Posted in: Industrial Solar Solutions

An archive of all our industrial solar solutions and solar energy stories and blog posts that have been published by SOLA. If you would like to learn more about our industrial solar solutions and installations please click here.

Sick of load-shedding? How wheeling can save the South African electricity landscape

Just as South Africans start forgetting about the resources that go on behind the scenes when they switch on the lights, they’re reminded about how much they’re actually reliant on Eskom. But the return of load shedding spells something even more concerning than the inability to make supper or catch up on the latest series: how South African industry suffers when Eskom can’t keep up with demand.

Private companies have, however, not been complacent when it comes to their power procurement strategies. As electricity provision and stability becomes a significant business risk, they are seeking out alternative strategies to procure the power that they need. They are demanding more from the market – they want stable, cost effective power – and the market is adapting to meet their needs. This is where renewable energy wheeling comes in.

Wheeling is a financial transaction that allows power to be produced in one location and billed to an energy user in another region via the grid. This allows power to be generated for a private company in bulk amounts, without the generator needing to be geographically located at the site of use (“embedded generation” has been the chief way of providing back-up power until now, through diesel generators, solar PV systems and energy storage or batteries). This enables corporate users of electricity to procure power for their operations, and for the market to provide solutions for them based on their needs.

Wheeling can take place through a wheeling-use-of-system agreement with Eskom, based on the principle of non-discriminatory access, provided that compliance with Nersa and other regulatory requirements are met. This has been in place since 2009, but has rarely been used; the SOLA Group signed the first large-scale wheeling agreement for private buyer Amazon in late 2020. Technically, any form of electricity generation could provide private power through wheeling, but companies who pursue this type of power procurement, like Amazon, are more likely to choose the most cost-effective and sustainable option: renewable energy.

With South Africa’s abundant resources in both solar and wind energy, renewable energy options are proving to be more cost effective than other forms of energy generation – particularly when the generation plants are located in areas with abundant resources of wind and sun. In addition, these forms of energy generation are low-impact to the environment – meaning that they produce very little greenhouse gasses to manufacture and operate throughout their lifespans. This is particularly important for international companies such as Amazon and ABinBev, who have committed to aggressive carbon reduction targets for their operations.

As alternative power procurement grows, it will relieve Eskom’s capacity constraints by providing additional power to the grid. Eskom has reported its urgent need for an additional 4000 – 6000 MW of generation capacity to assist the utility with power provision, alongside its accelerated maintenance programme, in order to reduce load shedding risk.

This could be great news for the economy: load shedding purportedly cost South Africa’s economy around R75 billion in 2020, draining at least 2% to South Africa’s GDP loss during 2020, a year in which economic activity was actually subdued due to the pandemic.

There are legitimate concerns about the phasing out of coal, both from a technical and social perspective. The technical concerns are easily addressed through the provision of energy storage facilities and on-demand back-up power sources like green hydrogen; the social issues by keeping the Just Transition front and centre of the picture. Part of this is recognising the extreme business and social risks that a rapidly warming planet will bring, particularly in countries like South Africa.

As renewable energy wheeling becomes the go-to option for business consumers of electricity, the phase-out of coal will be more achievable. But renewable energy wheeling does not spell the end of Eskom – it just modernises the utility’s function. Wheeling requires a fee to be paid for every kWh wheeled through the grid. It is a great model for the utility, as they get paid to maintain the gridlines that provide South African businesses and citizens with the electricity that is central to their operations and livelihoods. 

Wheeling is the start of a modernised electricity picture, as it uses Eskom’s grid to connect private buyers and sellers together, in turn making more space for competition and choice for private buyers. A modernised grid could see private buyers and sellers of energy trading, whilst Eskom is paid to maintain its important grid infrastructure. This could provide more generation capacity, reduce South Africa’s carbon footprint, and ultimately spell the end of load shedding.

Adams solar facility in the Northern Cape

What does the first large-scale wheeling project mean for South Africa?

SOLA has officially launched a first-of-its-kind 10 MW solar plant in the Northern Cape three months ahead of schedule, which provides clean energy to Amazon Web Services via the Eskom grid. Energy wheeling, a new model of private energy procurement, allows power to be generated and purchased in geographically distinct locations. The Adams Solar PV project will provide over 28 million kWh of clean electricity to Amazon Web Services annually. 

This is the first operational large-scale solar PV wheeling project in South Africa, and the model is futuristic: it uses Eskom’s grid to connect private buyers and sellers together making the way for more choice and competition.  It’s the first step forward in creating grid independence where private buyers and sellers of energy can trade with each other.

This means that the renewable energy plant will provide a low-carbon alternative to coal-fired power for a private offtaker (in this case Amazon Web Services) without needing to be geographically located at the site of use. 

How? The solar PV plant comprises over 24 000 bifacial solar modules on single axis trackers, covering an area of 20 hectares. It is situated in the Northern Cape, where the solar resource is one of the best in the world. The solar PV facility tracks the sun throughout the day and absorbs irradiance from both the sky and reflected light from the ground. This design will see over 25 000 tons of carbon emissions being avoided annually – the equivalent of taking 5400 cars off of the road for a year. 

This model could also help South Africa significantly in sticking to its carbon emission reductions targets whilst supporting economic growth and a just energy transition.

Amazon, like other large corporate consumers of energy, have committed to aggressive renewable energy procurement targets – in their case, 100% by 2025. But the successful provision of renewable energy can only be provided in an environment that supports it. Recently, the Department of Minerals and Energy, NERSA and Eskom have become supportive of renewable energy generation, which has allowed for the approval of renewable power plants such as this. 

This is great news in light of the onslaught of load shedding in South Africa. Power generated from wheeling projects will increase the amount of IPPs and relieve the sole electricity provision burden on Eskom.

The support of renewable projects means the equal prioritisation of economic and social factors. The Adams project is more than 63% black owned, with investor Mahlako a Phahla Financial Services holding stakes in the project, who are committed to delivering returns for local black investors. SOLA is also 100% South African owned, including a 40% shareholding by black investor African Rainbow Energy and Power.

Renewable energy projects which take into account local development are able to develop South African skills and provide jobs. During construction, the Adams Solar Project created 167 jobs, 63% of them from the local surrounding area, and it will sustain permanent jobs for its lifetime in electrical maintenance, cleaning and security. Wooden waste generated during construction, including pallets and electrical cable drums, were donated to local furniture businesses and special skills schools, in order to further bolster the SMME contributions of the project. 

Although the Adams Project is just the start of an energy wheeling and trading landscape in South Africa, it’s indicative of where the picture is heading: toward a modernised grid with renewable energy at its core. It also demonstrates the willingness of the government and the private sector to work together on solving South Africa’s electricity crisis.

Read more about the project here.

What the 100 MW license cap lift means for your business

In June, amid much celebration, Cyril Ramaphosa announced that the amendment of Schedule 2 in the Electricity Regulation Act – a clause that has long had both producers and consumers of energy at loggerheads with government – was imminent. Today, the amendment was officially gazetted. However, what exactly does this amendment mean, and will it affect your business?

The Electricity Regulation Act of 2006 is an important piece of legislation that governs how electricity is generated and distributed in South Africa, and the roles of the various stakeholders involved. Schedule 2 used to specify that any electricity generation activity over 1 MW requires a generation licence. Essentially, this implied the same amount of paperwork for a huge coal-fired power plant as a rooftop solar system! The amendment to schedule 2 of the ERA means that this cap has now been lifted – which is great news for large energy consumers in South Africa.

What does the new Electricity Regulation Act Schedule 2 Amendment say?

In short, this amendment exempts certain activities from licencing and registration with the electricity regulator (Nersa). Such exemptions include:

  • Any generation facility without a connection to the grid
  • Any generation facility below 100 kW in size (provided it complies with standard connection codes);
  • Any generation facility with/without energy storage under 100 MW and either:
    • No wheeling;
    • A wheeling agreement (provided there’s a connection agreement between the generator and the transmitter of the power); or
    • No import or export on to the grid
  • Generation facilities that are used for demonstration purposes and will not be in operation for over 36 months
  • Existing generation facilities that were exempted from the requirement before the gazette need to register within 6 months, if it is compliant with the grid-code and connected to the grid.

This means that, essentially, electricity generation projects under 100 MW, whilst still needing to meet requisite grid-code compliance and normal permitting procedures, will not require a generation licence from Nersa.

This will mean that projects that have historically taken years to complete will now be able to be built much more quickly, thus providing private consumers of energy with power and alleviating South Africa’s electricity crisis. 

Are there still other permits required for electricity generation?

Yes, the relevant regulatory approvals are still required for self-generation. The main change under the new legislation is that projects between 1 – 100 MW will not require a Nersa generation licence, which are substantial and very complex licences to obtain. Historically, this meant that a project of 2 MW would require the same amount of paperwork as a large coal-generation facility (oven GW in size), and thus slowed the uptake of renewable energy quite dramatically. 

It’s important to note that the projects must still be registered with Nersa, in which the relevant grid approval documents and environmental approvals, amongst other documents, will be submitted. Nersa will review the documents over 60 business days before granting registration to the relevant projects.

If the client is part of the municipal grid network, they would still need to obtain the relevant permissions in order to self-generate. This is standard practice for all solar PV plants and is necessary to make sure that the municipality has oversight of how much their grid is likely to be loaded at a specific time. The capacity of the grid needs to be taken into consideration, and so weak grid areas are likely to remain constrained, regardless of legislation.

The gazetting of this ERA Schedule 2 amendment is incredibly positive and will make a big impact on the sentiment toward the Renewable Energy sector – both for the companies that supply renewable energy, as well as the large energy consumers.

What does the amendment say about energy storage? 

Whilst many large energy consumers choose to remain connected to the grid, as it allows the use of the cheapest form of energy at various times of the day (eg., solar during mid day, grid-supply during off-peak hours), there are increasing numbers of energy consumers that are using battery systems to supply them with power 24/7, which also prevents load shedding. The amendment includes energy storage provision – meaning that the licencing exemption applies to energy storage systems as well. 

Hybrid, “islandable” systems which act like on-grid systems, but automatically “island” during load-shedding, are also included in the provision. The opening of the self-generation threshold means that these islandable systems will be increasingly cost-effective, because larger solar PV systems can be built and their cheap power stored in batteries for dispatching during load shedding or the evenings. 

What is wheeling?

Wheeling is the transfer of energy from an independent power producer to a client via the grid. For our clients, this means that electricity can be generated in an area with lots of space and great solar resource, in order to supply an energy consumer that may not have the space or the solar resource available (such as our Amazon Wheeling project). Wheeling requires quite a few different licences, but the advantage of the generation threshold increase would mean that a Nersa generation licence would be one less piece of permitting required. 

Because of its affordability there is likely to be a great uptake of renewable energy with the ERA 2 amendment. We look forward to working with all relevant stakeholders to make this happen.

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.