June 14, 2024

Maximizing Benefits from Solar Panel Installations in South Africa

By March 2024, approximately 5,440MW of residential and rooftop solar had been installed in South Africa. In the previous year, rooftop solar saw an increase of 2,630MW, with an additional 236MW added in the first quarter of this year, as reported in the April 2024 "light paper" by GoSolr.

Blackout Pushes Businesses to Solar Energy

Last year, South Africa experienced severe power outages. Initially, businesses believed the intermittent blackouts were short-term. However, the length of these power cuts began to grow, and by January 2023, it became evident that the energy crisis would persist, leading to significant imports of solar panels.

According to Eskom's estimates, as of March 2024, approximately 5,440MW of residential and rooftop solar capacity had been installed across the country. The GoSolr "light paper" for April 2024 indicates that rooftop solar expanded by 2,630MW in the previous year, with an additional 236MW added in the first quarter of this year.

Teresa Settas from One Energy group warns of significant future electricity cost increases for businesses, projecting annual hikes of 15% due to Eskom's 12% increases compounded by municipal additions of 2%-3%.

Andre Nepgen of Discovery Green contrasts traditional electricity costs, based on usage, with renewable energy costs, which are tied to generated energy regardless of immediate consumption. He advises businesses to tailor their renewable energy mix to match consumption patterns from the start.

The Long-term Implications

Nepgen's research highlights that no industry's electricity demand profile perfectly matches solar generation, emphasizing the need for careful planning in meeting future renewable energy needs. He highlights a current strong preference for solar energy, noting its immediate financial benefits. However, there's a tendency to overlook the long-term implications in favour of short-term gains.

According to Discovery Green's research, businesses often face a significant 77% premium when trying to meet the remaining 55% of their energy needs with renewable sources after adopting 45% solar energy. This challenge arises because sourcing renewable energy exclusively for nighttime consumption is costly for suppliers.

As a result, businesses frequently settle for a limited level of renewable energy coverage post-solar adoption, which also incurs costs. This approach leaves them vulnerable to future utility price hikes expected to surpass inflation rates. These long-term expenses are typically overlooked during sales processes, and decision-makers may still need to fully grasp these complexities.

Accessing Renewables Energy

Andre Nepgen underscores that businesses frequently overlook the potential impact of extreme events on energy generation or consumption, often relying on historical averages for decision-making. His analysis demonstrates significant variability in energy output: solar facilities can vary by more than 14% between consecutive months, and wind plants by up to 33% under normal conditions.

Businesses can access renewable energy through various methods. They can install on-site setups like rooftop solar panels or nearby solar plants, although these generate power only during daylight hours, potentially resulting in unused energy outside regular operations.

Alternatively, businesses can pursue renewable energy wheeling contracts with independent power producers (IPPs) for solar photovoltaic (PV), allowing them to buy privately generated electricity connected to the national grid, often under a take-or-pay arrangement. Another option involves wheeling contracts with renewable energy traders who purchase from IPPs and sell to businesses at a profit margin.

Lastly, businesses can participate in renewable energy product platforms that aggregate IPP-generated renewable energy, offering procurement contracts to both IPPs and businesses as energy consumers.

Partnering for Maximum Benefit

Nepgen suggests combining renewable energy from various sources creates a diversified energy portfolio, enhancing resilience against fluctuations in generation. This strategy smooths out variability in sources like solar and wind power, ensuring a stable energy supply.

It's less risky for businesses, as evidenced by research indicating a consortium of five businesses across different sectors can achieve up to 78% renewable energy coverage, reducing wastage compared to individual businesses reaching a 49% coverage limit.

Importantly, Nepgen adds, businesses can use this model to replace up to 90% of their energy consumption with renewables in a single transaction, reducing risks associated with strategies focused solely on solar energy.

The increase in the adoption of solar energy to combat rising electricity costs and enhance resilience against power outages, emphasises the importance of long-term planning and diversified renewable energy strategies.

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