Here’s how much it will cost to take larger businesses off the grid – if government scraps the ‘red tape’ now limiting self-help electricity

Business Insider SA

Photo by Matthew Henry on Unsplash
Photo by Matthew Henry on Unsplash
  • Load-shedding relief could become possible for more, bigger businesses if the government acts on its intention to scrap red tape around self-generation.
  • At the moment powering a business that needs more than 1MW of power requires a time-consuming licensing process. 
  • If that is indeed scrapped, larger companies will be looking at around R25 million to start generating 3MW of their own power – but that price skyrockets if you add in battery storage.
  • For more stories go to the Business Insider South Africa front page.

Larger businesses could be getting relief from regulatory red tape holding them back from generating their own power – and could then free themselves from load-shedding, as long as they have R25 million or so lying around.

At the moment self-help electricity installations of less than 1MW require only municipal or Eskom technical sign-off around grid issues. But plants between 1 megawatt (MW) and 10MW are required to undergo a time-consuming Nersa licensing process that can mean delays of between 9 months to a year before an off the grid facility can even get off the ground, says the South African Photovoltaic Association (Sapvia).

That could soon change. Business Day reported that the African National Congress (ANC) has approved plans to allow municipalities to buy their own electricity and to make it easier for businesses to generate their own electricity. A similar intention was expressed by President Cyril Ramaphosa at Business Unity South Africa’s second yearly Business Economic Indaba.

If the current 1MW cap is raised to 10MW, Sapvia believes up to 2,000MW from small-scale capacity could be added to South Africa's energy mix in a year.

That would reduce the load on the grid from businesses like mines, airports, farms, and large shopping malls said David McDonald managing director of SolarAfrica, that sells solar solutions in South Africa. 

“We have a number of clients who consume large amounts of energy that will immediately benefit from increasing their solar PV systems beyond 1MWp. Given the current regulations, we are unable to commit capital to these projects without significant evidence that we are able to obtain these licences,” said McDonald.

There is pressure to cut the red tape – fast.

In a presentation released last week, the Council for Scientific and Industrial Research (CSIR) found that government needs to start the process of getting energy onto the grid by the end of first quarter of this year.

The CSIR looked at Eskom's energy availability factor (EAF) and found that between now and 2023, Eskom needs to find more power or SA will have to cut back more on its electricity use - even if Medupi, Kusile and independent generating plans currently under construction all come online as expected.

Setting up for the 2020s Addressing South Africa’s electricity crisis and getting ready for the next decade, January 2020. Source: CSIR.

Here's how much it will cost larger businesses to get off the national electricity grid, if they're allowed to self-generate.

Business Insider South Africa asked several companies to give us cost estimates for a mall which needed a 3MW peaking plant, a size suitable for a wide array of independent businesses across a range of sectors.

On average a solar PV build this size would cost upwards of R25 million.

However, the costs sky rocket when you start looking at the necessary battery storage for renewable solutions. While battery technology is rapidly improving, current numbers suggest you'll need another R75 million to keep operating after the sun goes down.

It is important to remember that every installation is different. Renewable energy is reliant on a range of factors such as location, technology, roof type, space availability, battery capacity, seasons, and other related factors.

Here are some of the solutions currently on offer.

New Southern Energy: Solar PV and battery storage – R105 million

Installing a 3MW peak solar plant on a "hypothetical" mall roof could produce roughly 13,150kWh per day, said Deepak John, CFO and Founder of New Southern Energy. 

"The building would also need a large battery bank to store excess power from the solar plant during the day, for use at night. If we assume that roughly 40% of this mall’s energy is consumed outside of solar hours, we would need to supply 5,260kWh from the batteries on an average day." 

According to a rough quote, a 3MW peak PV solar roof install would cost. R30 million. 5.3MWh of usable battery storage would come in at another R75 million, for a total of R105 million.

Businesses may need to size the PV solar and batteries even larger than their demand to account for cloud days and high-use periods, John cautioned.

Regenergy: Solar PV with back up generator and battery storage – R115 million

Regenergy builds micro-grid solutions using super capacitor batteries made with enriched graphene. This it says, is more efficient than lithium-based batteries. 

Regenergy Energy Servers. Source: Regenergy
Regenergy Energy Servers. Source: Regenergy

Built into the package is a backup generator which can recharge the batteries when renewable energy sources are not available.  

A 3MW peaking plant that uses between 10,800kWh and 14,960kWh a day would cost approximately R85 million, the company says. A more demanding facility that requires more battery storage, using between 12,600kWh and 16,320kWh, would be looking at around R115 million.

"With these larger projects there must be an engineering and site feasibility study conducted as part of the pre-installation work to ensure guarantees can be provided," Regenergy's Paul Lombard told Business Insider. "There are many factors which go into sizing a system like this, but these are ballpark figures, not factoring in logistics to the end location or any site challenges with clearing space etc." 

SolarAfrica: Private power purchase agreement – R0.65 per kWh (without full backup)

An alternative to paying for your own mini power station is a private power purchase agreement (PPA), which mimics the way Eskom deals with independent power producers (IPPs), just for body corporates and businesses. Should governments regulatory red tape be cut, this may become an increasingly viable option for private users. 

Read: Residential complexes can now rent solar panels and just pay for the electricity. Here’s how it works.

SolarAfrica is one such company that offers PPAs. It will install solar panel systems for free, subject to the business signing a long-term lease and agreeing to a "solar tariff’, which increases at an agreed rate every year.

David McDonald, managing director of SolarAfrica, told Business Insider that a 3MW peak system would cost roughly R0.65 per kWh on SolarAfrica’s capex-free solar solution.

“As through economy of scales, the price at which we offer solar energy drastically reduces and is far more lucrative to the end user with higher cost savings from day one,” said McDonald.

The catch is that this comes without battery storage, which would push up the price significantly.

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