Posted in: Solar PPA

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.

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.

Mining in africa

Why remote mines in Africa should be considering energy storage

There is no doubt that solar PV is the cheapest form of electricity generation globally. However, how does its application apply to remote mining operations? Africa is blessed with great solar resource, as well as mineral and metal resources – making mining an important industry on the continent. But remotely-located mining operations often mean that energy generation is an important concern. 

If a mining operation is located close to a utility grid, there could be an option to commission a new power line or grid connection to the mine. Whilst this may seem like an appealing option, there are many uncertainties in the creation of a new power line, and even in connecting to an existing one. How long will the powerline take to build? How will it be maintained and/or repaired when necessary? What would the costs be of such a connection? These questions need to be asked in conjunction with the political, regulatory and logistical risk considerations in taking on such an intervention. There is also the risk of the existing grid or utility being unreliable with frequent outages. 

Another consideration is the risk of using an outmoded form of technology, and what the implications of this might be for the future of your mining operation. Using mobile technology as an example, Africa has been able to leapfrog fixed line telecommunications straight to mobile phones, which has improved livelihoods on the continent substantially. A similar argument can be made for the fixed line electricity grid: decentralised electricity supply enable the opportunity to leapfrog outdated technology and maintenance that comes with fixed power lines to provide decentralised, reliable power. 

As such, many mines in Africa do rely on decentralised power, either in the form of diesel or solar PV. In addition to these decentralised power generation sources, battery storage is a great option to reduce costs and risks of power supply. 

Lithium Ion Battery Storage solar PV microgrid

The most common go-to option for remote mining solutions is diesel generation, due to its portability and reliability for remote mining operations. However, diesel is a costly option. Typically, diesel costs in African gold mining countries are around US$1 per litre of diesel – which translates to US 30c per kWh. This is in comparison to US 5c per kWh of solar PV electricity. Another consideration is the transportation of diesel to the mine site, which ironically is burning diesel to, in turn, burn more diesel. Despite the greenhouse gas emissions implications of this, it also adds an unnecessary layer of costs to the mining operation.

But is there another way? As mentioned above, many remote mines in Africa, whilst distanced to the utility grid and/or high-voltage grid connections, have fantastic solar resource. With the affordability of solar PV solutions, it makes sense to explore a solar PV system for mining operations in Africa. However, to provide power after hours and/or during the early hours of morning or late hours of evening, solar PV needs to be used in conjunction with a backup supply to keep the energy supply consistent. This might take the form of diesel generators, but energy storage – particularly in the form of lithium-ion batteries – is quickly becoming a less risky option. This is, in part, to the falling costs of energy storage technology. 

With costs of storage rapidly decreasing, energy storage provides a much more stable cost profile than grid-powered or diesel generated electricity, which both have unknown future cost fluctuations and risks. Similarly, the increased interest in electric vehicles, as well as global uptake of off-grid electricity, have sparked a sharp decline in battery costs.  

In addition, battery manufacturing capacity is expected to increase significantly by 2021 from just under 150 GWh/year in 2018 to 350 GWh/year in 2021, with the bulk of manufacturing taking place in China and the US. A similar forecast predicts an increase in manufacturing capacity from 350 GWh/year, to ~700 GWh/year. Similarly, the average battery plant manufacturing size has increased significantly, from around 10 GWh/year to just under 30 GWh/year. 

In conjunction with increased global demand and manufacturing capability, the costs of lithium-ion batteries have decreased significantly from 2013 – 2019, from around US$ 446 per kWh in 2013 to US$ 112 per kWh in 2019. 

Should the application of a solar PV and battery storage microgrid system be unfeasible for a mining operation, battery storage can still assist mining operations to save money by extending the life of generators by creating spinning reserve. This can create a ~2% diesel saving – or 2 MVA of batteries of spinning reserve could save ~260 000 litres of diesel.

A solar PV and energy storage microgrid ensures the control of power and energy sources. A high concentration of renewable energy, such as solar PV, in conjunction with storage, enables complete control of energy costs, eliminating logistics risks and price fluctuations. There are also various financing options available, such as buying the system outright or entering into a power purchase agreement. 
As mentioned, solar PV on the African continent is a no brainer. However, for remote mines, it may be necessary to install solar PV alongside battery storage solutions. Whilst solar PV saves money, energy storage solutions solve a few problems: they provide consistent energy supply and handle load changes, and also ensure that the costs of supplying power to the mining operation are known. This reduces much of the risk of electricity supply for both planned and existing mining operations.

Three ways to future proof your business in light of COVID-19

We are now into our third month of lockdown, and are starting to see the widespread economic impact of the COVID 19 pandemic. In South Africa, lockdown restrictions have eased a little, with most sectors returning to work and strict health protocols in place. However, we are far from where we were at the beginning of March, when COVID 19 seemed only like a remote possibility. It now seems like we might be entering the worst economic recession since the Second World War. In light of this, how will businesses prepare for the already uncertain future?

A recession worse than last year

According to the South African Reserve Bank, the South African economy  is expected to contract by 7% in 2020. Many sectors have been hard hit, with sectors such as manufacturing being particularly affected. Manufacturing itself was already struggling before the pandemic hit:  in February it reported a 2.1% year-on-year decrease in production volumes. The loss of production during the lockdown has further slowed some manufacturing sectors, such as the automotive industry, making their future uncertain. 

The struggling sectors, combined with the the fact that many South African’s have lost their jobs and will be spending little in the economy. Initial research shows that up to 14% of South African consumers have lost their jobs, with a further 37% saying that their work hours have been reduced. Many of them will be forced to cut expenditures dramatically in order to make ends meet, further shrinking the economy.

Since a recession seems inevitable, how can businesses weather the storm? The following are three suggestions. 

  1. Look critically at your business strategy

Those businesses that are flexible in either their operations or their offering will be the most likely to survive economic recession. We’ve seen this first hand: the closure of businesses that were successful but unable to adapt to the lockdown situation, and the success of businesses that make the most of the opportunity. Because no one saw this coming, it is those businesses that quickly adapted that got this aspect right. 

During a recession, essential, basic-needs items remain, whilst luxury, non-essential items are prioritised less by consumers. Pivoting your business strategy in order to meet the needs of consumers is important. In a business that focuses on industrial manufacturing, see if there are opportunities for operational efficiencies, such as making a basic necessity from the by-product of an industrial process, such as South African Breweries changing their manufacturing processes during the nationwide alcohol ban to produce much-needed hand sanitizer.

Rethinking business strategy is important for remaining profitable during a recession
  1. Cut operational expenditure

Cash flow is an essential to surviving a recession, and the reason that even profitable companies go under: without the cash to pay off operating expenses or salaries, businesses can quickly become bankrupt. One way to cut expenses, before the difficult decisions to retrench staff members, is to start with operational costs. In manufacturing and other industries, the easiest way to cut these expenses is to look to utilities – electricity and water – to ensure they are not spending more than necessary on these items. 

Start by evaluating the business for any potential inefficiencies: is it possible to shift production slightly later, to avoid peak hours? Can you implement a staggered start up of the plant, to avoid kVA surges and the associated costs? Have you made sure that energy inefficient lighting and heating have been taken care of? Once these factors have been examined, it is easier to identify how to proceed with reducing operating costs. 

One way that is very helpful to cut operating costs is through procuring solar PV electricity through a Power Purchase Agreement or PPA. This allows your business to benefit from lower electricity tariffs during the sunlight hours, and can be particularly beneficial if you can shift the bulk of production to happen during the day when the sun is shining. The one great thing about solar PV is that, even in the context of a global recession, prices are predicted to continue rapidly dropping.  

  1. Make sure your staff are engaged

Although there has been much written about employee engagement over the last few years, this “buzzword” does translate to the bottom line. A study conducted globally found that companies with highly engaged staff members had 17 % returns than those with low engagement levels. Therefore, in a recession where the bottom line is under threat, ensuring that employees are engaged could have a significant financial impact. (This also translates to employee turnover, by the way – about 40% of employees at low-engagement firms were likely to be looking elsewhere for jobs).

So how do companies create high employee engagement? This goes beyond basic employee wellness interventions, and translates back to genuine employer-employee value. If your employees believe that you are genuine about investing in them, they will be more likely to invest themselves in their job, which will translate into financial returns.

Employee engagement for solar PV

Removal of Power Constraints Crucial for Post COVID-19 Recovery

This article originally appeared in the Daily Maverick Opinion Section.

It is difficult to understand why the main limitations to private power generation have not been removed, despite repeated pledges from government to that effect. There is a real danger that while grappling with the immediate crisis, policymakers will shelve the issue indefinitely.

Demand for electricity has plunged with the onset of South Africa’s COVID-19 lockdown, removing the threat of load shedding for its three-week duration. It could be several months before the economy is up and running normally again, but it would be a big mistake to forget the power constraints which plagued SA in the weeks before the pandemic struck.

When Moody’s downgraded SA on 27 March, it pointed out that unreliable electricity supply and its impact on the economy was one of the main reasons for the decision. The ratings agency also pointed out that a strategy to stabilise electricity production in the country has failed to materialise and that as a result, economic growth would remain low for years. Returning to a constrained electricity supply without an adequate government response is the last thing embattled businesses need after COVID-19. 

Against this background, it is difficult to understand why the main limitations to private power generation have not been removed, despite repeated pledges from government to that effect. There is a real danger that while grappling with the immediate crisis, policymakers will shelve the issue indefinitely. In addition, the National Energy Regulator (NERSA) has inexplicably halted all new licensing applications for the duration of the lockdown period. 

For connected projects larger than 1MW — which applies to most of the pent-up demand for corporate generation of electricity — a license is still required from NERSA even if the installation is for a customer’s own use, or established through a bilateral agreement involving only a customer and an independent power producer.

These onerous license application processes were intended for large, utility style power stations, hundreds of MWs in size, and each requires a public participation process with hearings. They have requirements which make the development of smaller project impractical. The official time for NERSA to issue these licenses is 120 days but in practice it takes far longer — with some cases so far taking as long as two years.

NERSA is theoretically able to process license applications, but in practice is inadequately resourced to handle the quantity of smaller applications that are now being made. This regulatory blockage is holding up the roll out of hundreds of MWs of electricity generation, which would be the fastest way to alleviate the power constraints which lead to load shedding. 

This point has been repeatedly made by independent bodies like the Minerals Council of SA, Business Unity SA, the South African Photovoltaic Industry Association, and the Council for Scientific and Industrial Research. It has been recognised by Minerals and Energy Minister Gwede Mantashe, who indicated at the mining Indaba in March 2020 that self-generation of any size would not require licensing. 

Companies in the private sector were hopeful that their pleas for the 1MW cap on licensing for their own electricity generation would be lifted to 10MW, which would include most of the projects they want to implement. And yet, when the eagerly awaited Schedule 2 of the Electricity Regulation Act was published on 26 March, the 1MW threshold for grid-connected facilities exempt from licensing was maintained. 

The shape of the national load profile – when and how much electricity is used – is important to Government because it affects which mix of electricity is most cost effective. Its preferable to have a load profile that allows for the maximum usage of the cheapest resources available to the country. From this angle, the control over who builds what generation is understandable, but even with this argument considered, the amount of solar power in South Africa still represents under 5% of installed capacity, and less than 2% of the consumed energy.

A 10MW solar generator represents 0.006% of annual electricity demand and 150 of such projects would need to be installed to reach 1% of the total demand. Lifting the license exemption threshold to 10MW will initially have negligible effect on the demand profile but a huge effect on lifting red tape in the way of more energy coming onstream and supporting small to medium size businesses. It is always possible for the state to monitor the uptake and lower the threshold for licences at a later stage if necessary.

As the chairperson of a solar PV company, the SOLA Group, I have seen many clients desperate to install larger solar plants than the 1 MVA limit to alleviate their electricity constraints and lower their costs. These projects are practically ready to be rolled out – and could be built within 8-12 months – if the licensing hurdle is removed. 

From my extensive experience in the solar PV industry in South Africa I estimate that, without such restrictions, solar PV companies could build 500 MWs within the next 12 – 18 months. The wasted opportunity due to these arbitrary licence requirements is obvious and destructive.

For the sake of saving businesses and creating jobs post COVID-19, I urge government to:

  • Lift the threshold on requirement for a generation license from 1MW to 10MW until the embedded generation allocation in SA’s new Integrated Resource Plan has been reached.
  • Require that these projects are registered with NERSA upon their commercial operation date through submission of an independent certificate of compliance against which the allocation to embedded generation can be measured, and keep the database of installed MWs public and updated.
  • Ensure that NERSA is provided with, or creates, clear guidelines as to the technical standards that must be met to obtain a generation license for generation projects above 10MW in size.
  • Provide NERSA with the resources, both through budget and staff, to evaluate the applications in a meaningful, prompt and scientific way.
  • Return to processing and receiving licence applications during the lockdown.

The business case for installing embedded power generation remains for the private sector, and the economy will once again start moving when the impact of the pandemic subsides. It would be tragic if its potential to recover is thwarted by continued electricity shortages. 

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. 

Solar for mines

How solar for mines helps to reduce operational costs and achieve a lower carbon footprint

Reliance on third-party infrastructure a significant risk for mines

The outlook for the mining industry in South Africa was a mixed bag in 2018 with bulk commodity prices continuing to rise from their lull at the beginning of 2016, while precious metals continued to struggle. Cost increases have put the mining industry under significant pressure and although price plays a crucial role in profitability, there are large fixed-cost elements associated with mining. Thus maintaining and ensuring optimum production levels plays a significant role in achieving profitability. 

This is why reliance on over-stretched third-party electricity suppliers such as Eskom can compromise profitability. In PwC’s annual publication highlighting trends in the South African mining industry it was reported that one of the significant subcategories driving risk is reliance on third party infrastructure with the cost and availability of electricity and water still a concern.

Mining facilities that typically rely on diesel electricity can use a solar microgrid to reduce the overall cost of energy, increase energy resiliency, thus ensuring control of their energy and power requirements. SOLA’s energy storage services department has considerable experience in combining battery storage solutions and existing generators in microgrid systems ensuring a continuous, uninterrupted electricity supply which is integrated with all other power sources.

Mining Data Tool

Namibia and Botswana considering a 20-year, 4.5 GW solar push

‘The market for electricity produced by the mega-solar projects in Botswana and Namibia includes 12 other countries in the region that could be connected via new and/or upgraded transmission infrastructure,’ – WEF

The World Economic Forum’s (WEF) Global Future Council on Energy, has revealed that the governments of Botswana and Namibia are planning to develop 5 GW of solar capacity over the next two decades. Namibia and Botswana are considered perfect candidates for solar owing to their high solar radiation, strong legal and regulatory environments, suitable land availability and potential to host a low-cost, efficient electricity market to meet rising demand in the region. It has been suggested that this ambitious project, if completed, could lead to Namibia and Botswana exporting power to South Africa.

Botswana, a founding partner in a responsible mining initiative

Reducing carbon emissions is part of a global trend in the mining industry. Bloomberg reported last month that an explosive demand for renewable energy is expected to drive a global rush of exploitation, thus Botswana, the US, Australia and Peru are founding partners in an initiative to encourage responsible mining of rare earths and other minerals used in renewable energy projects such as solar panels, wind turbines and car batteries. 

Botswana’s mining industry contributes a third to the country’s GDP and 50% of tax earnings, and although the last quarter has seen a dip, economic growth is projected to pick up to 4.6% in 2020, supported by ongoing structural reforms aimed at diversifying the economy. It is perfectly primed to implement solar energy storage for mines owing to high solar radiation, the remote location of its mining facilities, weak grid supply and reliance on diesel.

Projected economic growth in Namibia in 2020

The IMF reports that Namibia’s economy will return to growth in 2020 after contracting for three straight years, though a failure to implement structural reforms could contribute to sluggish growth. Namibia has the second highest solar irradiation levels in the world, thus making solar energy storage for mines an appealing option.

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No longer a question of if, but when

‘Industries that aren’t moving towards zero-carbon emissions will be punished by investors and go bankrupt’

Industries that aren’t moving towards zero-carbon emissions will be punished by investors and go bankrupt, warned the governor of the Bank of England, Mark Carney, last week. Thus renewable and storage technologies present the perfect solution by reducing energy costs while improving power quality and lowering carbon emissions.

The climate crisis will have a real financial effect on all major industries. Last Tuesday Carney told large corporations that they had two years to agree to rules for reporting climate risks before global regulators devised their own and made them compulsory.

Energy autonomy or supplementing grid supplied energy with embedded energy generation are both solutions to optimising production costs and reducing carbon footprint. Solar PV is both a cost-effective and decentralised form of energy, making it perfect for mines and other large scale energy-producers choosing to supplement their supply.

 Off-grid solar provides the ideal energy storage solution for mines. Remote locations, weak grid supply and reliance on diesel provide the optimal business case for solar PV microgrid. To test if your mining facility is suited to making the switch to off-grid make use of SOLA’s user-friendly mining tool.

Try Our Mining Data Tool