POWER to the PEOPLE

Distributed solar has for a long time been perceived as secondary to the large, utility-scale photovoltaic plants. However, in recent years it has grown in importance and now takes the front seat in energy transition plans in many countries. How can South Africa benefit from this emerging trend?

Now a far cry from a once-niche solution targeted at industry aficionados – commercial and industrial and residential PV installations account for 50GW of solar power deployed globally in 2022. That means about one third of the whole solar capacity installed around the world came in the form of distributed solar.

While residential and C&I installations can be ground-mounted, they are most frequently placed on rooftops. In leading solar markets, residential solar installations are becoming a rule rather an exception. Nowhere is this more apparent than in Australia. According to the National Survey of PV Power Applications in Australia, more than 30% of free-standing households across the nation are fitted with PV systems. In Queensland and South Australia, the average is closer to 40%, and more and more communities record penetration of rooftop solar at over 50%.

The burgeoning importance of residential solar is confirmed by Norwegian research company Rystad Energy. As per the company’s data, in 2021, for the first time in history, the world installed more PV capacity in residential than in C&I systems.

Untapped Potential

Compared to other markets, the fundamentals of distributed solar in South Africa are as strong as it gets.

The technical potential is exceptional, with PV plants in South Africa producing 2 500kWh of electricity per year from 1kWp of solar power installed, twice as much as in the European Union.

“The motivation to go solar by businesses and homeowners is already very strong, even without additional incentives from the government. Daily loadshedding resulting in blackouts for six, eight or more hours makes an investment in solar systems less about savings and more about securing business continuity,” comments Heino Louw from solar equipment distributor Menlo Electric. “That is not to say that savings potential is not a strong motivation – and with electricity prices at a level seven times higher than in 2007 and still growing, that motivation is getting stronger every year,” he adds.

Based on benchmarks, distributed solar could make for a significant portion of the whole power mix for South Africa, both rooftop and ground mounted. Presently, Australia has the highest power of per-capita rooftop PV installations with about 750 watt-direct current (WDC), then Germany at a close to 700WDC per person, and Japan at approx. 350WDC per person. If South Africa reached only 100WDC per person, rooftop installations would add 6GW of PV capacity, producing 15TWh of electricity each year. Adding ground-mounted distributed solar systems to the calculation could double these numbers. In total, the electricity generated this way would equal the expected output of Kusile Power Station.

DISTRIBUTED POWER AND FUNDING – AND RISKS

The comparison to the troubled development of Kusile station highlights other advantages of distributed solar. First off, the funding does not have to burden the State budget or that of Eskom. The costs are borne by thousands of individual and corporate clients, who are commissioning the plants from their local engineering, procurement and construction (EPC) contractors. And these are no small sums –development of 1GW of distributed solar costs almost $1-billion. Additional savings are derived from the fact that the installations are located close to sources of demand. This translates into a lower strain on electricity distribution networks and reduced capital expenditures for the development of the grid. Obviously, at some saturation level new investments in the transmission network would still be required.

On the risk side – since the installations are dispersed among many locations, EPCs and clients; delays in an individual project do not spill over to other projects. That means that new capacity comes online daily, in a gradual, but uninterrupted way.

Help Me Help You

The main challenge with owning a solar system is that it produces most of electricity in the middle of the day – when residents are typically at work. In contrast, electricity is mostly consumed by households in the mornings and evenings, when the installation does not produce as much energy.

One way to work around this mismatch is to add a battery set to the system. This, however, can easily double the value of the investment, inflating it to a prohibitive level for most homeowners and companies. That is why distributed solar is most successful in countries where a dedicated incentive scheme is implemented.

One popular measure is “net metering”, which has been adapted in various forms by many countries in Europe and almost 40 states in the USA. Under this scheme, surplus electricity generated by the solar system is fed into the grid for other users. The electricity meter “runs backwards” to record this energy, so that the homeowner only ends up paying for the net electricity consumed – hence the name of the scheme.

Other support schemes may involve sales of electricity to the grid at pre-agreed price under the Feed-in-Tariff regime, direct subsidies for systems or guarantees for bank loans.

IT’S BEEN DONE BEFORE: IT CAN BE DONE AGAIN

“Among other countries that have swiftly ramped up capacity through distributed solar, Poland is perhaps the most akin to South Africa,” comments Bartosz Majewski, CEO of Menlo Electric. “Poland’s power generation system has faced many of the same challenges that South Africa is experiencing, including a large and aging fleet of coal-fired power plants built in the 1960s and 1970s as well as a slow pace of utilityscale renewables developments.”

The introduction of net metering allowed for owners of PV microinstallations up to 50kW to feed surplus energy into the grid and then receive 70% to 80% of it back at no cost. This spurred a wave of deployment of such systems across the country. In the four years between 2019 and 2022 more than one-million people and businesses installed solar systems on their rooftops and in their backyards. This translated into almost 10GW of additional PV solar power connected to the grid. From being perceived as one of European Union’s laggards, Poland surged ahead to become one of the top three solar markets on the continent both in 2021 and 2022.

More than $8-billion of private investments from home and business owners were mobilised through this scheme. Of it, Poland’s state and municipal administration collected at least USD1-billion in VAT and income taxes. Moreover, the industry created an estimated 120 000 jobs in installations, servicing and sales – of which more than 50% were located in Poland’s underdeveloped regions.

“Entrepreneurs and technical specialists that entered the solar industry during this photovoltaic boom often branched out to other segments or renewable energy, animating the ecosystem and contributing, for example, to a recent growth in sales of heat pump installations. So apart from the immediate, quantifiable benefits developing distributed solar will have a positive impact on the energy industry as a whole,” concludes Majewski.