- The initial investment to go solar can be rich for SA households – andbbody corporates.
- So solar companies are offering complexes private power purchase agreements, where they pay for the electricity rather than the hardware that provides it.
- Here’s the pros and cons.
- For more stories go to the Business Insider South Africa homepage.
With upfront costs that can hit around R200,00 for a 4-bedroom (stand-alone) residence, the initial investment to start generating solar power at homer can be too high for many South African households.
For those that don’t have the cash available, there are two main financing options in the South African market now, says the South African Photovoltaic Industry Association (Sapvia).
One option is to go banks that offer financing packages for home power generation – but the borrower ends up taking all the risk, including on interest rates, future trouble with regulators, breakage, vandalism, theft, and the many other disasters that can befall.
But if you live in a residential complex – and if you have enough people living in it – there is a cheaper and less risky way of getting green energy going. Solar companies are offering their own form of private power purchase agreements (PPAs), which mimics the way Eskom deals with independent power producers (IPPs), for body corporates.
Under these PPAs, companies will install solar panel systems for free, subject to the body corporate signing a long-term lease and agreeing to a "solar tariff’, which increases at an agreed rate every year.
Residents pay for the power they use, and over time the installing company turns a profit on the steady flow of cash they pay for that power.
“For PPAs, these are usually provided on three principle conditions. 1) Client signs a long tenure (say 20 years), 2) Provides a parent guarantee, and 3) agrees to a ‘take-or-pay’ clause which complies the client to pay for deemed usage if the solar produced cannot be consumed on site (for whatever reason e.g. site is shut-down for maintenance or renovations for a month etc.),” said Deepak John, the chief financial officer or New Southern Energy, a solar energy solutions company that builds solar parks for industrial user, private game reserves, and farms.
Sapvia says this model is proving to be quite successful for residential, commercial, and industrial PV systems (also known as RCI projects) that want to start looking at green energy, but can't afford the upfront costs.
Private companies can legally sell you electricity if generation is less than 1 megawatt (MW) – which only requires municipal or Eskom technical sign-off to supply their owners or feed into the grid.
Larger installations, for facilities above 1MW and up to 10MW, need to go through a strenuous licencing process, which can take between nine months to one year.
Here's how the model works.
One such company offering a grid tied PPA is Solar Africa. They say the average body corporate can save 5% to 25% on energy costs when using the solar. The company operates across the country from Limpopo all the way to Cape Town, with most of their work being in in Gauteng, says managing director David McDonald.
Grid tied / connected, with reverse power blocking: the property is connected to the national grid, but any surplus electricity generated by the system is prevented from being directed back into the grid for other users.
Grid tied / connected: Electricity generated can be used at the property and any surplus can be directed back into the grid. In some cases, that electricity can be sold.
Off-grid / standalone: The PV system generates electricity for use on-site and operates completely independent of the national grid. In this case, it necessary to have additional –expensive – components such as a charge controller and battery storage.
The model works best for complexes with 50 units or more, and where the combined roof space is around 200m2 to 400m2.
The solar system is integrated with the complex's bulk electricity meter, and they’ll install the whole system from solar panels to inverter.
The cost saving is passed onto the body corporate, which can in turn pass it on to unit owners, or re-invest it in common infrastructure.
Pros: you get solar energy that supplements your electricity demand during the day.
Offtake contract of this kind offers estates competitive pricing and savings on municipal or Eskom rates from day one. It offers price protection and predictable energy rates for years ahead – regardless of what happens to Eskom – and you only pay for the energy you use.
Solar Africa take on all the responsibility of investing, installing, operating, and maintaining the PV system.
Cons: the entry-level system doesn’t help with load shedding.
Because the standard, less expensive systems are grid tied, they are not a backup for load shedding. The solar system will only provide around 25% of the property’s electricity during daytime hours, which means you are still dependent on Eskom.
“The majority of our systems are grid tied only. Which means that when Eskom cuts the power unfortunately our system goes down as well. The grid tied solution is really only a supplement to the grid where our clients are able to save on electricity costs by buying solar energy at a reduced price compared to current grid costs,” said Solar Africa's McDonald.
There are options for off grid solutions – but it’s way more expensive.
“We do have fully autonomous off grid solutions that provide power during load shedding. These systems are generally far more expensive and hence clients opt for a grid tied solution to save on electricity costs from day one," says McDonald.
"These solutions are still based on a services model, however clients are charged a fixed monthly fee as apposed an energy tariff.”
The costs vary depending on the size of battery storage and the size of the complex.
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