Smaller scale renewable energy producers can help relieve pressure on the grid
A new report launched on Monday 11th March at the Res4Med&Africa Regulatory Innovation Conference in Cape Town shines a light on opportunities for corporates and intensive electricity users looking for affordable and low carbon ways of securing electricity.
A new study commissioned by the South African Wind Energy Association (SAWEA), against the backdrop of volatility and uncertainty in the current electricity landscape in SA, has revealed that the role of Distribution Generation Renewables (DG-RE) in the SA electricity market is currently significantly undervalued and that it has an important role to play in supporting the delivery of clean, cost effective and reliable power to South African business.
Launched at the at Res4Med&Africa Innovation Conference in Cape Town on Monday, the SAWEA study examined 14 different scenarios in five different SA municipalities. The study found that smaller scale wind and solar systems could reduce significant load on municipalities; lowering the price of electricity, preventing electrical interruptions, reducing losses and providing an effective and efficient contribution to resolving SA’s power crisis.
“Within the current regulatory environment improvements in renewable energy technology and falling prices are not reaching consumers directly and quickly enough and it is within this context that the report should be considered,” says CEO of SAWEA, Brenda Martin.
Distributed generation refers to a variety of technologies that generate electricity at or near where it will be used, such as solar PV panels, wind and combined heat and power and may or may not make use of existing electricity infrastructure for distribution to customers.
“Distributed generation may serve a single structure, such as a home or business, or it may be part of a microgrid (a smaller grid that is also tied into the larger electricity delivery system), such as at an industrial facility or a university campus,” explained Kevin Minkoff, chairperson of SAWEA’s Technical Working Group.
He said Eskom tariff increases and continued struggles only strengthened the business case for DG-RE plants and the role these could play in supporting the sustainable delivery of power.
The report also highlights opportunities for investors. “This is an exciting time for current and prospective investors in the growing South African renewable energy market,” said Martin. “This is an important piece of work for entities interested in investment other than utility-scale as it reveals opportunities and potential routes for corporate PPAs (power purchase agreements) to step forward to become part of the solution to SA’s power woes by relieving pressure on the grid.”
Minkoff explains that PPAs support the purchase of electricity at an agreed price for the duration of an agreed period. Instead of buying power directly from utilities (typically state-owned as in SA), several businesses are now beginning to consider how to purchase electricity from independent generators, as well as investing in generation assets themselves – along with the necessary regulatory reforms that can support this.
“PPAs have economic and environmental advantages,” says Martin, adding that large multinationals are beginning to apply their sustainability pledges to their global supply chains and data centres, which has led to a significant uptick in corporate PPAs globally.
“However, in South Africa, current regulations are restricting the uptake of corporate PPAs. To support growth of the industry, the SAWEA report calls for regulatory reforms to allow for direct PPAs between municipalities and energy intensive users and details how this could provide security of supply to heavy industry at lower tariffs,” said Martin.
“It is important for local municipalities and utilities to revise planning methods, devise new technical specifications and update commercial arrangements.”
Investing in DG-RE plants can help corporates to meet environmental targets, giving them an instrument to evidence compliance with increasing climate change reporting and corporate governance requirements.
Eskom will also benefit from DG-RE projects as the loss of revenue is more than offset by a reduction in the cost of distribution. Additionally, the practice of “wheeling”, whereby renewable energy plants pay a fee to use the national grid to transport the electricity from the production site to the end user can also benefit the state power utility.
“While government has reaffirmed its commitment to renewable energy and private sector investment in renewable projects, there is still much to be done to make these commitments a reality,” said Martin. “This report confirms the potential of DG-RE in the South African market and offers practical suggestions as to realising these. Renewable energy is increasingly being accepted as the way of the future. We hope this report will make a substantial and meaningful contribution to the growth of the sector in SA.”
The Res4Med&Africa Regulatory Innovation Conference seeks to put the spotlight on innovation and sustainability, specifically with regards to regulation, as well as new business opportunities in the renewables sector.