Posted in: Utility scale solar

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.

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.

Can urban high-energy consumers benefit from solar PV?

It’s no surprise that high energy consumers are those that might benefit the most from renewable energy. In South Africa in particular, the coal-based electricity system means that large energy consumers carry large carbon footprints, which can undermine sustainability efforts and targets. But simply adding a few solar panels is not necessarily the answer either. 

That’s because renewable energy – in particular solar – needs space in order to effectively produce the necessary energy. For large energy consumers, the required space can be substantial – requiring a large solar farm situated in an area with excellent irradiance (solar resource). Whilst it does sometimes happen that the energy consumer is situated in an area with large land and good irradiance, this is not always the case. 

Open energy markets allow the trading of energy from different sources of production – either governmental, such as an Eskom-owned and operated coal-powered generation plant – or independent power producers (IPPs) – typically solar, wind, gas, and so forth. When energy is at its cheapest – as solar is during mid-day – consumers can buy this power and benefit from the associated cost savings. This is the type of energy market which is common overseas in places like California, where a central body facilitates the provision of power from various different sources. 

In South Africa, we are not yet at an open energy market situation. Energy is still provided almost exclusively by Eskom, with a few IPPs contributing to Eskom’s grid. But wheeling of power – forming an arrangement between an IPP and a commercial offtaker to use power via Eskom’s grid – is a possible workaround for large energy consumers. This fits with global trends that show that businesses are taking a more active role about procuring the type of power they want, according to Bloomberg.

Wheeling is essentially like a remote Power Purchase Agreement – it is a way for a corporate consumer of energy to procure electricity from an independent party. But unlike typical PPAs, wheeling enables larger amounts of power to be transferred, because the generation source – such as a solar PV system – doesn’t have to be situated geographically close to the offtaker. 

This means that a large solar farm – producing several MW of power in the highest solar resource areas of the country- could generate electricity for a high-energy consumer on the other side of the country, using the national electricity grid.

In South Africa, wheeling currently involves amending the System of Use Agreement from Eskom to stipulate that the energy can be wheeled – or generated in one source and consumed in another. The actual energy generated by the plant does not get transferred physically to the consumer, but electricity meters at either end (both at the producer and consumer) measure how much energy was generated and consumed and will be accounted for, respectively. 

The industries that can benefit from wheeling include large corporate energy consumers, such as mining operations, smelters, or data centres. All of these operations are suitable for wheeling because they are large energy consumers, but may have neither the space nor the inclination to build a large solar plant located at their operations. Wheeling agreements can ensure that they meet their sustainability targets, by reducing their carbon emissions, and cut operating costs, by procuring cheaper power when this is available.  

So wheeling can help to facilitate energy markets by allowing IPPs to produce affordable, clean power and sell it directly to corporate consumer, helping the latter to reduce costs and carbon emissions. Is there a catch?

There are a few different aspects of a wheeling agreement that can influence the tariff costs. Firstly, there are the wheeling fees, which Eskom charges in order to recoup the costs of utilising their grid to distribute power. These costs mean that economies of scale are still needed in order to make the tariff an affordable one – making wheeling suitable for very large consumers of energy only. 

Secondly, the regulatory environment can take time to navigate. In South Africa, Eskom has a wheeling framework that enables wheeling, but these agreements are still subject to approval by the National Energy Regulator, Nersa, who need to give overall permission for the arrangement. Navigating the two entities can take time, and therefore wheeling agreements typically take a while to come online. 

Nevertheless, wheeling of power has great potential to assist large energy consumers to optimise their energy loads and provide cost savings, whilst also reducing pressure on Eskom. Wheeling means that Independent Power Producers can supplement the grid and provide clean electricity to those companies that wish to procure it.