Using solar power to keep businesses open
The grim news is that load shedding is here to stay. Eskom’s system status report for the end of August 2022 shows a red or orange warning for every week until the start of September 2023. Orange signifies that capacity will not be enough to meet the need for operating reserves and may also fall short of actual demand. A red warning means that capacity will be short of demand and the need for reserves by at least 2,001 megawatts. The unpredictability of the country’s energy supply has long been putting health services at risk – potentially endangering lives – as well as hindering economic growth.
The problem is dependence on a rickety network of old coal-fired power stations. The average age of Eskom’s power stations is 35 years. The construction of two new power stations – Medupi and Kusile – has run into problems, and some news sources have reported that they have serious design flaws.
Yet, in a country uniquely positioned to take advantage of solar power and other renewables, the solution is staring us in the face. In July 2022, President Cyril Ramaphosa announced a 10-point plan for dealing with the power crisis. He said that procuring new capacity from other sources, including renewables, will be a key priority. This means doubling the amount of generation capacity to be procured through the latest round of bids for wind and solar projects. It also means scrapping licensing requirements for private projects that feed into the grid.
But, while we wait for those measures to be implemented, many businesses are taking control of their own energy security through investment in solar.
Why so many businesses in South Africa are investing in renewable energy
The problem of load shedding is in itself a powerful enough motivator for businesses to move away from dependence on the grid. Businesses, especially those in energy-intensive sectors, know from experience that enforced downtime means serious productivity loss and possible damage to equipment. But, there are also many other reasons why South African businesses are choosing to invest in renewable energy.
Great ROI on Solar Panels
The price of photovoltaic (PV) panels has been falling for years, which means that upfront cost is less of a barrier than it might have been ten years ago. Even more important than the purchase price is the return on investment, which keeps getting better as the generation capacity of solar panels improves alongside the price drop.
The International Renewable Energy Agency reports that by 2019, about 40 per cent of solar capacity had a better cost per unit (over the lifetime of the generation asset) than the cheapest fossil fuel options. No wonder 2020 was a record year for solar PV generation worldwide. Rising wholesale energy costs make solar power an even more attractive option for 2022 and beyond.
Protection from price volatility
The global price of fossil fuels has soared recently, leading to record prices at the petrol pump and hardship for those who heat their homes with paraffin. Rising energy costs and unprecedented price volatility mean that energy suppliers are operating on much thinner margins than in the past, and businesses approaching contract renewal are vulnerable to price hikes. Investing in solar power is a way to control energy costs and keep a large part of a business’ budget predictable.
Most parts of South Africa average more than 2,500 hours of sunshine per year. In a typical 24-hour period, solar energy here provides about 220 watts per square metre (W/m2). In contrast, much of northern Europe gets around 100 W/m2 . Even famously sunny parts of the United States, such as California and Florida, cannot compete with South Africa’s natural abundance of solar energy capacity.
Many South African businesses are not waiting for the government to take action on its net zero pledges. Instead, they are setting their own targets on emissions. Both cement giant PPC and oil and gas firm Sasol have committed to net zero emissions by 2050, with the latter setting out plans to move its entire business model away from fossil fuels. Over 50 companies with operations in South Africa have committed to the RE100 renewable energy initiative, publicly pledging to decarbonise 100 per cent of their energy consumption.
Why companies should invest in solar energy
Keeping the lights on
The Eskom restructuring does not mean that the country’s power problem will be solved overnight. South Africa’s five biggest financial institutions have set targets to move away from funding coal, which could cause a bumpy transition in a country currently using coal for over 70 per cent of its electricity generation. While the restructuring and new investment are ongoing, it makes sense for businesses to secure their own energy supply by investing in solar power.
In the past, the need to justify capital expenditure has been a barrier for businesses that might have wanted to invest in renewable energy. But now, businesses do not need to pay the upfront costs of purchasing and installing solar panels because there is a range of other funding options available.
If you have a lot of unused roof space, it might make sense to sign an agreement where a solar power firm pays you for the use of the roof, and you pay them for any energy you use.
Some businesses enter into a lease agreement whereby another company installs and maintains the solar panels on-site, and the business pays a monthly fee.
Corporate power purchase agreements (CPPAs)
Rather than paying a fixed fee, the business agrees to buy renewable energy from a generator at a fixed price, usually well below the market rate. This option is increasingly popular with commercial and industrial businesses. It is a good choice if a company’s sites are unsuitable for solar panels because the solar power does not have to be generated on-site.
Significantly lower energy costs
How ever a company chooses to finance its solar energy investment, it will quickly reap the benefits in the form of lower bills.
No responsibility – unless desired
Naturally, some businesses want to have ownership of their energy assets. But, for many others, the new investment models offer a welcome opportunity to enjoy the benefits of solar without taking responsibility for the installation or maintenance of the solar panels.
No wonder South Africa is Africa’s largest solar energy market and one of the fastest-growing. For smart businesses, investment in solar is one of the most cost-effective ways to protect themselves from blackouts, cut energy costs and secure their energy supply for the future.
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