the selection of tier 1, quality equipment will likely push the price up slightly, but it will mean that the system is better able to perform over its 25 year lifespan.
  • Inverter and panel derating characteristics: the derating of inverters and panels will affect the ability of the PV system to produce power over time
  • The sizing of the PV system: Is is optimally sized in order to meet your load requirements? A system that is too large or too small won’t save you the optimal amount of money. A slightly higher AC-DC ration will also affect price.
  • Lifetime savings and guaranteed savings: make sure you compare these two metrics, as the initial EPC price might differ but offer more in the way of lifetime savings, etc.  
  • Total guarantee/warranty package, insurance and liability: what parts of the system are insured and have warranties? This will affect the costs of upkeep and maintenance of the system. 

If you are thinking of entering into a solar Power Purchase Agreement (eg. buying solar energy directly), consider the following when comparing quotes:

  • The length of the PPA. Generally, the longer the PPA, the more affordable the tariffs will be. The length of the PPA will need to suit your business’s needs over the long term, considering things like whether the business would like to take ownership of the PV system.
  • The tariff escalation. At a first glance, a PPA tariff might appear higher, but it will have a lower escalation throughout the length of the PPA. Understanding the escalation is important to consider
  • Any upfront payments – again, a lower tariff might be because of a large upfront payment, so it is important to consider when comparing quotes. This is also the case with any bullet payments during the term or at the end of the PPA. 
  • Whether insurance and part replacement is included in the tariff. Again, a lower tariff might have excluded these items, making the costs more over the long run.
  • Forex – how forex is calculated and included on the agreement will affect the price. 

Don’t: Delay the solar procurement process

As much as it is important to practice due diligence when procuring solar PV, delaying the process unnecessarily is also seriously detrimental to the solar PV process. Solar PV savings start from day 1 – meaning that delaying the process is also delaying the cost savings. If the process is delayed, there could be unnecessary complications and expenses, such as 

  • Availability of the construction team and build schedule – most companies have tight timelines and their availability could mean that the process is further delayed if your project is not booked into the build schedule timeously.
  • SSEG applications – delaying choosing a solar PV provider can result in a delayed SSEG application, which can result in delays to switching the PV system on (and thus benefiting from the clean energy that it provides!)
  • Structural assessments – delaying the procurement process can also affect the structural assessment process, which is an essential part of rooftop solar PV systems. This can result in an overall delay of constructing the project. 

Dont: forget to calculate your cost savings through solar – both monetary and environmental 

At the end of the day, the solar PV system will save your business significantly in terms of operational costs. However, there is also significant benefit in terms of environmental savings. Keeping track of the carbon emissions savings is an important way to acknowledge the value of the solar PV system. 

Making sure that you have a competent Operations and Maintenance Service Partner will ensure that you can keep track of the relevant cost savings on a monthly basis and ensure that the plant is performing optimally. This can help to diagnose and solve any issues early, saving money for your operations.

If you have opted for a solar PPA, ensure that your partner provides you with carbon emissions savings with your monthly invoice, so that you can use the data when calculating your overall carbon savings. Solar PV is a choice that not only saves money – it is a conscious choice that ultimately will sustain generations to come. It’s something to be proud of, and use in your marketing strategy.

In conclusion, solar installations are useful for industrial facilities. Saving costs and carbon, they are a surefire way to increase cost savings. Following the above dos and don’ts will ensure that your solar installation is ultimately the right fit for your business.