ENERGY

WHAT IS SA’S ENERGY FUTURE?

The real cost of taking back the power

As Eskom grapples with costly maintenance and the increasing cost of coal, there will be less incentive for the parastatal to maintain its coal-generation units. There has never been a greater need to switch to alternative energy sources.

BY MATTHEW CRUISE*

Loadshedding and the price of electricity are projected to double over the next five years. Both Eskom and the municipalities each get an increase close to inflation year-on-year (last year 18%1, this year 17%2 overall). There are other market dynamics that are coming into play that will further increase the price. The price of diesel3 and coal4 are currently skyrocketing due to the Russian/ Ukraine war and these costs will be passed down to the consumer as they have not been budgeted for in Eskom’s five-year projection. This will further increase the cost of electricity in the short-to-medium term as gas-fired turbines are utilised to curtail loadshedding.

As old power stations come offline due to reaching end-of-life, the ability to meet the peak demand of 32 000MW will be reduced. The oldest power stations (Camden, Hendrina, Arnot, Grootvlei and Komati)5 will be coming offline within the next five years, they have a combined capacity of 7 885MW.

Will the IPPs resolve the crisis?

REIPPP Bid Window 5, with a combined capacity of 2 583MW6 (1 608MW wind, 975MW solar), has been delayed recently in terms of its financial close. The commercial close timelines for the 25 preferred bidders are being undertaken in a phased approach with all projects expected to sign agreements by the end of September 2022. The projects are expected to reach commercial operation within two years from commercial close.

Bid window 5 will see the energy coming onto the grid in about a year-and-a-half and during the same time the coal power is coming offline. Bid Window 6 is planned to have a generation capacity of 5 200MW7 and will follow in about three years. This renewable energy that is planned to come onto the grid is one fifth of the coal power that is leaving it.

Does renewable energy contribute to peak demand?

Peak demand is when we have the highest demand for electricity in the country. The peak demand periods are in the evenings, when people cook their dinners and warm their homes, and in the mornings, when they are getting ready for the day.

Unfortunately, the renewable energy capacity totalling 7 783MW will not contribute much towards meeting the peak demand. It will need to be supplemented by batteries or gas turbines for peak demand to be met. The RMIPPPP will add 2 000MW, about 1 200MW8 of this will be able to contribute to peak demand as gas-fired turbine or battery energy.

Now is the best year to invest in a solar and battery installation.

Power during the day does not automatically mean that it’s available at night when needed. Solar energy peaks in the middle of the day and declines at night. The morning energy use peak demand is around 7am. At this time, the sun hasn’t started shining yet, so there is no solar energy coming onto the grid. Similarly in the evening, when we have our highest peak demand of 32 000MW the sun is not at that time providing power on the grid either.

Our highest input of energy from wind is at 2am, when wind tends to peak – and then it is sporadic during the day. As the wind blows is when we get power.

What is the recommended solution?

Homeowners and businesses are recommended to take control of their electricity needs with a solar and battery installation that is grid-tied. The price of solar equipment has historically declined consistently over the past 15 years, up until 2021 when prices rose due to global demand. Growth in this market is accelerating due to the increase of solar farms worldwide. The demand is increasing the price of equipment coming out of China and India primarily.

Now is the best year to invest in a solar and battery (hybrid) installation. Getting a system that takes care of 80% to 90% of the electricity needs is recommended, along with a lifeline to Eskom to recharge the battery during cloudy weather. This is the optimal percentage that will mitigate loadshedding and the impending price increases.

By investing in a hybrid installation, an immediate net saving is made as the monthly cost of a system does not increase. The saving is from the amount of money you used to pay Eskom for the same electricity that you get with the installation.

Energy demand juxtaposed against solar and wind output.

Costs of a typical installation

The total all-in costs for a system and what that would cover when financed through a bond or a rent-to-own model result in a minimal impact on the monthly budget. A package for a home that is spending about R1 500 per month will include 3.6kWp of solar, a 3.6kW inverter and a 2.8kWh battery. (A prepaid meter is charged in kilowatt hours which is currently about R2.50 per kilowatt-hour.) A 3.6 package will cover about R1 000 on average per month of the home’s energy needs.

How does an installation result in saving?

Financing a hybrid system would result in a monthly net saving for most systems, provided they are specified professionally. A home that spends R2 500 per month on electricity and has a bond at prime with 10 years left, would save R50 per month, with more savings in following years. A system that costs R197 718 would on average replace R2 150 of the monthly electricity bill and cost R2 376 per month. (The Eskom price hike of 17% for 2023 was implemented from July.)

Qty Size

R 178 314.98

Core Solar System

Solar PV panels Battery backup system Inverter system (inverter, MPPT and controller) Mounting structure Cabling & accessories Labour DB rewiring Solar Certificate of Compliance Third-party signoff 10 2 1 1 1 1 1 1 1 455kWp 5kWh 5kWh R R R R R R R R R 32 493.83 57 647.78 22 218.00 3 967.50 22 019.63 27 370.00 6 532.00 1 437.50 4 628.75

Total Turnkey Solutions (inc VAT) Optional five-year Maintenance Plan (incl. VAT) R 178 314.98

R 28 750.00

An installation plan with two batteries.

What are the line-item costs?

The battery is the most expensive part of any solar and battery installation, with the solar panels being the second-most expensive followed by the inverter. In the example above, the client opted for two 5kWh batteries to ensure that solar energy is stored for the mornings – especially during periods of heavy loadshedding. This system would take care of about 90% of the client’s energy needs. The installation can be built up gradually.

An inverter system is critical as it regulates the power coming in from the sun and feeds it into the battery and the house (the battery needs recharging, and the house uses power during the day). It will separate the power as needed and reduce the overall amount of Eskom power.

More panels and a bigger inverter are recommended for higher energy demand. Below is an example of a client who opted for an 8kWh inverter system that has about R2 500 worth of electricity usage per month.

The labour, cabling and accessories are included in the price and in the above example, the distribution board needed wiring. Another line-item cost is the certificate compliance with third-party signoff from an engineer to confirm that the system has been installed properly.

Core Solar System

Solar PV panels Battery backup system Inverter system Mounting structure Cabling & accessories Labour DB rewiring Certificate of Compliance Third-party signoff 16 2 1 1 1 1 1 1 1 545kWp 5kWh 8kWh R R R R R R R R R 45 780.00 46 200.00 27 300.00 10 987.20 19 516.50 32 050.00 3 680.00 1 250.00 3 500.00

Hohm Facilitation fee

VAT Total Turnkey Solution (inc VAT) Optional five-year Maintenance Plan (incl. VAT)

Qty Size

15%

R 190 263.70

R 22 467.56

R

31 909.69 244 640.94 R 28 750.00

Monthly electricity bill Reccomended kit

R1 500 3kW Backup Kit system specifications

3kW inverter + 3kWh battery Cost inc. VAT Monthly electricity savings at R2.50 p/kWh Cost @ prime (9%) over 10 yrs

Overall increase in monthly budget

R66 000 n/a R836 R836

R2 000 5kW Backup 5kW inverter + 5kWh battery R84 266.83

5kW Hybrid 4.9kWp solar, 5kW inverter + 5.5kWh battery R138 981.36 n/a R1 067 R1 067

R1 532 R1 761 R229

R2 500 6.5kW Hybrid 6.54kWp solar, 5kW inverter +10kWh battery R188 802.73 R2 044 R2 392 R348

R3 500+ 9.3kW Hybrid 9.27kWp solar, 8kW inverter + 15kWh battery R276 778.40

An example of various packages for a hybrid installation. R2 895 R3 506 R611

How can the government help?

Hybrid installations are incentivised9 in first-world countries by their governments through tax incentives, rebates and preferential feed-in tariffs for providing power to the grid during peak demand. Government needs to incentivise customers to feed back their stored power into the grid. Instead, there’s talk that Eskom may charge solar users an upfront cost. Unlike other countries, such as Europe, the US and Australia which are doing all they can to encourage private solar use through rebates and beneficial tariffs, South Africa is heading in the opposite direction. By incentivising the wealthy and middle-class citizens to invest in their own installations, the citizens of a country start to contribute towards supplying energy demand directly.

There will be no coal power coming online from government, as they cannot afford it, nor can they borrow the money for coal power from the World Bank or similar institutions.

In the President’s recent national address on the loadshedding crisis, Cyril Ramaphosa announced that Eskom will be unbundling into three separate entities in December 2022. This move heralds the democratisation of the energy sector towards an open market model. This will unfortunately lead to further increase in the cost of electricity as it will take about a decade for the market to become efficient and the price of electricity to decline.

REFERENCES

The democratisation of the energy 1 2 Businesstech 2021 Businesstech 2022 sector to become an open market is 3 4 WeForum 2022 The Conversation 2022 going to increase the cost of 5 NS Energy 2021, Green Building Africa 2019 electricity even further. 6 Successful energy projects bid window 5 7 Greenbuilding Africa article 8 RMIPPPP - a disappointing outcome 9 FuturePolicy The German Feed-in Tarriff, Instyle Solar Australia, Forbes advisor USA 2022, Solar Reviews Top Solar

Having worked in the energy sector for several years, Matthew Cruise has insider knowledge of the state of South Africa’s electricity sector. In addition to an academic background in electrical and mechanical engineering, Cruise completed an MBA on the need for a sustainability and energy transition. He now consults for Hohm Energy, an online solar platform and marketplace.

*Content is from What is South Africa’s energy future? a Hohm Energy Media Roundtable presented by Matthew Cruise.

READ REPORT

THOUGHT [ECO]NOMY

greeneconomy/report recycle 2022 ENERGY SERVICES | Market Intelligence Report | GreenCape [2022]

There are five main factors driving growth in the energy service market: the above-inflation electricity price rises; national energy insecurity; decreasing technology costs; supportive policies, regulations and tariffs; and well-adapted finance options.

Amidst the Covid-19 recovery, there is an increased interest from businesses in improved cost efficiencies and secure energy supply. The national embedded generation market for installations, operation and maintenance of rooftop solar PV has been identified as an important part of the country’s immediate efforts towards energy security.

Positive regulatory movement, investor sentiment, and steady recovery in the key commercial, industrial and agricultural sectors have led to continued market growth during 2021. The market is still expected to reach a total capacity of 7.5GWp by 2035 at a market value of R75-billion, it is estimated that 20% of this market is in the Western Cape.

This market intelligence report highlights investment opportunities in embedded generation and energy efficiency created by South Africa’s diversifying energy services market.