BD Energy March 2022 by SundayTimesZA

ENERGY MARCH 2022

WWW.BUSINESSMEDIAMAGS.CO.ZA

THE FUTURE OF SA’S ENERGY CRISIS? Leveraging solar, wind, water and geothermal energy

Inside: WASTE TO ENERGY | BIOFUELS, BIOGAS AND GREEN HYDROGEN | WHAT HAPPENS IF THE GRID COLLAPSES? | REIPPPP EXPLAINED | ENERGY-EFFICIENT BUILDINGS

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ENERGY MARCH 2022

WWW.BUSINESSMEDIAMAGS.CO.ZA

THE FUTURE OF SA’S ENERGY CRISIS?

ON THE COVER: IMAGE: Kayla Goss/istockphoto.com

Leveraging solar, wind, water and geothermal energy

Inside: WASTE TO ENERGY | BIOFUELS, BIOGAS AND GREEN HYDROGEN | WHAT HAPPENS IF THE GRID COLLAPSES? | REIPPPP EXPLAINED | ENERGY-EFFICIENT BUILDINGS

Contents 50

32 6

COP 26 ROUND UP A brief look at the key decisions and discussions and what these mean for the world’s future.

11 WASTE TO ENERGY How waste to energy projects offer twofold benefits: waste elimination and energy generation.

12 REIPPPP EXPLAINED What the Renewable Independent Power Producer Procurement Programme is, the technologies in the mix and what it will add to our grid.

16 THOUGHT LEADERSHIP: IPPS AND THE LAW Law firm Norton Rose Fulbright on independent power procurement – how it works, the legalities and what this means for our energy future.

19 THOUGHT LEADERSHIP: ENERGY AND THE 4IR How the Fourth Industrial Revolution is positively impacting on the energy sector and what technological advancement might mean in these power-constrained times.

20 THOUGHT LEADERSHIP: MAKING BUILDINGS MORE ENERGY EFFICIENT Building management systems and the Internet of Things are ideal tools to make new buildings more energy efficient.

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48 26 RENEWABLE ENERGY UNBUNDLED Take a deep dive into the various types of renewable energy available in South Africa.

30 THOUGHT LEADERSHIP: SUSTAINABLE SKILLS A sustainable transition to sustainable energy requires a sustainable commitment to skills development.

31 EMPLOYMENT Renewables are about more than clean energy – they also open job creation opportunities. What skills and training might be needed for this nascent market?

32 BIOFUELS, BIOGAS AND GREEN HYDROGEN What sort of impact can these environmentally friendly takes on more traditional fossil fuels have as sustainable fuels in the longer term?

38 INVESTING IN RENEWABLE ENERGY Renewables may be a great resource, but who funds these new projects, what do they look for in a project and how are the investments structured?

44 THOUGHT LEADERSHIP: RENEWABLE ENERGY AND RETAIL Shoprite Group’s sustainability manager on the company’s increasing drive towards sustainability.

46 ENERGY STORAGE Solar and wind are only effective at certain times – until battery storage methods improve. Where do we stand currently with batteries, and what does the future hold?

47 IS CLEAN COAL A REAL THING? We look into the potential offered by so-called “clean coal”, how it works and what makes it better in environmental terms than standard coal.

48 E-MOBILITY: IS SOUTH AFRICA READY FOR EVS? Electric vehicles are out of reach for many. Despite this, South Africa is slowly creating the infrastructure for when these vehicles are finally priced for the masses.

50 ENERGY SOURCE ROUND-UP The three key energy options available to South Africa: we look at the pros and cons of each.

56 SOLAR ACROSS THE SECTORS We explore the latest technologies, how these differ from sector to sector, the storage conundrum and the green recycling of old panels and parts.

58 WHAT HAPPENS IF THE GRID COLLAPSES? Load shedding is a huge inconvenience, but still only an inconvenience. We look at how a worst-case scenario of total grid collapse might occur, and what it would mean.

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F ROM T HE EDI T OR

The future of energy

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EDITORIAL Editor: Rodney Weidemann Content Manager: Raina Julies rainaj@picasso.co.za Contributors: Trevor Crighton, Caryn Gootkin, James Francis, Gareth Griffiths, Anél Lewis, Itumeleng Mogaki, Thando Pato, Anthony Sharpe Copy Editor: Anthony Sharpe Content Co-ordinator: Vanessa Payne DESIGN Head of Design: Jayne Macé-Ferguson Senior Designer: Mfundo Archie Ndzo Advert Designer: Bulelwa Sotashe Cover Image: Kayla Goss/istockphoto.com SALES Project Manager: Gavin Payne GavinP@picasso.co.za | +27 21 469 2477 +27 74 031 9774 Sales: Corne Louw, Brian McKelvie PRODUCTION Production Editor: Shamiela Brenner Advertising Co-ordinator: Johan Labuschagne Subscriptions and Distribution: Fatima Dramat, fatimad@picasso.co.za Printer: CTP Printers, Cape Town

s South Africans ruefully joke about an electricity provider that constantly begs its customers to use less of its product, the economy continues to take hit after hit from losses incurred during load shedding. An answer is desperately needed, and renewables might be it. After all, the recent 2021 United Nations Climate Change Conference conference highlighted the desperate need for the world to shift away from fossil fuel-based energy. In this issue, we look at the key decisions and discussions from the event, what these mean for South Africa and what the results indicate for the global future (page 6). Naturally, renewable energy is a big focus today, with the Renewable Energy Independent Power Producer Procurement Programme aiming to leverage wind, solar and more to bring additional megawatts into the country’s electricity system. The good news for these projects is that there is a huge drive from the financial sector to invest in renewable energy projects. We take a look at how this is now taking centre stage (page 38). Since renewables are so vital to the future, we also look at the different types – solar, wind, water and geothermal – and how these can benefit South Africa (page 26). Of course, these energy sources only provide power intermittently, so it’s important to take note of the existing and developing battery storage methods (page 46). We also look at how solar impacts various sectors, from residential to agriculture, as well as the kind of skills and training required for a career in this field (page 56). There’s also a round-up of the pros and cons of nuclear, renewables and coal (page 50), and a look at what “clean coal” is,

how it is used and whether it makes any tangible environmental impact (page 47). There are other types of sustainable energy sources beyond these, so we give consideration to energy from waste, which impacts both energy production and waste disposal (page 11), as well as new opportunities like biofuels, biogas and green hydrogen – and what these mean for a sustainable future (page 32). Finally, electric vehicles may still be perceived by some as “rich people toys” but the market is growing rapidly and South Africa is preparing for it, albeit slowly. We look at what is being done locally in this space (page 48). We also take a look at what happens in a worst-case scenario: complete grid collapse (page 58). Finally, we speak to thought leaders in the energy space, with a legal expert answering our questions around independent power producers and the law (page 16), Shoprite’s group sustainability manager discussing the company’s ongoing efforts in implementing renewables and driving sustainability (page 44), expert opinion on how the Fourth Industrial Revolution can be leveraged to ensure consistent and cheaper energy (page 19), and how building management systems and the Internet of Things can be used to make new buildings more energy efficient (page 20). I leave you with this phrase from Chinese philosopher Lao Tzu, whose words are not only good ones to live by, but are also particularly appropriate for when next Eskom cuts the lights: “It is better to light a candle than to curse the darkness.”

Rodney Weidemann

MANAGEMENT Management Accountant: Deidre Musha Business Manager: Lodewyk van der Walt General Manager, Magazines: Jocelyne Bayer

Copyright: Picasso Headline. No portion of this magazine may be reproduced in any form without written consent of the publisher. The publisher is not responsible for unsolicited material. Energy is published by Picasso Headline. The opinions expressed are not necessarily those of Picasso Headline. All advertisements/advertorials have been paid for and therefore do not carry any endorsement by the publisher.

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What does COP26

mean for SA?

The 2021 United Nations Climate Change Conference opens the door to address Eskom’s problems, suggests JAMES FRANCIS

he need for action around climate change has become very urgent. Keeping global temperatures limited to 1.5°C above pre-industrial levels now seems highly optimistic. Instead, we can expect temperatures between 1.9°C and 3°C higher by 2100, according to Climate Change Tracker. Hence the mood of optimism for action ahead of the 2021 United Nations Climate Change Conference, commonly known as COP26. Unfortunately, the conference produced agreements that many feel don’t reflect the urgency of the situation. Still, there is room for hope, says Jayne Mammatt, PwC’s partner/director of sustainability and climate change and ESG Africa lead. “COP26 definitely achieved some crucial milestones and commitments, and while some would say it did not go far enough, the momentum and ambition have most definitely increased. However, we will only know if we have turned that corner if there is timely follow-through on these commitments. Commitments and declarations have been made before, yet progress has been slow. Our objective now is not to stop climate change, but to maintain it at a ‘manageable’ level.”

A financial boost The conference produced a notable silver lining: more funding for developing nations. COP26 delegates pledged to help middle- and low-income countries transition to greener energy sources while not damaging their economies. Most notably, South Africa will receive R129billion to help transition away from coal. But talk is cheap, notes Zachary Donnenfeld, senior researcher at the Institute for Security Studies. “Developed countries famously pledged to produce R1.5-trillion per year in climate assistance by 2020 [in the 2015 Paris Climate Accords], only to come up well short of that goal. I agree that the rhetoric sounds different this time, but I’ll only believe we’ve turned a corner when there is meaningful technology transfer surrounding renewable energy, in addition to fulfilled commitments regarding financial assistance. Technology transfer is critical, because it’s the most direct way to circumvent legal restrictions and get African countries producing renewable energy at scale.”

“Technology transfer is critical, because it’s the most direct way to circumvent legal restrictions and get African countries producing renewable energy at scale.” – Zachary Donnenfeld 6

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COP26

KEY SUCCESSES AT COP26 • Green finance for the net-zero economy • Greater disclosure and climate transparency in the private sector • Increasing the pace of implementing the Paris Climate Accords

“South Africa’s biggest economic challenge right now and for the foreseeable future is unreliable and dirty electricity supply.” – Lullu Krugel

IMAGES: ISTOCKPHOTO.COM, SUPPLIED

Spending on climate change

“South Africa’s biggest economic challenge right now and for the foreseeable future is The money provided to South Africa via unreliable and dirty electricity supply,” says the Just Energy Transition Partnership (a Lullu Krugel, PwC’s chief economist in South conglomeration of developed states and Africa. “Climate finance towards increasing climate change funds) aims to change power generation from renewables should Eskom’s coal fleet and related industries. be a priority.” The Eskom Media Desk notes that as part There is not yet any concrete indication of the work in developing Eskom’s Just Energy of how the money will be spent. Transition (JET) strategy, the organisation is Some might align with the Renewable Energy assessing the pathways to decarbonisation. Independent Power Producer Procurement This includes system modelling - the ability of Programme, or be used to address the system to deliver the electricity demand employment and economic concerns in required - using cleaner technologies that are coal-producing regions such as Emalahleni. commercially available and are deployable in Notably, South African has yet to assign a the short-term. financial team to manage the funds. “An important part of this work is to ensure Some allocations will depend we have system adequacy on lender requirements. There and network operability, as are also questions about the we transition to renewables. nature of the contribution: Gas plays an important Is it a loan adding to public role in ensuring we can debt or a grant with lower meet the capacity gap, debt obligations? “If the debt both in Generation and is assumed directly by the Transmission capacity,” government or a state-owned notes the Media Desk. enterprise, it would be a “Eskom has also burden on the public-sector conducted socio-economic balance sheet,” Krugel explains. impact studies related to Lullu Krugel “However, if the funding is coal-plant shutdown and will for a private or public-private continue to do this for every partnership endeavour, then there is less or no plant so affected. These studies highlight the debt burden on the sovereign. Grants certainly risks associated with plant shut down and are carry stipulations and conditions but are not a used to develop mitigation plans.”

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burden on the debt load. This is a much more favourable option – if available – for indebted public enterprises.” Questions also remain around private business access and how to replace coal. Donnenfeld urges us to keep our eyes on the big picture, as South Africa has abundant potential for renewables. “Personally, I would like to see a lot more development in those spaces. There’s some potential for natural gas to play a role as a transitional fuel while South Africa moves away from coal, but those markets are extremely volatile and the cost of domestic extraction of natural gas may prove prohibitive. In my view, moving away from coal is more important than whatever replaces it. I can’t emphasise that enough.”

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President, GE Southern Africa

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“From this point, the gas can be flared, to dispose of flammable constituents safely, control odour and mitigate climate change through conversion of methane to carbon dioxide. It can also be used to generate electricity, or used directly for space and water heating. It can also be upgraded, concentrated and compressed to pipeline-quality gas, where the gas may be used directly or processed into an alternative vehicle fuel.”

Breaking down

One man’s waste… The world is facing waste and energy crises, but there are means available to address both challenges at once, writes RODNEY WEIDEMANN

ith a rising global population creating increased pressure on existing resources, greater amounts of waste and additional energy demands, there is a clear need to change the way we do things. Kate Stubbs, marketing director at Interwaste, suggests that along with a transition to wind and solar, waste-to-energy (WtE) is critical as it addresses two key issues at once. “In South Africa alone, we generate some 122 million tonnes of waste per year, 90 per cent of which ends up in landfills. This leads to environmental challenges like underground water contamination and methane creation. Turning this methane into energy is often more costly than the wind and solar options but, unlike these, waste offers a more reliable base load.”

Biogas

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WA S T E T O ENERGY

In its report, Sustainable Energy Solutions for South African Local Government, Sustainable Energy Africa notes that a number of WtE technologies exist, with the most relevant one being biogas digestion at landfill and wastewater sites.

FAST FACT

Interwaste estimates that South Africa’s waste is worth around R25-billion per annum, and yet currently around R17-billion of this value is not accessed.

Biogas digestion at landfill and wastewater treatment sites is based on mature technologies, notes the report, and is now taking place within the larger metros. The report notes these technologies are located on municipally owned sites with municipally controlled energy feedstocks. According to the report, “The basic idea behind the technology is that landfills are covered – such as with a layer of earth – and methane is extracted using a series of wells and a blower/flare (or vacuum) system. This system directs the collected gas to a central point where it can be processed and treated depending upon the ultimate use for the gas.

“In South Africa alone, we generate some 122 million tonnes of waste per year, 90 per cent of which ends up in landfills.” – Kate Stubbs

Stubbs points out that there are also different waste types and technologies used for WtE production, with the three main types being thermal, biological and physical. “Thermal destruction is not incineration – which does not create energy – but rather destruction for energy recovery in the form of gas or steam creation, to generate power. This option can also process certain types of hazardous waste. “Pyrolysis is another heating process to create fuel, where the typical waste streams are tyres, rubber and sometimes plastics. There is also gasification, where biomass like wood chips, refuse or solid waste is burned to create energy.” From a biological perspective, energy is created from organic waste, such as food, animal carcasses, agricultural waste and sewage, explains Stubbs. Since these types of waste generate methane in landfills, an increasing number of organics are being banned from such sites. “Anaerobic digestion is a biological method that is quite complex in terms of getting the right balance of input material to achieve the right gases, but such plants are scalable and have the potential to operate at large scale. However, the challenge here is that because of transport costs, it remains cheaper to take such waste to a landfill, rather than supply it to an anaerobic plant.” Stubbs says that physical solutions include the production of refuse-derived fuel (RDF), which is usually done from the general waste that is tough to recycle such as milk cartons and chip packets. “With RDF, it is vital to get the feedstock right, but it can be used as an alternative to coal in fuelling industrial boilers.” Stubbs suggests that due to the complexity of separating such waste, this option may not work on a mass scale, but it is worthwhile because the waste used would generally go to a landfill because it can’t otherwise be recycled. “For me, the circular economy is about designing waste out of the system, and these types of WtE solutions are ideal for achieving such an aim, while at the same time adding energy back into the system.” Kate Stubbs

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PROCUREMEN T

The ABC of the REIPPPP South Africa’s renewable energy tender programme is about more than adding clean power to South Africa’s grid, writes TREVOR CRIGHTON

Located between Jeffreys Bay and Humansdorp in the Eastern Cape, the Jeffreys Bay Wind Farm site spans 3 700 hectares and reached Commercial Operations mid-2014

Blowing in the wind

outh Africa’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) was set up to increase the supply of renewable energy and help alleviate the energy shortfall that has led to more than a decade of load shedding. Beyond that, it also aims to contribute to environmentally sustainable socioeconomic growth. The Atlantis Special Economic Zone (SEZ) has a specific focus on the facilitation of green technology investment, in line with REIPPPP requirements around local beneficiation, among other things. “Our location accommodates manufacturers of green technology products also suitable for REIPPPP project value chains,” says Jarrod Lyons, business development executive for green technologies at the Atlantis SEZ. Lyons explains that REIPPPP project bidders develop project proposals, which are submitted to the Independent Power Producer Office. “Once a project is selected, it’s up to the developer to resource and build it – and areas like the Atlantis SEZ can facilitate the production of components associated with these projects,” he says. “A wind turbine is a massive structure that is difficult to transport, so it makes sense to produce it locally in an SEZ that is able to offer benefits via being closely located to projects in the country.” The unique selling point of the Atlantis SEZ centres around its ability to cluster and co-locate similar entities. This capitalises on the sharing of resources and logistics, and the repurposing

RENEWABLE POWER A total of 6 329MW of renewable energy had been procured via the REIPPPP by February 2020, with 3 876MW currently connected to the grid. The fifth bid window closed in October 2021, with the successful projects set to add 2 600MW of new generation capacity, including 1 600MW from onshore wind energy. A total of 36 wind independent power projects have been procured and have mostly reached commercial operations, contributing 3.4GW capacity to the national power system. Two of the 36 are currently under construction, with expected commercial operations in the near future.

of waste products by other linked industries. “We can build a community of investors who are resource and energy efficient, and provide a more competitive landscape,” says Lyons. “It’s a ‘living lab’ approach to doing business. “Part of our responsibility is to position ourselves as a location for the local manufacture of components that feed into renewable energy projects, the broader REIPPPP, and other green technology value chains like electric mobility and energy storage, for example.”

“We can build a community of investors who are resource and energy efficient, and provide a more competitive landscape.” – Jarrod Lyons 12

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GRI Wind Steel located adjacent to Zone 1 of the ASEZ. Table Mountain and Ankerlig Power Station can be seen in the distance

South African Wind Energy Association (SAWEA) chair Mercia Grimbeek says that the next decade will see the acceleration of wind-power procurement, considering the decreasing cost and the allocation in the country’s energy road map. “This is demonstrated in the latest Integrated Resource Plan (IRP), which maps out the energy mix for the next 10 years and envisions the nation’s electricity production capacity rising significantly by 2030.” Grimbeek says around 14.4GW of wind has been allocated in the IRP, giving wind energy 18 per cent of the total capacity allocation. “Our ballpark figure for required annual investment to build that capacity of wind projects is R40-billion per annum, so there is a massive opportunity for investors to be part of transitioning the South African power system to a green one.” SAWEA is of the opinion that Mercia Grimbeek enabling the required quantity and quality of components will require at least two to three years of investment and development, reinforcing the need for rolling procurements without interruptions or delays. Grimbeek says that this will allow all aspects of the value chain, not only the manufacturing sector, to expand. The local green technology manufacturing industry has significant room to grow and mature. Lyons says there have been positive moves by government to facilitate this growth, notably by promoting local content uptake and increasing the number of designated components in the renewable energy value chain that need to be produced locally. “We also work with companies to help develop the skills of their labour force,” he adds. “We look at the requirements, develop a curriculum and administer it to help upskill workers, for the good of the greater industry.”

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NOR T ON RO SE F UL BRIGH T A DV ER T ORI A L

LEGAL EXPERTISE ON ALL THINGS

Norton Rose Fulbright offers a full-service banking, fi nance, and projects team boasting a diverse group of competent lawyers with offi ces in Johannesburg, Durban and Cape Town.

ENERGY-RELATED

Norton Rose Fulbright South Africa offers legal services across many industry sectors, and has extensive experience within the energy sector

orton Rose Fulbright South Africa is one of the top legal practices in southern Africa with close to 200 lawyers and offices in Johannesburg, Durban and Cape Town. We are a proud level 1 BEE-certified company with a strong and experienced team of lawyers behind our name. We handle a rising tide of cross-border transactions on behalf of banks, development financial institutions, government bodies, major domestic and international corporates and large mining concerns seeking energy security, and multinationals.

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MEET OUR ENERGY TEAM We have a dedicated and skilled projects and project development team and, added to this, the ability to call on additional expertise and experience from our global practice. We have been a driving force behind an unprecedented number of successful transactions in the South African energy transition, delivering regulatory expertise, corporate and fi nancing transactional advice, and intuitive South African business law

acumen and competitive edge to sponsor and lender clients in the energy sector. Our experience in the energy sector has been gained through advising on all aspects of the development of the industry, its diversity reflecting the changes in the sector through privatisation, new models of regulation and financing, and increasing internationalisation. We are market leaders in the South African government’s various energy procurement programmes. Over the various bid submission phases of the South African Renewable Energy Independent Power Producer Procurement Programme, of the 117 bidders selected as Preferred Bidders to date, we have advised on more than half of these projects on a mix of sponsor, lenders and contractor mandates.

Alliance/Network of the Year by the African Legal Awards in 2021. We are active across key industry sectors, including power, oil and gas, renewable energy, infrastructure, mining, transportation, food and agribusiness, technology and healthcare. Our lawyers have experience of working in more than 45 common law- and civil law-based African jurisdictions and advise on groundbreaking projects and transactions, as well as assisting our clients with their ongoing commercial operations across Africa and internationally. Complementing our energy practice are robust project finance, project development, infrastructure and mining teams who together deliver an unsurpassed, full-service legal solution.

OUR SERVICE OFFERING EXPANDS ACROSS the CONTINENT We offer a leading commercial legal practice throughout Africa, one of the fastestgrowing economic regions in the world. We have an award-winning presence on the continent, having been voted African

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T HOUGH T L E A DERSHIP

IPPs and the law MATT ASH, a director of Norton Rose Fulbright, on how independent power procurement works, what the legalities are and what this ultimately means for our energy future

but there will obviously be concern about connecting intermittent renewable projects to the network. It is suspected we will soon see a greater focus on energy storage solutions in order to “smooth out” the intermittency issue, as well as see Eskom implement grid-balancing rules and fines for breaches of those rules. Another challenge is the potential impact such projects might have on municipalities’ finances, as many of the metros currently earn a margin on distributing energy they have purchased from Eskom.

t is important to understand that the Electricity Regulation Act stipulates that nobody can generate and sell power without a generation licence issued by NERSA. Applications for such a licence have typically been complex and adminintensive, and not simply available for the asking. Both the evaluation process and the public-participation element are quite intensive, making it a lengthy process before such a licence is granted. However, where in the past there were exemptions for projects of less than 1MW – basically those entities putting in a rooftop solar project – the new regulations allow for projects up to 100MW to be exempt from this licensing process. The new rules mean that embedded independent power producers (IPP) no longer need to apply for or hold a generating licence if their project is 100MW or less. This should help to unlock the IPP capacity that has existed for years in a way that that will assist Eskom with its generation constraints.

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Challenges remain The highly onerous compliance and cost impediments faced by those previously seeking such generation licences have been removed. However, there remains a challenge in that, although there are hundreds of projects of this nature wanting to connect to Eskom’s grid in order to wheel power, the network simply does not have the capacity to handle all these IPP facilities. Another challenge is that these IPP facilities are typically wind or solar plants, which makes intermittency an issue, as they will not always Matt Ash be capable of generating as anticipated. This type of fluctuating generation profile inherently destabilises the network. So far, Eskom has done a masterful job in managing the stability of the network under trying conditions,

Although there are hundreds of projects of this nature wanting to connect to Eskom’s grid in order to wheel power, the network simply does not have the capacity to handle all these IPP facilities.

IMAGES: ISTOCKPHOTO.COM, SUPPLIED

An iterative process Pragmatically, it is unlikely we will see any new coal generating capacity being developed, with nuclear and gas being more likely options for base-load power. The concern with nuclear is mostly around procurement, as there has not been a nuclear build in the past 15 years that has been on time and on budget. Moreover, experience tells us that mega-projects of this nature lend themselves to corruption. From an IPP point of view, the exemptions appear to go as far as they can. What government has done is throw down the gauntlet to those clamouring for a higher exemption threshold, offering them the ability to do it, but querying whether they really have the wherewithal to do so. Remember that the issues around network capacity, load balancing, and municipal finances mentioned above are all nettles that will need to be grasped. This is likely to be an iterative process rather than a big bang, specifically inasmuch as the grid presently does not have enough capacity to connect all proposed projects. Substantial investment in network expansion and strengthening will be required first before most of the myriad sub-100MW facilities will be able to connect. On the other hand, the exemption framework does facilitate the development of embedded generators, which can create power without connecting to the network, for isolated projects like mines. These changes have the potential to be a massive game changer, but remain dependent on solving the constraints of access and network capacity. Ultimately, it is believed this will be a key driver not only for increased availability of electricity, but also for the liberalisation of the electricity market, moving South Africa closer to a deregulated, day-ahead free market. This definitely has the potential to have long-term impacts; what we need to solve first is the network challenge.

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S A PPI A DV ER T ORI A L

SAPPI: TAKING ACTION TO INCREASE ITS USE OF CLEAN ENERGY Sappi SA has introduced several energy-saving initiatives to accelerate its renewable energy and emission reduction journey

Ngodwana Biomass Plant.

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limate action failure is the most critical threat to the world in both the medium-term (2–5 years) and long-term (5–10 years). That’s the finding of the Global Risks Perception Survey 2021–2022 conducted by the World Economic Forum. Recognising that the use of fossil-based fuels is one of the major contributors to climate change, Sappi Southern Africa (Sappi SA), has identified United Nations Sustainable Development Goal 7 (UN SDG7: Affordable and Clean Energy) and SDG13: Climate Action, as key priorities. The organisation is already advantaged by the fact that 43.8 per cent of the energy it uses is renewable, mostly from its black liquor (89.9 per cent), generated through its pulping processes. Sappi SA is working to reduce its carbon footprint by making process changes, installing Best Available Technology (BAT), reducing purchased energy (electricity and fossil fuel) by increasing its use of renewable energy – an approach that ultimately results in a reduction in carbon dioxide (CO2) emissions. In alignment with SDGs 7 and 13, Sappi SA has implemented several innovative renewable energy projects. As an example, it holds a 30 per cent share in Ngodwana Energy, a 25 MW biomass project at its Ngodwana Mill in Mpumalanga. The project, which falls under the Renewable Energy Independent Power Producers’ Programme (REIPPP), is being commissioned. It uses biomass from Sappi SA’s surrounding plantations to generate energy that is sold to the national grid, thereby expanding the availability of renewable energy on the grid. Solar energy is another avenue being used. Heating at plant nurseries is required for root initiation, faster rooting and improved hedge growth during winter months. A solar heating system has been installed at Sappi SA’s Ngodwana nursery. The system delivers an

As an early supporter of the Paris Agreement, Sappi SA’s overarching aim in terms of science-based targets is to ensure a more sustainable future for all by limiting the increase in the global average temperature to well below 2°C and pursue efforts to limit warming to 1.5°C. We expect our targets to be validated by the SBTi in mid-2022. Under these targets, Sappi SA has established detailed decarbonisation plans, to further reduce its use of fossil energy. In a carbon-constrained world, this is not only the right thing to do, it also makes sound business sense – positioning the business for the future and making it more resilient and sustainable. Saiccor Mill.

average of 4 000 kilowatt-hours (kWh) daily during winter months – a total of 488 000 kWh over the winter months with a solar radiation average of 4.8 kWh/m2/day energy to generate heat. A R7.7 billion environmental improvement and capacity expansion project at the Saiccor Mill in KwaZulu-Natal represents a significant step forward on Sappi SA’s renewable energy and emission reduction journey. Process improvements at the mill will result in CO2 emissions being halved, water consumption reducing by 5%, water-use efficiency increasing by 17%, energy efficiency improving by 10% and the mill’s use of renewable energy increasing by 20%.

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SCIENCE-BASED TARGETS SET To further accelerate its progress towards SDGs 7 and 13, Sappi SA has committed to setting science-based targets through the Science Based Targets initiative (SBTi). The SBTi is a collaboration between CDP, the United Nations Global Compact, World Resources Institute and the World Wide Fund for Nature.

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What is to be done?

Embracing the Fourth Industrial Revolution PIETER DE VILLIERS, associate director of carbon and energy at EY Cova, takes a look at what local manufacturers have to gain from 4IR technologies

IMAGES: ISTOCKPHOTO.COM, SUPPLIED

hen we think of research and development, our minds automatically turn to advances in computer technology, space travel, the vision of putting a human on Mars, or designing the next generation of electric vehicles. Less glamorous, but still of vital importance, are the less in-your-face advances that the Fourth Industrial Revolution (4IR) is bringing. Let’s just remember some of the advances that the earlier industrial revolutions have brought, moving people from the land to factories, first with the introduction of steam power, then the internal combustion engine. We have seen the age of electronics and the internet. We now have a fusion of technologies in this latest industrial revolution, leading to artificial intelligence (AI) and so much more. It is not easy to keep up, let alone plan ahead, in such a fast-moving environment. However, you don’t need to be a rocket scientist or an IT superstar to learn, adapt and profit from this revolution. Take your basic South African manufacturer – in the auto sector, steel, clothing and textiles, electronics, or even making floor tiles or cement. What all these manufacturing processes have in common is the consumption of energy, and with Eskom prices on the rise, there is more and more financial pressure on Pieter de Villiers our manufacturing sector to trim energy use and become more energy efficient. Meanwhile, we see the local manufacturing sector has been in steady decline for a decade or more, due to cheaper imports from China and other fast-developing competitors in Asia and elsewhere.

Using modern sensor technologies, robotics and AI algorithms, a manufacturer could reduce a recurrent flaw in their manufacturing plant, eliminating the need to rework faulty products.

It is surely the case that local manufacturing can, in part, improve its competitiveness by looking at 4IR technologies such as AI, real-time data analytics, robotics and so forth. Understanding and implementing these technologies can reduce energy and manufacturing costs while improving quality and competitiveness. Using modern sensor technologies, robotics and AI algorithms, a manufacturer could reduce a recurrent flaw in their manufacturing plant, eliminating the need to rework faulty products. If production defects are picked up early in the process, this can improve quality and eliminate costly customer returns, not to mention excessive rejection at the end of the production line, which reduces yield and increases the need for reworking. Get it right by using technology to iron out the faults and you have a faster, more reliable and ultimately cheaper plant. Technology can bring down your energy bills, boost your productivity, and make you more competitive at home and abroad.

Cutting more than just the energy bill The potential varies dramatically from sector to sector, but energy costs typically account for a significant portion of the overall operating costs in most factories and plants. Therefore, improving energy efficiency goes right to the bottom line of a company. There are examples where a few improvements, greater awareness of what has been done wrong and – crucially – the use of high tech to iron out the faults can lead to savings of 15 per cent or more in energy bills. This is also good for the planet and may help you to reduce your liability for the carbon tax, the stick being used by our government to put pressure on companies to adopt cleaner and greener modes of production. Go further into the possibilities of 4IR technologies and not only might you trim your carbon tax liability, but there is also a chance of tapping into the government’s R&D and energy efficiency incentives to offset the costs of introducing these technologies into your production process. You will not be swimming against the tide but will be surfing the green wave. Ultimately, 4IR will lead to betterquality products, increased production and reduced energy consumption. The challenge for South African manufacturers is to spot the potential, stay ahead of the trends and adopt the right technology at the right time.

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MARK FREEMAN of Schneider Electric South Africa considers the benefits of leveraging new technologies for sustainability

he building industry is experiencing unprecedented disruption due to a variety of factors including the pandemic, ongoing technological transformation, market pressures, and evolving occupant expectations and needs. However, discussions continue to focus on what the building of tomorrow looks like, instead of examining how current innovations such as the Internet of Things and next-generation building management systems (BMS) can create sustainable, customer-centric spaces within existing structures.

BMS at work South African businesses and individuals continue to be affected by the country’s volatile grid and power provision, and tertiary institutions are no exception. To this end, a local university, faced with the realities of load shedding and its impact on the quality of education, decided to negotiate with the municipality to find a mutually beneficial solution. The municipality’s prerequisite: the university had to guarantee it could drastically reduce its power consumption with two hours’ notice for the duration of the load shedding period. The university set to work and implemented a sophisticated BMS system that could assess its power consumption. The system found that by rotating the heating, ventilation and air-conditioning (HVAC) system throughout the campus, the university would be able to meet the municipality’s requirements. Utilising smart sensor technology, the BMS system determined that by switching off the HVAC systems in allocated areas for 45 minutes at a time, it would be able to drastically cut down on power usage. This 45-minute window is short enough not to drastically impact the space temperature, which means that by the time students and lecturers start feeling some discomfort, the HVAC system is switched on again. In another case, an office block in Umhlanga decided to find a solution to its exorbitant power consumption. A major contributor to the office block’s energy usage was its HVAC system, which had to ensure the building stayed cool and comfortable during the hot and humid summer months. Steps had already been taken to support the HVAC systems by making ice at nights and running it through an ice plant system. Unfortunately, due to the heat from the early morning sunrise over the ocean, the ice supply was depleted by midday and the HVAC system had to take over during the peak hours of the day.

Optimising energy usage according to guest occupancy in this way has led to almost 40 per cent savings in energy bills in hotels throughout Africa. 20

Leveraging a BMS system, the office block ascertained that by utilising the HVAC strategically, it could save on costs and energy. It was found that by switching on the HVAC system earlier (between 4am and 5am) and gradually cooling the office block during non-peak times, the ice plant could be used during peak daytime, thus saving on energy and costs.

Building automation The above-mentioned examples clearly make a case for the importance of BMS in saving money and energy. Taking this one step further, one can look at the automation of these systems to optimise buildings. For example, integrated presence detectors can detect whether a room is in use and adjust the heat, ventilation, and lights accordingly. Integrating HVAC, lighting and booking systems also offers opportunities to reduce energy use. It can be as simple as automatically warming conference rooms 10 minutes before meetings, thus extending the lifespan of equipment and cutting energy usage. Furthermore, the newest guest room management systems seamlessly integrate with property management systems (PMS) and BMS. When a guest arrives, front desk personnel can remotely take the room from energy-saving mode to the guest’s preferred temperature. Through an integrated and automated BMS and PMS system, staff have access to the do-not-disturb and make-up-room status of rooms. The lights are automatically switched on when housekeeping enters the room to clean, and switched back to energy-saving mode when they leave. Similarly, the HVAC and lights will switch on or off when guests enter or leave rooms. Optimising energy usage according to guest occupancy in this way has led to almost 40 per cent savings in energy bills in hotels throughout Africa. The importance of leveraging the latest digital and automation technologies should be clear from the above. It is about helping owners and managers get the most out of current resources and systems, and assisting them to future-proof properties with digitally connected, open solutions that are adaptable for future needs.

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Establishing the sustainable buildings of the present

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REIMAGINING SUSTAINABLE ENERGY SOLUTIONS FOR AFRICA Looking at the African continent where millions of people have no access to electricity, makes one think that we need big thinking to change the trajectory of energy transformation … but what if it is about sweating the small stuff? By BHAVTIK VALLABHJEE, head: power, utilities and infrastructure, Absa CIB

any African countries find themselves serviced by – and ultimately dependent on – single, large power utilities that include power generation, transmission and distribution. In South Africa, despite having one of the most successful Independent Power Producer Procurement (IPPP) programmes in emerging markets today and a growing renewable energy sector, the country remains structurally dependent on Eskom and its coal-fired power plants, which still make up 91 per cent of all power generated in the country. This is according to Eskom and the Department of Mineral Resources and Energy. The mostly ageing power stations feed into old transmission and distribution networks, resulting in large-scale losses that the economy can ill afford. If the most advanced in Africa is being hamstrung by these challenges, it highlights the broader issues for the rest of Africa. Considering that economic activity on the continent is expected to quadruple by 2040, according to various industry resources and confirmed through Absa’s research, access to electricity is expected to only improve by 50 per cent over the same period, it is clear we are facing a very real challenge. Looking towards transformative projects to drive electrification, we must combine big and small thinking.

BIG SOLUTIONS, SMALL SHORT-TERM IMPACT Wearing an investment banking hat, there is no question that the continent should be excited by the pronouncements from the recent United Nations Climate Change Conference (COP 26). For example, the $8.5bn that South

Africa has been promised by Germany, the United Kingdom, the United States and the European Union to help the country transition into clean energy. While financial solutions such as “green” and “sustainability” bonds will provide capital in the long run, there is an underlying sense of “greenwashing” regarding the environmentally responsible claims around certain products and services. It doesn’t matter how many billions are being committed to your country by 2030, if you can’t switch on the power and run your business today, it is hard to get behind the solution.

SMALL SOLUTIONS, BIG SHORT-TERM IMPACT It is general knowledge that many African governments still favour centralised planning models when it comes to key infrastructure such as energy. If one considers that on average it takes between 8 and 10 years to bring a large-scale industrial project online in Africa, the shift from talk to action is slow, particularly in situations where government wants to be prescriptive around both the policy and the implementation of the projects. The continent simply cannot wait another decade to meet electrification goals. A focus on shorter-term tactical solutions such as smart-metering solutions may, ultimately, deliver better results. In June 2021, President Cyril Ramaphosa announced that businesses could now generate up to 100MW of power without having to secure a licence from the government. This policy shift allowed the private sector to green-light investments that would allow them to keep their business operations running and free up capacity on the grid.

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Bhavtik Vallabhjee

Each time one of these smaller projects is brought online, it removes strain from the centralised grid and ensures that businesses can continue to generate tax revenue for the government, which, in turn, can reinvest in longer-dated projects. Smart metering is receiving a lot of attention currently and is something that can be rolled out without major government policy intervention. It solves the problem of having many centralised energy models, where a single party is responsible for generation, transmission and distribution, resulting in difficulty making informed decisions around supply and demand. While it is still strategically fragmented, the roll out of smart-metering solutions has the potential to optimise under-pressure power grids. This will not only improve the understanding of the demand-side of the equation, but also assist countries with revenue collection models – again broadening the tax base while bringing electrification projects online.

PURPOSEFUL STEPS TRANSLATE INTO PROGRESS The African energy sector represents one of the most attractive and transformative investment opportunities in the world currently. Whether it is gas deposits in Angola or Mozambique or helium in the Free State, the potential is massive. By making use of these natural resources we can improve access to electricity, create jobs and drive economic growth on multiple fronts. The trick is ensuring that we don’t become paralysed by seeking out big-ticket solutions and ignoring the short-term wins that help to build momentum.

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ELECTRIFICATION OFFERS BIG BUSINESS FOR SMES Small and medium-sized enterprises can benefit from the opportunities offered by a changing energy market, writes DAVID MPARUTSA, head: enterprise and supplier development, Absa CIB

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he development of a stable, reliable and sustainable electricity grid is fundamental to the African growth story, but while large-scale infrastructure projects are critical, we must not ignore the opportunities available to small and medium-sized enterprises (SMEs). According to the African Development Bank, 640 million Africans have no access to electricity and across sub-Saharan Africa, excluding South Africa, per capita consumption is just 180kWh compared to 1 3000 kWh per capita in the US and 6 500 kWh in Europe. While the problem is clear, it is very difficult for a small business to see an opportunity unless the rest of the ecosystem is aligned. What is their motivation to invest if regulation, access to capital and a lack of political will are going to hold back investment in the sector? I believe that all SMEs currently operating or aspiring to operate in the energy sector should familiarise themselves with UN Sustainable Development Goal 7 (SDG7): Ensuring access to affordable, reliable, sustainable and modern energy. When the goal was announced, the core issue was that three billion people rely on wood, coal, charcoal or animal waste for cooking and heating while indoor air pollution accounted for over four million deaths per year. The current energy mix accounts for around 60 per cent of total greenhouse gas emissions, despite the adoption of renewable energy solutions across the globe. (Source UN SDGs https://sdgs.un.org) The starting point for tackling this challenge is ensuring that there is sufficient generation capacity for the grid. This has seen a number of large infrastructure projects being commissioned. While generation is

important, we must not lose sight of the two other elements in the electrification journey: distribution and transmission. When looking at the African continent, we need to remember that many countries operate a centralised parastatal-controlled power grid responsible for all three of these elements. These models are not fit-for-purpose in the changing energy ecosystem – particularly after the COVID-19 pandemic has put enormous financial pressure on state-owned enterprises.

ALTERNATIVE SOLUTIONS Uganda has understood that its electrification challenges are multifaceted – what works in the city will not be as effective in rural communities. This has led to the establishment of the Rural Electrification Agency whose mandate is to find innovative ways to connect rural households to safe electricity solutions. A simple example here is that “one out of every five Ugandan households can’t afford to wire their in-house electricity safely”, says the Rural Electrification Agency. Subsidised training and deployment of electricians to support this mean that the cost of electrification for consumers drops while creating a safer electrification network. If one considers that only 26 per cent of rural Ugandan households are to be connected by 2022, this represents a clear market opportunity. In a similar vein, smart-metering solutions are becoming an increasingly popular tool for managing supply and demand as previously unconnected communities are being added to centralised grids. The installation and maintenance of these solutions present an ideal opportunity for small businesses to carve out their niche. Off-grid solar and rooftop installations are other perfect examples of where SMEs can benefit. A

OFF-GRID SOLAR AND ROOFTOP INSTALLATIONS ARE OTHER PERFECT EXAMPLES OF WHERE SMES CAN BENEFIT. THE SOUTH AFRICAN ROOFTOP SOLAR MARKET IS EXPECTED TO GROW BY 9.5 PER CENT PER ANNUM UNTIL 2026

David Mparutsa

Mordor report on the South African rooftop solar market states that the market is expected to grow by 9.5 per cent per annum until 2026, while UK-based consulting firm Kleos Advisory believes that the African off-grid solar market could be a $24bn per year market. Innovators like Azuri Technologies are shaking up the African continent with “Pay-As-You-Go” solar solutions that allow you to create further off-grid solutions that are now rolled out in over 12 countries in Africa. Microgrids and battery storage solutions are also becoming more popular as the technology advances. Founded in 2011, PowerGen is a Kenya-founded business with a growing presence in Africa. It has developed a variety of microgrid solutions that connect over 120 communities daily with solutions that are “digitised, decentralised and “decarbonised”. Businesses that can deliver solutions of this nature will perfectly align with SDG7 and be a catalyst for small businesses, creating a win-win solution for the ecosystem. Africa is tired of being left in the dark and Absa looks forward to working with innovators in the energy sector that have identified solutions to change the trajectory of the continent.

Scan this QR code to go directly to the company website www.cib.absa.africa For more information: www.cib.absa.africa

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POWER SECTOR POLICY CHANGES WILL UNLOCK SIGNIFICANT VALUE The announcement to allow businesses to produce up to 100MW of power without a generation licence will unlock a new era in electricity generation in the country, write THEUNS EHLERS, head: resource and project finance, Absa CIB and BHAVTIK VALLABHJEE, head: power, utilities and infrastructure, Absa CIB

he government’s announcement in June 2021 was a gamechanger and will enable gradual diversification away from reliance on Eskom for power generation. Our bank expects to fund several exciting energy projects over the next 24 months. We anticipate the emergence of several trends as funding for generation projects is unlocked.

NEW GENERATION PARTNERSHIPS There are typically two models on the table for funding energy projects. The first, less common, structure is where the business uses its balance sheet to procure the required equipment to develop and operate a project. In this model, the business retains the risks associated with constructing and operating the power plant. Debt financing is typically limited to corporate-style covenants with shorter funding tenors compared to the Independent Power Producer (IPP) model. Regardless of plant performance, the balance sheet strength of the business is looked to for debt service. The second and more common model entails a business entering into a long-term Power Purchase Agreement (PPA) with an IPP. This allows the respective businesses to focus on their core competencies. An interesting emerging subtrend is that organisations are seeking out IPPs with strong black economic empowerment credentials. We believe that, through a combination of financing from banks and financing institutions plus incentives from the Department of Trade, Industry and Competition, we could see many new entrants in the energy space.

QUICKER APPROVAL OF PROJECT FUNDING A longstanding feature related to the IPP programme is that national government has been standing behind the offtake and

termination payments due by Eskom under the PPA – a requirement for investors and financiers to achieve bankability. New captive power projects (decentralised generation) will be driven by private sector agreements without government support, hence reducing the level of contingent liabilities in National Treasury’s books. Banks will evaluate the credit quality of the private sector offtaker in their assessment, but, in most cases, banks are prepared to take a long-term view on the financing as the projects are value-enhancing and typically result in cost savings compared to current electricity tariffs of power procured from Eskom.

BUSINESSES AND CONSUMERS CAN PLAN South African electricity consumers have been trapped in a cycle of double-digit tariff increases over the past decade with limited certainty around future increases. While wholesale consumers of power such as mines procured power on a “preferential tariff” basis (megaflex tariff), a benefit of captive power solutions is that tariffs are typically linked to CPI, which provides more certainty and can assist wholesale consumers in long-term planning. If the historical trend of double-digit electricity price increases continues, the captive power projects should result in very significant savings on companies’ electricity bills. Procuring power from renewable energy is already at “grid parity” and very competitive. Even if hybrid power plants are developed, the benefit of favourable tariffs compared to the upward trajectory of the Eskom tariff path makes captive power a very attractive proposition.

THE CHANGING ELECTRICITY MODEL GLOBALLY South Africa’s electricity grid was designed for centralised electricity generation. Most of

Theuns Ehlers

our (coal) power plants are situated in the coalbelts of Limpopo and Mpumalanga. With the advent of renewable energy, this has changed. Decentralised power is now being generated by plants at the load centres where they are required. The roll out of captive power at scale, requires clarity around the wheeling arrangements and the cost thereof. Self-generation and “wheeling outside the fence” must entail a wheeling charge. Although South Africa’s Electricity Act permits wheeling, the exact cost is not widely clear. In the case of Germany, “Netmetering” is permitted. Individual homes can essentially be generators of power for self-consumption. Excess capacity can be sold back into the grid. This does not occur in South Africa, but is another initiative that could alleviate the pressure on Eskom’s grid.

MOMENTUM IS A POWERFUL FORCE For the better part of two decades, the South African economy has been stuck in a low-growth environment, much of which has been blamed on restrictive economic policy by government, including lack of certainty around power supply. This policy change could translate into 5GW of additional renewable energy capacity – almost the entire renewable energy generation capacity added to the grid over the past decade. This is likely to drive construction activity, job creation and general economic confidence across the broader economy. Big step-changes like this can be a catalyst for additional foreign direct investment and help the country regain its global competitiveness.

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OIL AND GAS SECTOR PROJECTS MUST BENEFIT SOCIETY The oil and gas sectors are critical for the social part of the ESG equation, writes CAMILLO ATAMPUGRE, director: resources and energy, Absa Securities United Kingdom

SG investing has become incredibly topical with activist investors over the last couple of years, but while there is much focus on the “E” and “G” elements, there is a poor understanding of the “S” element, particularly how it pertains to the African continent. ESG investing looks at three elements: environmental (E), social (S) and governance (G). Stakeholders are expected to look at both the financial and nonfinancial metrics on a transaction. This creates some interesting dynamics, particularly when not all three elements align – currently a key discussion for the resource sector in Africa.

ENVIRONMENTAL AND GOVERNANCE ELEMENTS

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The energy sectors – specifically oil, gas and coal – have their detractors when measured against the environmental element. Oil and gas will remain a key component in the energy mix for the African continent for the next 5 to 10 years at least. One has only to look at the oil price, currently trading at north of $70 per barrel, to understand that while alternative energy is a growing option, it is a commodity that is here to stay in the near term. We need to appreciate this sector’s importance to Africa. Currently, it accounts for roughly 20 per cent of the continent’s gross domestic product (GDP), according to a report issued by the African Development Bank’s African Natural Resources Centre. According to the World Bank, in countries like Angola and Nigeria, it accounts for 94 per cent and 96 per cent of export revenues respectively. In places like Angola and Nigeria, it accounts for nearly 70 per cent of the hard currency these countries generate and nearly 60 per cent of government tax revenue.

While Nigeria, Mozambique and Angola are often identified as the key oil and gas players on the continent, there have also been developments in Kenya, Uganda, Ethiopia, Madagascar and Tanzania. As the Africa trade bloc develops and integrates, further investment through the value chains will ensure. In terms of supply, Africa’s share of global crude production has trended between 9 and 12 per cent over the last decade. This has attracted significant foreign investment that translates into jobs, development of capital markets, and other downstream benefits. Recognising the strategic role of the sector in their economies, Angola and Nigeria have taken steps to improve governance elements. Angola’s president has placed significant focus on cleaning up the sector’s image and courting foreign investors, while Nigeria recently passed the Petroleum Industry Bill aimed at making it easier to invest in Nigerian oil and gas operators.

tHE SOCIAL SIDE While the sector still has work to do on cleaning up its image, we must remember that many of these projects have a 20 to 30 year lifespan and project stakeholders all understand that if they can’t get social and community buy-in, their projects won’t get off the ground. In more extreme cases, like Nigeria and Mozambique, infrastructure can become a target of social unrest and create untenable security situations that add to the cost of the projects. Much like the mining sector in South Africa, initiativies are being developed to ensure that the benefits of the oil and gas projects are enjoyed by the impacted communities. Apart from job creation and hard currency investment into communities, there are further downstream benefits. African governments

RATHER THAN FOCUSING ON HOW THE SECTOR IS EXTRACTING RESOURCES FROM EMERGING MARKETS, A DEEP DIVE INTO THE ECONOMIC BENEFITS IT PRESENTS FOR AFRICA COULD PAINT A VERY DIFFERENT PICTURE.

Camilllo Atampugre

depend on the revenues from the sector to reposition their economies for sustainability and a just transition. For instance, Shell has played a pivotal role in investing in healthcare infrastructure to help the fight against diseases such as Ebola and HIV. Similarly, dual-listed oil and gas player Oando has trained over 2 800 teachers and financially supported 88 schools via its Oando Foundation. For ESG and activist investors, the equation is simple: flick a switch and renewable and clean energy sources will be able to replace traditional energy sources. For Africa, the transition will occur over time with the focus on alleviating poverty and access to affordable energy. However, a more nuanced discussion is needed. Rather than focusing on how the sector is extracting resources from emerging markets, a deep dive into the economic benefits it presents for Africa could paint a very different picture. As an investment bank specialising in funding oil and gas projects in Africa and with a deep understanding of the continent, we look forward to working on projects that tick all three ESG elements.

Scan this QR code to go directly to the company website www.cib.absa.africa For more information: www.cib.absa.africa

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DID YOU KNOW?

Renewable energy prospects for 2022 GARETH GRIFFITHS takes a look at the status of the local renewable energy market in 2022, and what the future may hold

ith the exception of private or embedded energy generation of power, our future renewable energy supply still forms part of the government’s Integrated Resource Plan (IRP – currently 2019) and its implementation roll-out, the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). Despite the support from influential sources for coal-based power to remain the country’s major source of energy, the renewables industry is upbeat about the tremendous opportunity presented by non-fossil fuel-based options, including the impact they will have on job creation and our economy, as well as our future economic growth. Since the IRP was originally published in 2010, the cost of fossil fuel utilisation has risen while that of renewables has dropped dramatically. In fact, the proponents of solar power argue that photovoltaic (PV) energy is currently the cheapest technology in the world for power generation and that the early challenges of intermittency (when the sun isn’t shining) have largely been solved due to the ubiquitous battery power storage options now available on the market at a viable price. Thus some experts express the view that the latest IRP 2019 is already outdated. South African Photovoltaic Industry Association (SAPVIA) chairperson Wido Schnabel believes that the renewables industry has the potential to attract investment back into South Africa, because it delivers results quickly. In contrast, lack of reliable grid power and consequent load shedding have been major disincentives to investors. A recent study by SAPVIA, in conjunction with the Council for

Scientific and Industrial Research, found that renewable energy had far greater job creation potential than coal-fired power generation.

Stop-start However, Schnabel feels the nature of the Integrated Resources Plan 2019 roll-out, which defines what technology is to be used and when it will be added to the grid, is problematic for the solar industry and a disincentive for industry at large. “You can’t have a roll-out with gaps in it, as we have had with the successive stages of the REIPPPP bid windows. Hence, you can’t have people here to work on a project (build phase) for a year and then for a two-year gap have nothing to do (while waiting for the next stage). It also does not help get further industrialisation going to support local content programmes, a requirement of REIPPPP round five and currently a big stumbling block.” Schnabel says that following REIPPPP round three in 2014, it took four years for the next phase to be implemented. “During those four years, all investment in industrialisation to support and supply this industry shut down, including plant and factory investments. This caused investors to lose trust in the government’s programme. So the government is not procuring renewables fast enough nor removing the red tape for the private sector to invest in infrastructure.” The risk mitigation projects currently envisaged by the government should also be seen as temporary, argues Schnabel. Of concern has been the move to contract powerships for up to 20 years. This long-term action greatly exposes the country to both the inevitable gas price escalation as well as the risk of the declining rand. Schnabel believes

“You can’t have a roll-out with gaps in it, as we have had with the successive stages of the REIPPPP bid windows.” – Wido Schnabel 26

• The South African average for quality sunlight is in the region of 1 800-2 500 hours per year. Upington is well above the average, with 3 700 hours per year. Many leading European countries get less than 1 000 hours per year. (Source: energy.gov.za) • The cheapest solar generation cost in South Africa’s most recent REIPPPP round five bid was just 37.5c/kWh. Wind power was even cheaper, at 34.4c/kWh. (Source: SAPVIA, SAWEA) • The full 25 REIPPPP bid window five renewable independent power projects (IPPs) represent more than R50-billion of investment for the South African economy and should deliver almost 14 000 job opportunities. (Source: Gwede Mantashe at the launch of REIPPPP bid window five) • A total of 12 of these IPPs are onshore wind projects and are expected to add an additional installed capacity of 1.6GW. (Source: SAWEA) • The amount of electricity already produced by privately owned rooftop level installations could be as high as 2.6GW. (Source: SAPVIA)

that renewables in general have far greater potential to fill the emergency power gap and will afford the country a genuine investment, not just an expense.

The good news Encouragingly, however, the industry’s research and calculations show that private investment into embedded solar PV infrastructure has rendered 2.5-2.6GW of renewable energy, most of which has been added to the grid. “This represents a large number of ‘electrons’ added into the grid, at no cost to government or risk to the national treasury,” says Schnabel. “This also helps diminish the impact of load shedding on the country.” In 2021, President Ramaphosa made a bold move in lifting the licensing requirement from 1MW to 100MW for embedded (private) installations. “It is a certainty that the private sector will rise to this challenge and that investment will occur in the private embedded power facilities,” believes Schnabel. “We need more bold steps in this regard to get us out of our energy crisis. We need to see an IRP with 4-6GW of solar deployed every year, along with wind power of 3GW and energy storage rated at 2GW hours for four hours (typically battery) per day for at least 10 years. To do this, South Africa needs to be very aggressive and fast-track these programmes.”

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OU T L OOK

Wind in the sails Meanwhile, on the wind power generation side, the South African Wind Energy Association (SAWEA) chairperson Mercia Grimbeek confirms that to date in South Africa, 36 wind independent power producers have been procured. Most have reached commercial operations and now contribute 3.4GW capacity to the national power system. Grimbeek agrees that to enable economic recovery, the country needs to overcome the current energy deficit to keep the wheels of industry turning and meet the needs of a growing population. “To achieve this, key elements require alignment, including supportive policy and political will, rolling procurement, the ability to drive the local manufacturing sector in addition to other localisation requirements, investor confidence and access to green finance, and a sector transformation framework. “Lifting the self-generation threshold to 100MW without licensing – our first free market in this space – opens up the demand- and supply-driven market to the private sector,” adds Grimbeek.

“This will drive investment in the energy generation sector and support economic growth, while diversifying generation away from a single risk entity. The industry could easily enter into power purchase agreements with private entities, including intensive energy users that form a significant portion of our GDP, delivering projects quickly.” SAWEA board member and managing director of Globeleq South Africa Dhesen Moodley agrees with Grimbeek. “A clear plan [from government] to unlock grid constraints will support competitive permitted projects winning in upcoming rounds. This will be key to maintaining tariffs close to those recently achieved, despite the pandemic having increased transport and materials costs, and may endure for a few years. A fast-tracked public-private partnership could build out the transmission network for handover to a new-look grid operator without disrupting the rolling procurement proposed in the IRP. The foundation work has been completed in the Renewable Energy Development Zones. Developing local expertise to optimise wind farm availability, rather than relying on international options, is key.”

IMAGES: ISTOCKPHOTO.COM, SUPPLIED, CITY OF CAPE TOWN, HOTEL VERDE

“Lifting the self-generation threshold to 100MW without licensing – our first free market in this space – opens up the demand- and supply-driven market to the private sector.” – Mercia Grimbeek Hydroelectric generation

Geothermal power – the missing link?

Strictly speaking, utility-scale hydroelectric power does not exist in South Africa due to our scarce inland water resources, but Eskom has four grid-connected hydro-peaking plants. These do not contribute net power to the grid, since water has to be pumped back to upper reservoirs when the demand grid power is low, thereby utilising power during off-peak periods. The most successful hydro-peaking plants is the City of Cape Town’s Steenbras power station, which was commissioned in 1979 and generates up to 180kW of power via four turbines. It is used to offset the demand for electricity during peak times and has been invaluable during load shedding, when the city is able to offset the declared level of load shedding by one unit during daytime.

Another natural resource worth noting lies under the very ground we live on. Geothermal energy is a type of renewable energy harvested from below the earth’s crust. This can be used in the production of steam, which can drive a turbine to produce electricity. Although abundant in places such as Iceland and parts of California, geothermal energy is not a large-scale power option for South Africa. However, this resource is present in another form, which allows it to be harvested and used to produce heat or cold in place of grid

Geothermal field manifolds

power, suggests André Harms, an experienced sustainability engineer and the founder of Ecolution Consulting. “The concept works via two main components: the heat pumps and the geo-exchange field, through which an exchange fluid such as water circulates,” explains Harms. “The heat pumps work by extracting thermal energy from the cooling cycle, which happens inside the geothermal field. This makes it cold enough to be used for space cooling instead of air conditioning. The energy taken up is transferred back to the geothermal field and cooled. Conversely, when the geothermal field is warmer than the surface temperature, a heating cycle occurs where the exchange fluid becomes warmer and is used for space heating (in winter) and/or hot water production. It’s like a giant-scale refrigerator that moves the energy out of the fridge compartment to the radiator coils at the back.” One of Harms’ groundbreaking and award-winning projects, Hotel Verde at Cape Town Airport, has a geo-exchange system. “A geo-exchange system such as the one at the Hotel Verde, bluntly put, offloads thermal energy into the ground in summer and extracts thermal energy from the ground in winter,” he explains. “Hotel Verde has 100 boreholes in the ground, each about 65m deep, with each containing twin water-filled tubes connected by a U-bend at the bottom. All the horizontally connected pipework and routing goes back to the plant room (where the heat pumps are located) and there is more than 13km of pipework in the earth available to exchange thermal energy with the ground.” Harms says the system produces heating, cooling and hot water extremely efficiently and cost effectively compared with the total system electrical energy input. “It is suited to a greater scale, where it might even be better because the demand of more buildings for heat and/or cooling can be balanced and more efficiently met.”

“A fast-tracked public-private partnership could build out the transmission network for handover to a new-look grid operator without disrupting the rolling procurement proposed in the IRP.” – Dhesen Moodley ENERGY

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A DV ER T ORI A L AT L A N T IS SPECI A L ECONOMIC ZONE COMPA N Y

OPPORTUNITIES APLENTY THROUGH GREEN ECONOMY INNOVATION In what promises to be a gamechanger for the Western Cape’s economy, the Atlantis Special Economic Zone Company for green technologies will become a focal point for investment with local businesses and residents benefitting from the initiative

tlantis in the Western Cape has been prioritised as a Greentech hub by all three tiers of government. The scheduling of the Atlantis Special Economic Zone (SEZ) state-owned company Limited as a provincial business enterprise was approved by National Treasury on 15 December 2021. The Atlantis Special Economic Zone Company (ASEZCo) is driving sustainable development and job creation in the area by harnessing the opportunities in a growing green economy. The ASEZCo, with its Greentech theme, is a unique SEZ that speaks to the needs of investors in Greentech. It is a key element in the Western Cape Government Economic Recovery Plan and the scheduling of the company as a provincial business enterprise bodes very well for its role as a gamechanger in the renewable energy and green technology sectors of the Western Cape’s economy. The company seeks to attract Greentech investors that embody the elements and ethos of green technology manufacturing and resource-efficient cleaner production. It is being positioned as the ideal destination for sustainable manufacturing for manufacturers wanting to supply their technologies to

Independent Power Producers bidding on the national government renewable energy programme, the REIPPPP. Partnerships with InvestSA, Wesgro, Greencape and the City of Cape Town’s Enterprise and Investment Unit create an environment of rapid facilitation and access to opportunities –considered to be best practice globally. The support received can be leveraged to make investors’ businesses more globally competitive. Opportunities to establish profitable trade relationships through Wesgro’s Trade facilitation unit and GreenCape’s membership to the International Cleantech Network (ICN) abound. Both these mechanisms provide immediate access to international markets, helping investors to grow their order book significantly and mitigate against supplying to a single market.

INVESTMENT INCENTIVES The City of Cape Town’s Enterprise and Investment Unit has a range of incentives – both financial and nonfinancial – for companies keen to invest in Atlantis and other industrial areas in Cape Town. Nonfinancial incentives include single-point investment facilitation, including

the Atlantis Investment Facilitation Office, and development application fast-tracking for land use applications, building plan submissions, and occupancy certificates. Financial incentives include development application fee exemptions for land-use applications and building plan submissions, a special electricity incentive for medium and large power users, and development contribution deferral/debt write-off (capped at R1m per investment). Atlantis is the ideal location from where to compete in Africa’s green technology markets. It is located within a transport corridor with easy access to two ports. It has a large manufacturing skills base, which continues to grow with the support of local and provincial government, and operational costs, especially for manufacturing businesses, are low. In addition, the City of Cape Town continues to roll out modern infrastructure throughout the area. The ASEZCo offers industrial-zoned land, strong support from government, and mutually beneficial business relationships where investors work closely with the locals and help uplift the community – this lays a solid foundation for sustainable productivity and success.

LIVING LAB The ASEZCo has positioned itself as a world-class eco-industrial park and Living Lab. The Living Lab is an exciting concept that will showcase how green and sustainable industrial development is possible.

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AT L A N T IS SPECI A L ECONOMIC ZONE COMPA N Y A DV ER T ORI A L

Green technology manufacturing is a priority of the ASEZ investment strategy.

The Living Lab’ five goals are: • Net-zero carbon, which means using as much renewable energy as possible, for example, relying on solar panels and biogas for power. • Net-zero water, using less water in the zone than falls onto the land each year. This can be achieved through water retention ponds and the re-use of rainwater in factories and for landscaping. • Net-zero waste to landfill. This involves working with industrialists to find creative ways of turning waste into resources for production processes. • Net-zero loss in ecological value. This means working with nature and includes activities such as removing alien plant species from the SEZ land, relocating existing threatened species, and, once the factories are built, restoring as much of the ecology as possible in an industrial area. • Maximising social inclusion, which means working closely with the community in everything, be it ensuring access to jobs during construction, training in new skills, or helping support new businesses and small, micro and medium enterprises. A dedicated team is doing everything possible to ensure that the Atlantis SEZ positively impacts the community.

Government working with business to unlock barriers and fast-track their investments.

ATLANTIS IS THE IDEAL LOCATION FROM WHERE TO COMPETE IN AFRICA’S GREEN TECHNOLOGY MARKETS. IT IS LOCATED WITHIN A TRANSPORT CORRIDOR WITH EASY ACCESS TO TWO PORTS. DRIVING GREENTECH DEVELOPMENT Green skills development and growing technical capabilities within the Atlantis community are part of the ASEZCo’s strategic objectives. This aligns with the legislative requirement of the Special Economic Zones Act to grow the regional economy and drive socioeconomic impact. And now, the provincial government hopes the special economic zone will boost the fortunes of the renewable energy sector in the province, contributing significantly to its economic recovery. Since the gazetting of the ASEZ as a government business enterprise, the company can now enter into commercial arrangements with private sector businesses looking to benefit from the growing green

technology sector globally. Essentially, this means that the ASEZCo can enter into lease agreements and fully transact with investors, tenants, and partners for the benefit of the region around Atlantis. This allows the ASEZCo to leverage national funding to provide world-class infrastructure to investors and partners looking to manufacture their green technologies in the most efficient and environmentally friendly manner. With the provision of renewable energy, fibre internet connectivity and recycled water, the resource-efficient way that green technology manufacturers can manufacture their goods adds additional value to their products at the global level. Driving growth through green economy innovation and sustainable job opportunities remains at the heart of what the Atlantis SEZ does. In addition to this, the Atlantis SEZ can offer investors tax relief and allowances, employment tax incentives, fast-tracked development approvals, fee exemptions and subsidies, as well as favourable lease rates and terms.

special economic zone

➔ Scan this QR code to go directly to the Atlantis Special Economic Zone Company website.

IMAGES: SUPPLIED

For more information:

Land available for investors to locate their manufacturing facilities in a globally competitive destination, the Atlantis Special Economic Zone.

Jarrod Lyons 087 183 7000 jarrod@atlantissez.co.za www.atlantissez.com

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T HOUGH T L E A DERSHIP

VIREN SOOKHUN, managing director of Oxyon, believes sustainable energy requires sustainable skills

Upskilling critical to alternate

outh Africa is poised on the brink of an energy revolution, as we make the shift from fossil fuels toward more sustainable solutions – a move that involves highly specialised skill sets within the engineering sector. This is particularly true when it comes to artisan trades such as skilled welders, fitters and turners, coil winders, riggers and boilermakers. There are also new, in-demand skills that need to come into play with renewable energy supply. To deliver sustainable solutions and bring the country in line with the Paris Agreement and the 2021 United Nations Climate Change Conference, it is imperative to upskill resources, which makes having the right employment partner critical as we move into a new energy future.

New energy, new skill sets A number of wind and solar farms have been deployed in Viren Sookhun remote areas of South Africa. However, as one of the world’s top coal producers and consumers, there is a lot of work to be done to transition toward more sustainable solutions, and there are many projects in the pipeline. For example, liquefied natural gas is seen as a more eco-friendly alternative to coal, but it needs to be extracted using offshore rigs, pumped onshore and stored in highly specialised storage facilities. There is also a move towards the manufacture of green hydrogen gas using either solar or wind power to generate it, which again requires

specialised artisans to construct the necessary facilities. The solar and wind farms that are part of the independent power producer (IPP) bid windows will also require skilled artisans for construction and maintenance.

Upskilling is key All of these skills are in short supply and many are also relatively new, such as those required by wind turbine and solar photovoltaic technicians. The people with the skills are simply not available, and if they are, they are not in the typically remote outlying areas where alternative energy projects are underway or due to begin. In addition, as more and more jobs on the lower end of the skill spectrum become automated, it is becoming increasingly important to upskill human resources with appropriate training to enable them to continue to be productive in future. As IPP bid window five begins, this skills shortage will be felt acutely unless training takes place to upskill artisans in the new skills required. For example, traditional riggers can be trained to become wind turbine technicians, enabling them to assist on these renewable energy projects and others.

Employment partnerships can help With alternative energy projects frequently being located in remote areas of the country due to the nature of the energy production facilities, the skills required are often not available close to the site. Thus they must be sourced elsewhere and attracted to these locations.

A further challenge for this sector is that jobs are typically project-based, meaning they involve fixed-term contracts. Skilled personnel will be in demand, but only if they can be matched to the positions that are available as they are required. Once projects are over, these artisans may need to find alternative employment, which means they also need a variety of soft skills to make them more employable in other sectors. The right employment partner can be an invaluable asset when it comes to handling these challenges. A trusted partner with a national footprint and offices localised to all cities will have a huge pool of skills to draw from, as well as the ability to upskill as required or even source skills internationally if this becomes necessary. A reputable and skilled employment partner will also have an understanding of the local communities, and the availability of skills and general labour. This is alongside relationships with the relevant ward councillors and trade unions, and knowledge of bargaining councils, to smooth the process. They will also be able to handle a variety of other admin-intensive tasks, including onboarding, human resources, industrial relations, benefit structures, entry and exit medicals, and more. The right training partner can also provide community engagement to make a positive contribution and uplift surrounding communities. The ultimate goal should be to deliver sustainability as a whole, to improve the country and the economy.

Traditional riggers can be trained to become wind turbine technicians, enabling them to assist on these renewable energy projects and others.

IMAGES: SUPPLIED, ISTOCKPHOTO.COM

energy production projects

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EMPL OY MEN T

Renewing employment through

Renewable energy The renewable energy sector is well placed to create jobs, many of which require new skills. ANÉL LEWIS finds out more about the new career opportunities in this evolving sector

n a country with an almost 35 per cent unemployment rate, the transition to renewable energy means that this sector is “beautifully positioned to help people get jobs,” says Candice Seggie, head of people operations at SolarAfrica Energy. In fact, a 2019 study by the Council for Scientific and Industrial Research and the Institute for Advanced Sustainability Studies estimated that the growth of this sector would create up to 1.6 million jobs by 2050.

IMAGES: ISTOCKPHOTO.COM, SUPPLIED

Types of jobs The International Labour Organisation (ILO) says jobs can be created directly and indirectly along the entire value chain of renewable energy. This includes the manufacturing and distribution of equipment; the production of inputs such as chemicals; and project management, installation, operation and maintenance. While some jobs will be lost in the transition to cleaner energy systems, the ILO says these losses will be outweighed by the new employment opportunities in the sector. The good news is that these jobs will require a range of qualifications and skills, from engineering jobs to design the systems, to technical positions like electrical tradesmen to install and manage sites, to semi-skilled labour, according to Warren Winchester, Impact Farming product manager for Fedgroup. SolarAfrica, which specialises in solar finance through power purchase agreements, is an example of a company in the renewable sector reporting dynamic growth, doubling in size last year. “As licence agreements change and more

consumers opt for renewable energy supply, we are seeing positions developing and a rising need for new skills,” says Seggie. There’s been a growing demand for people with electrical skills, for example. “There wasn’t much depth at first, but now everyone has three to five years’ solar experience. As there are so many skill levels, there really is something for everyone.” Winchester agrees. “The industry is looking for people with electrical engineering degrees, as well as tradesmen who are proficient in building and maintaining electrical circuits.” Tender administration is another emerging career stream, notes Seggie, especially as the licence exemption threshold for self-generation has been lifted from 1MW to 100MW.

Equal opportunities George Asamani of the Project Management Institute (PMI) says project management has shown considerable growth as a career path in the renewable energy space. “PMI believes that the future of work is project-based, and teams will deliver on values and strategic objectives. Careers will increasingly revolve around a portfolio of projects rather than a bulleted list of static job responsibilities.” PMI’s Talent Gap 2021 Report predicts a global need for 25 million new project professionals with management-oriented skills by 2030, meaning 2.3 million project managers will be needed to fill project management roles every year to keep up with the demand. Many of these roles will be filled by women. “We are seeing more women come into the industry, specifically female engineers,” notes Seggie.

“ALTHOUGH not yet in the volumes we would want, we are also seeing more women technicians, not to mention more women qualifying as ELECTRICIANS.” – Candice Seggie

FAST FACT

Global employment in the energy sector is predicted to increase from to 100 million in 2050, up from 58 million in 2017. Source: International Renewable Energy Agency

“Although not yet in the volumes we would want, we are also seeing more women technicians, not to mention more women qualifying as electricians.” Winchester adds that half the engineers at the solar company Fedgroup partners with for Impact Farming’s solar sites are women. As green power purchase agreements are usually signed for 10-20 years, renewable energy guarantees “sheltered employment”, says Seggie. People will always be needed to clean and maintain renewable energy assets. As the sector expands, there is a need for analysts, product specialists, financial experts and technicians. “There are also so many add-ons in solar applications that we need people with product knowledge and who are able to work on new technology.” Winchester says that while engineers require a university qualification and tradesmen should have a diploma, on-the-job training as an intern is vital. The South African Photovoltaic Industry Association offers training for the PV GreenCard assessment, which is needed to become a certified installer. Finally, the South African Renewable Energy Technology Centre provides industry-related and accredited training across the sector. And while technical knowledge is important, so too are soft skills. “Punctuality, communication and an innate interest in renewable energy trends are among the desired soft skills needed in this field,” concludes Seggie.

George Asamani

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Sustainable

forms of energy It is well known that the consumption of fossil fuels contributes significantly to climate change. So what other, more sustainable options are available to help wean us off these “dirty” fuels? RODNEY WEIDEMANN investigates

s the desire for sustainability grows and the demand for new, less-polluting sources of energy rises, humankind has turned its considerable knowledge to the task of finding new ways to achieve both these requirements at the same time. High on the list of these potential solutions is the development of means to generate biogas, biofuel and – in the longer term – green hydrogen.

Biogas According to Alberto Borello, secretary general of the Southern African Biogas Industry Association (SABIA), there are two key types of biogas production: landfill gas and anaerobic digestion. “For landfill gas, the production plant needs to be sited close to the landfill from

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which it is extracted. This plant uses vertical wells drilled into the waste, and a series of pipes to transport the methane extracted to the treatment and power generation plant. This would then be connected directly to the municipality to sell the energy produced.” Anaerobic digestion utilises either organic waste destined for a landfill or animal waste like manure, says Borello. “The plants are usually situated close to the waste producer, although these tend to be smaller-scale operations.” SABIA has undertaken a deep analysis of the size of the local biogas industry, which indicates that, if all the organic waste produced in the country was utilised effectively, we could generate some 10GW of power. “More realistically, we believe it is possible to generate around 1.2GW within five years,” says Borello,

“mainly from from chicken, dairy and municipal solid waste, as well as the agriculture, food processing and landfill sectors.” From a greenhouse gas elimination perspective, biogas plants operating at landfills are good news too. “Every tonne of methane captured from a landfill is worth 21 tonnes of CO2, meaning biogas contributes massively to a reduction in greenhouse gas emissions.” Although biogas ticks all the sustainability and circular economy boxes, as it both produces electricity and tackles the issue of waste, Borello says South Africa struggles with the enforcement of legislation around things like illegal dumping. “Until the disposal of organic waste in a landfill is made more costly than taking it to anaerobic digestion plant, the industry won’t be as effective as it could be. “Nonetheless, we feel there is huge potential for the future. SABIA will continue to promote the benefits of biogas and drive the development of the industry, as we believe it is one that is vital for South Africa’s environmental and energy future.”

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BIOF UEL S

Biofuel potential Unlike diesel created from crude oil, which is full of sulphur, biodiesel blending allows for the complete desulphurisation of conventional diesel due to its special lubricity properties. This is vital, as when normal diesel is burned, it releases sulphur dioxide, a key contributor to acid rain, explains Riaan Botha, director of South African Biodiesel Manufacturing Company. “Biodiesel is made by taking any animal or vegetable source of fat – including sunflower, soya and rapeseed oils, or animal fats like beef tallow or yellow fat from chickens – and properly treating it,” explains Botha. “Methanol and a catalyst are then added, and the resulting product can be blended with normal diesel to remove virtually all its sulphur. “Locally, the used cooking oils such as those from fast food restaurants – around 100 000 tonnes per annum – are collected and cleaned. Currently, however, they are exported to the developed world to be turned into biodiesel, because we have no commercial-scale biodiesel manufacturers in South Africa.” Botha suggests that the practical reason for this has to do with the major fuel players in the country being less eager to spend the money required to develop infrastructure for such production, along with the additional requirement of having a biodiesel pump at every service station. It is also due to issues around legislation and the enforcement thereof. “From our perspective, we are looking into the possibility of introducing this as a burner fuel for industries that still use coal to create steam for power and process heat, for example,” says Botha. “Remember, these players will soon be penalised for burning coal, so utilising biodiesel instead will enable them to become carbon neutral.” He does, however, feel the Department of Mineral Resources and Energy needs to place more focus on this kind of sustainable effort, adding that government has shown little interest thus far, which is a challenge for the industry. “Many industries are seeking sustainable solutions to avoid the proposed carbon taxes around the burning of coal; what we need now is for government also to seek to hit the fuel companies in their pockets, to make avoiding this solution costly.

IMAGES: SUPPLIED

FAST FACT

“Industries will soon be penalised for burning coal, so utilising biodiesel instead will enable them to become carbon neutral.” – Riaan Botha “After all, a strong biofuel sector will create jobs, stimulate the economy and prevent waste like used cooking oils polluting the environment. However, government needs to institute proper penalties on the fuel industry and, of course, enforce these too if we hope to reap such benefits.”

Green hydrogen As the world moves away from a fossil fuelbased economy, the question remains as to what will replace these fuels as an energy storage and transportation molecule. While wind and solar are the renewable production means, there are two options on the table for the storing and transport of such energy, suggests Quintin Hobbs, Africa leader for Strategy and Transactions at EY. One option is lithium-ion batteries, while the other focuses on green hydrogen or green ammonia. “Green hydrogen is produced using renewable energy to perform electrolysis on water, to create hydrogen in a green manner,” explains Hobbs. “This can potentially be used as a new fuel for vehicles and ships, not to mention for power generation when there is no sun or wind. It could also be used as feedstock for industrial processes, much like biodiesel.” Hobbs acknowledges that hydrogen is of course a volatile chemical. “This is why there is a move to convert this to a more stable chemical in ammonia, which can be used similarly to hydrogen.” The three elements needed in order to be a market leader in green hydrogen production are: plenty of available land; lots of renewable energy potential; and effective logistics.

GREEN HYDROGEN USES • Displacing fossil fuel use in vehicles, ships and aircraft • As a feedstock for industry, replacing coking coal • Generating electricity when the sun is not shining or the wind is not blowing • As a growth mechanism for the platinum industry, since the electrolysis process requires a lot of platinum. Platinum group metals are inextricably linked to the green hydrogen economy; this is key to their future Source: Quintin Hobbs, Africa Leader for Strategy and Transactions at EY

KEY BENEFITS OF NEW ENERGY SOURCES • SABIA suggests that the biogas industry can theoretically create more than 250 000 direct permanent jobs, although realistically this could be in the region of 30 000 within five years. The additional development and construction jobs created could theoretically be over 1 million, although the realistic figure is closer to 150 000. • Biodiesel is considered carbon neutral, so a 100 000 tonnes per annum would in turn create 300 000 tonnes of carbon offset, which could be traded to improve organisations’ carbon footprints. • EY studies indicate that within seven to 10 years, green hydrogen will be cheaper than grey hydrogen, driven by the decreasing cost of renewables and falling capital expenditure costs related to the electrolyser units. As carbon taxes increase, it will demonstrate additional cost advantages.

South Africa has the first two, but logistics remains a challenge, as effective rail and port facilities are required to export it over distance. So for our country to take the lead in this industry, Hobbs says, we need solve our logistics challenges, as well as create a conducive environment for investment, which falls on government’s shoulders. Although the cost of producing green hydrogen is relatively low, the initial capital outlay will require an enabling investment environment. “Regional co-operation should also be at the forefront of our plans,” says Hobbs. “Namibia is banking on this technology, and may even be at a more advanced stage than us. Therefore, we should look to work with our Southern African Development Community allies to stimulate this new industry on a regional basis.”

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Investing in renewable energy CARYN GOOTKIN talks to key investors about what is driving investment in renewables, what they look for in a renewable project, how such investments are structured and what sort of returns can be expected

oal, which fuelled the industrial revolution, remains the world’s dominant source of energy. However, if not phased out by 2040, coal will push the world closer to climate change catastrophe, according to the United Nations Framework Convention on Climate Change. According to global statistics provider Worldometer, South Africa ranks seventh in the world for coal consumption, accounting for about 17.8 per cent of the global total. Add to this the fact that WWF South Africa says renewable energy sources in South Africa produce power costing nearly half that generated from coal, and the conditions are ripe for a booming renewable energy industry.

Drivers of growth Even in the absence of the environmental factors pushing the country towards renewable and more cost-effective energy, South Africans are looking for alternate sources of power – if for no other reason than to ensure a constant supply of energy in the face of regular bouts of load shedding. “Load shedding is the trigger that gets everyone thinking; it has been the best marketing tool for solar power and generators,” says Justin Schmidt, head of new sector development for Absa Retail and Business Bank. Schmidt says there are other factors at play, however. “These include the massive decline in the price of solar panels from China’s mega-factories in response to growing global demand, the higher-than-inflation rises in the cost of power from Eskom, and the regulatory certainty provided to small-scale embedded generation installations through the third amendment to the Electricity Regulation Act in 2021. These factors have led to the creation of a strong local market that can install profitable renewable energy plants quickly and cheaply.

Justin Schmidt

A new 1MW solar plant costs in the region of R8-million to R10-million, and can sometimes be built within one month.” The Renewable Independent Power Producer Procurement Programme (REIPPPP), launched in 2011 by agreement between the Department of Mineral Resources and Energy, National Treasury and the Development Bank

of South Africa through the Independent Power Producer (IPP) Office, is mandated to secure energy from the private sector through competitive procurement tenders. “The REIPPPP works in a series of bid windows,” says Rentia van Tonder, head of power, corporate and investment banking at Standard Bank. “There have been five rounds so far and Standard Bank has been funding IPPs since the first round of bidding in 2011.” Van Tonder says the bidding projects initially covered a range of technology, including coal and biomass, but more recently the focus has been on clean technologies, like wind and solar photovoltaic (PV). “Another factor driving the industry is the move among corporates towards sustainability, with many now issuing their own requests for proposals to procure renewable power by building on site. This aids in security of supply (by reducing their reliance on Eskom), control over costs, and addressing environmental, social and corporate governance considerations.” Paul Semple, portfolio manager of the Power Debt Fund and head of the unlisted credit team at Futuregrowth Asset Management, says that since the government opened up the private sector power market by raising the licensing threshold for embedded generation to 100MW, there are many new projects in the pipeline. “Private-sector producers can now generate and sell up to 100MW to offtakers other than Eskom, with a set tariff adjusted for inflation over the life of the power purchase agreement (PPA), making this an attractive investment. “The Power Debt Fund typically invests in IPPs that sell power to Eskom under a PPA. Some of our current investments include solar PV, concentrated solar power, wind farms and a small hydroelectric project.”

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F IN A NCE Investment considerations As with any investment, there are a number of important considerations to make before committing money. These fall into four categories.

Legal framework of the PPA “The projects are all contract-based PPA to sell power, so it is important to make sure that the legal structure of the deal is correct,” says Schmidt.

Ziyaad Sarang

Quality of the offtaker Investors must examine the ability of the offtaker to meet its commitments. All successful bidders under the REIPPPP enter into offtake purchase agreements with Eskom for power they will produce over the next 20 years. These revenue streams are what the projects use to repay the debt finance. “Like any other infrastructure investment, the quality of the offtaker is one of the most important elements to consider in assessing any renewable energy project because it affects the other factors that influence the financial structure of the project, like the debt terms: quantum of debt raised; tenor of debt and pricing,” says Ziyaad Sarang, head of fund initiatives at Investec. “Corporate and rooftop projects are similarly impacted by the quality of the offtaker’s credit profile. Corporate PPAs also have additional considerations around regulatory risk and location (wheeling charges) to consider.” Semple says that in the case of the Power Debt Fund, the offtaker is usually Eskom, which could be considered risky. “However,

ESKOM INVESTMENTS According to the Eskom Media Desk, as Eskom shuts down older coal-fired plants, in line with the Integrated Resource Plan of 2019, while also driving the development of new Renewables and gas capacity, funding/financing is required for the transition. “The company has existing relationships with various development finance institutions multilateral development banks, and is in continual engagements with these entities to fund its pipeline of projects. Eskom has just completed World Bank-funded engineering studies for the repowering and repurposing of the Komati Power Station. Studies for the Grootvlei, Hendrina and Camden power stations have also commenced,” it states.

we are comfortable taking this risk because of the way the REIPPPP is structured. The legal construct provides a credit enhancement to investors, because it offers protection in the form of a sovereign guarantee behind Eskom. In addition, the terms of the PPA between Eskom and the successful bidders require Eskom to buy all the energy that is produced even if it doesn’t use the power – it pays the full amount of the contracted tariff.” Van Tonder notes that key considerations for funding power projects remain the offtaker’s risk profile, ability to provide sufficient comfort under the PPA and risk allocation, especially from a payment perspective. “Absa will lend up to 70 per cent of the cost of the project or portfolio on the back of commercial and industrial PPAs,” adds Schmidt, “if we think the end user will have the cash flows to fund their obligations in terms of the PPA.”

Quality of the IPP Sarang says Investec considers other important factors such as “the quality and competence of the project sponsor or developer, as well as the engineering, procurement and construction (EPC), and operations and maintenance service providers”. Schmidt says there are many solid IPPs in South Africa because there is a lot of scope in the smaller space. “They have paid their dues over the last seven years and are now seeing good growth. The cost of building a plant has reduced drastically while the cost of buying energy from Eskom has increased substantially, making clean power a very attractive business.”

“A business procuring energy from an IPP becomes more resilient, so it has better chances of survival because it can trade through load shedding and power cuts, putting it ahead of competitors.” – JUSTIN SCHMIDT

Absa has learned through experience with farmers not to focus only on security, but to view the projects as business enhancements rather than straight asset finance, explains Schmidt. “A business procuring energy from an IPP becomes more resilient, so it has better chances of survival because it can trade through load shedding and power cuts, putting it ahead of competitors. The business becomes more competitive because cash flow is better.” Semple says it is important to look at the track records of developers in the South African energy space. “We look for experienced developers that have successfully constructed projects in the previous rounds of REIPPPP bidding.”

The shareholders in the IPP Semple says many IPPs are constituted as special purpose vehicles (SPV) with several shareholders. “We look at the make-up of the shareholders to see if they have enough capital to support the project over the long term and if they are optimally aligned with the project lenders.”

Other factors “There are also other factors like the strength of the strategic partners who provide support and contribute to the robustness of the project through technical know-how and global presence,” says Van Tonder. “We look at the quality and track record of the EPC contractors that will build the project.” “The project itself needs to stack up in terms of its credit metrics,” says Semple. “This includes the strength of the PPA but, equally, the project must be able to stand on its own irrespective of who the offtaker is. We check that they have the correct gearing and cash coverage ratios to service the debt, and that there is sufficient equity contributed by the shareholders.”

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F IN A NCE

FAST FACT

“Renewable energy projects, with their large capital costs, are typically structured as project finance transactions using non- or limited-recourse debt and equity, and are fully funded from the outset,” explains Sarang. “The equity and debt are paid back from the cash flow generated by the PPA signed with the offtaker.” Van Tonder says the bulk of these projects are SPVs with various equity partners. “The shareholders are usually developers, strategic investors and private equity funds, with Standard Bank as the main debt funder.” “If our client is looking to install solar in their own office or retail park, Absa would use the hardware (solar panels, batteries) as security, but also look at how the installation will improve the cash flows of the business,” says Schmidt. “This is an asset finance transaction, but we assess the cash flow and structure the debt off the back of that.” Schmidt adds that this type of client generally pays off the loan at the same yearly value or less than what they were paying for power from Eskom.

TYPES OF PROJECTS Rentia Van Tonder of Standard Bank says requests for loan finance at the bank fall into three broad categories of projects: • Developers (IPPs) looking to build a power plant to supply power to a corporate or Eskom under a PPA • Corporates looking at selfgeneration through their own power plant, normally rooftop, on site or through wheeling • Service providers or original equipment manufacturers wanting to sell equipment and energy solutions

“Because solar panels have a lifespan of 20 or more years, the finance is structured on a longer term than usual. Generally, the solar investment has an investment payback of three to five years, but our funding would be structured at five to seven years, sometimes even as long as even 10 years. We are currently seeing a six to seven-year break-even point for farmers, where we would look to a longer

“One factor driving the industry is the move among corporates towards sustainability, with many now issuing their own requests for proposals to procure renewable power by building on site.” – Rentia van Tonder

loan period because the cost offset on energy bills to a loan improves their cash flows and makes them more competitive in totality.”

Expected returns for investors Bidders under the REIPPPP must bid at a competitive tariff to be allocated megawatts, explains Van Tonder. “Once you are bid compliant, they look at your tariff and award the contracts to the lowest bidders. The winning tariff for solar PV in bid window five was 34c/kW and for wind projects was 37c/kW – these are very low rates that are positive for both Eskom and the consumer. So the returns are now reduced from around 20 per cent in earlier rounds to much lower.” Sarang points out that equity investments in renewable energy projects are seen as attractive and generate strong demand. “For greenfield projects, equity returns in the REIPPPP have decreased from around 17-19 per cent in bid window one to single-digit returns on the low end in bid window five. Corporate and industrial PPAs are targeting early to mid-teen equity returns for greenfield projects.”

IMAGES: SUPPLIED, ISTOCKPHOTO.COM

Structure of the investments

The cost of building a solar PV plant has dropped from roughly R20/W five years ago to less than R8/W on a 1MW plant, according to Absa’s Justin Schmidt.

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juwi RENE WA BL E ENERGIES A DV ER T ORI A L

SPECIALISED RENEWABLE

ENERGY SOLUTIONS

The transition to a low-carbon energy system is one of the greatest challenges of our time. juwi believes that 100 per cent renewable energy is possible, and every day we work hard to create that future

Operations and Maintenance.

ith 25 years’ experience, a global presence, and a team of over 850, juwi is a proud global leader of the low-carbon energy transition. We have an installed capacity of over 5.5 Gigawatts – enough to power over two million homes. We develop utility-scale solar photovoltaic (PV), onshore wind and hybrid renewable energy solutions. We also provide engineering, procurement, construction and operations and maintenance services for solar PV and hybrid systems. juwi Renewable Energies in South Africa is part of the juwi group. We have a strategic relationship with the Reatile Group and are among the industry leaders in the transformation of the South African energy space. We believe that what sets us apart in South Africa is our ability to draw on many years of global experience from our holding company in Germany, while also having a thorough understanding of the intricacies of the South African market and its unique challenges and opportunities.

A CHANGING ENERGY MARKET The South African energy market is an exciting space in which to operate. Despite the energy crisis the country has been facing for several years, we understand that a failing system is exactly what can catalyse positive change. This change is resulting in the increased adoption of renewable energy technologies, and juwi is proud to be a leading partner for organisations looking to switch to green energy. One change that has catalysed the energy transition is that projects below 100MW no longer require a generation licence from the National Energy Regulator. This presents an opportunity for large consumers of energy to develop projects with partners that can meet a substantial portion of their usage requirements. This results in fi nancial savings as well as emission reductions, making the switch to green energy a no-brainer. Another change to the energy system is the ability to wheel and trade energy through the grid. Wheeling entails feeding energy through the grid from a producer to a consumer. The ability to do this means that

WE BELIEVE THAT WHAT SETS US APART IN SOUTH AFRICA IS OUR ABILITY TO DRAW ON MANY YEARS OF GLOBAL EXPERIENCE FROM OUR HOLDING COMPANY IN GERMANY, WHILE ALSO HAVING A THOROUGH UNDERSTANDING OF THE INTRICACIES OF THE SOUTH AFRICAN MARKET AND ITS UNIQUE CHALLENGES AND OPPORTUNITIES.

consumers of energy no longer need to have space available to develop an energy project where the energy is needed. Power Purchase Agreements also remove the need for energy users to fi nance the projects themselves if they prefer not to. Instead, they can enter into an agreement with a developer and purchase energy at an agreed price over a period. juwi engages with stakeholders that include independent power producers, large consumers of energy, such as mines and factories, and owners of land suitable for developing renewable energy projects, such as farms. We also specialise in tailored hybrid energy solutions for energy users, for example, mines, which require careful integration of multiple sources of energy and energy storage. One of our flagship hybrid energy projects is at the Evander Gold Mine in Mpumalanga.

➔ Scan this QR code to go directly to the juwi website.

For more information:

IMAGES: SUPPLIED

An aerial view of the Aries Solar Plant.

+27 (0)21 831 6100 info@juwi.co.za www.juwi.co.za

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T HOUGH T L E A DERSHIP

SANJEEV RAGHUBIR, group sustainability manager at the Shoprite Group, explains how the company has made extensive efforts to implement renewables, reduce the company’s dependence on the grid and become more environmentally friendly

he effects of climate change on the retail sector are widespread. Suppliers and supply chains are affected by the availability and sourcing of key commodities due to impacts on the agricultural sector. Adverse weather conditions threaten manufacturing facilities and logistics networks, presenting challenges to the quality, price and availability of goods. There are also direct impacts on retailers too. Flooding and intense storms will place stresses on retailing infrastructure and logistics, resulting in Sanjeev Raghubir increased operational and insurance costs. Conversely, droughts and water shortages result in impacts on food manufacturing and retail operations. Climate-related risks are concerning for the Shoprite Group. At the group’s core is its ambition to be the most affordable, accessible and innovative retailer on the continent, and climate change makes it difficult to realise this ambition. The impact of Cyclone Eloise last year on tomato availability and pricing was just one example – and the frequency of such instances is increasing. More recently, there have been multiple reports about the impacts of the recent uncharacteristically heavy rains and adverse

weather conditions on fresh produce across South Africa. This impacts the availability, quality and pricing of these products for retailers and their customers.

Driving forces There are a number of drivers for the Shoprite Group to develop a climate change strategy, including: • Recognising that there is indeed environmental harm, resulting in direct and indirect impacts on its business and local communities • Increasing customer awareness of environmental and climate-related matters. Research commissioned by Mastercard and published in April 2021 revealed that 75 per cent of South African respondents think it’s now more important for businesses and brands to do more for the environment. Companies not acting on environmental and climate change issues will be exposed to reputational risks • New and emerging regulations, such as the carbon tax • Global environmental, social and governance frameworks and standards like the United Nations Sustainable Development Goals • It simply making business sense to address risks and realise opportunities

Sustainability targets The Shoprite Group has committed to a science-based greenhouse gas (GHG) emission reduction target that is aligned to the Paris Agreement’s ambition of limiting global

The Shoprite Group has set a target to be at zero GHG emissions by 2050, with an interim target of halving emissions by 2030. 44

Shoprite Beaufort West solar installation

temperature rise to 1.5°C above pre-industrial levels. This means that the group has set a target to be at zero GHG emissions by 2050, with an interim target of halving emissions by 2030. The group has developed plans to realise these targets, which includes using more renewable energy and improving energy efficiency throughout its operations. The Shoprite Group has committed to sourcing 25 per cent of its electricity from renewables over the next five to seven years. This will be made up of rooftop solar photovoltaic systems at its stores and distribution centres, and wheeling renewable electricity across the national grid. The group will continue to source more renewable electricity and drive more energy efficiency within its business, such as through sustainable refrigeration. Additional mitigation measures include reducing food waste and increasing recycling. While ambitious targets and commitments are necessary, meaningful plans and actions are equally critical.

Cooling down Shoprite employs solar-powered refrigerated trailers, which make use of four solar panels to generate energy that is then stored in batteries. This energy is used to move nitrogen around to cool the trailer. The solar-powered units have been deployed in the Shoprite fleet since 2017, in an effort to reduce the company’s carbon footprint. The solar-powered trailers mean that we have reduced our use of diesel and, therefore, our emissions. Ultimately, while some progress has been made nationally and globally, there is a need to accelerate decarbonisation. It is more important now than ever before that government, business and civil society work together to address the pending climate disaster. Bold ambitions are needed to address the climatechange challenges we increasingly face, but the time has come for decisive and meaningful actions, because without it the ambitions will remain nothing but dreams.

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Implementing renewables in retail

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ENERGY S T OR AGE

FAST FACT

According to South African Energy Storage Association chairperson Mikhail Nikomarov, there are benefits in both stand-alone storage projects, where systems are installed as substations, and those systems which are co-located with renewable energy projects. There is also increased interest in solar and storage projects by larger industrial users, such as mines.

Effective storage key to renewables

GROWING DEMAND

South African Energy Storage Association chairperson Mikhail Nikomarov explains that more storage is required to ensure renewable energy meets grids requirements. “We have seen that storage, when coupled with renewable energy, is the cheapest and fastest ITUMELENG MOGAKI looks into energy storage systems and their ability method to add new electrons to the grid. The Department of Mineral Resources and Energy’s to capture energy that can be used in periods of higher demand and low (DMRE) Integrated Resource Plan calls for just or no energy production over 2 000MW of storage by 2029, but we feel this is grossly inadequate, with a true need multiple times larger.” hat do we do when renewable An essential addition Asked whether the DMRE is in full support energy sources alone will not work Letlhogonolo Tsoai, technical programme of renewable energy as a probable future during a power outage? officer at the South African Wind Energy alternative to fossil fuel, as well as the use This question has ensured that Association, agrees that battery energy storage of battery energy storage devices to keep energy storage has become a key systems are an essential addition to the power power on for both business and households, component of renewable energy installations, system. “Wind and other renewables are Nikomarov says the best especially in small-scale embedded generation variable sources of energy, with way to articulate this is that projects, because batteries address the issue load profiles that are different the support is uneven from of intermittency. on an hour-to-hour basis. department to department. According to South African National Energy When battery energy storage “There is work in progress Association board member Tumi Mphahlele, systems (BESS) are used in at the Presidency and the “One of the biggest drivers of adoption of conjunction with these, they Department of Trade, Industry renewable energy is the parallel use of batteries improve reliability,” she says. and Competition to meet the as energy storage for night time or when the Tsoai says BESS would energy demands of the country, wind is not blowing.” assist in storing energy but the efforts at the DMRE Mphahlele says the most dominant generated during times of high seem to be more thinly spread, technology in energy storage is lithium-ion wind and low consumption. “As covering not only storage and chemistries, which is used in both stationary the power system transitions Letlhogonolo Tsoai renewable energy, but also and e-mobility applications. “This has a to one that is greener and gas, coal, nuclear and so forth. number of advantages as far as energy emits less carbon, there will It may be easier to focus on fewer options and storage is concerned, including comparatively be further development and improvement of storage needs to be at the core. high energy and power density, relatively long these systems. The various systems that are “As more storage technologies are introduced lifetime, low self-discharge rate and higher already available have different benefits and into the mainstream power sector, such levels of safety.” disadvantages. For example, the lithium-ion as mechanical storage, thermal She adds that lot of research is going battery offers the highest energy density and storage and non-lithium options towards finding new battery technologies safety.” She adds that hybrid models assist with such as flow batteries, we will that will have better physical and chemical the need for energy that can be despatched on be able to produce the same properties, but that it takes time. “We have demand. “Once this is achievable in a reliable quality of electrical energy recently heard of a zinc-based chemistry that way, a modern power system comprising as a coal plant for the same could be safer, but this still falls short on renewables and BESS could replace one price. And we can do it with life-cycle length and is less stable.” powered by fossil fuels,” says Tsoai. fewer adverse environmental impacts and likely even more benefits to the South African power grid,” concludes Tumi Mphahlele Nikomarov.

IMAGES: ISTOCKPHOTO.COM, SUPPLIED

“One of the biggest drivers of adoption of renewable energy is the parallel use of batteries as energy storage for night time or when the wind is not blowing.” –

Mikhail Nikomarov

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Is clean coal a real thing? What is “clean coal”? And is it the solution to the environmental threat posed by regular coal? THANDO PATO speaks to the experts

t the 2021 United Nations Climate Change Conference, more than 190 world leaders committed to a zero-carbon emission future. South Africa announced that it aims to cut coal usage to less than 60 per cent of power generation by 2030, from around 75 per cent at present, while increasing the share of wind and solar power to around 25 per cent. In the meantime, Mineral Resources and Energy Minister Gwede Mantashe has been suggesting that, instead of reducing our reliance on coal, South Africa’s energy sector should introduce clean coal. But what is clean coal exactly?

FAST FACT

CCT benefits to the environment are obvious. Not only does it reduce the amount of pollutants emitted by fossil fuel-fired power plants, but by decreasing sulphur and nitrogen oxides emissions it also reduces acid rain. This in turn reduces acidification and eutrophication of lakes, along with damage to forests and other vegetation. It also decreases damage to structures made of materials like steel, limestone and concrete. Source: sciencedirect.com

Clean coal technology

IMAGES: ISTOCKPHOTO.COM, SUPPLIED

IMAGES: SUPPLIED

F O S SIL F UEL S

“Clean coal” and “cleaner coal” are industry buzzwords and do not refer to the coal itself but rather to clean coal technology (CCT) – advanced coal utilisation processes that are used to reduce environmental pollutants in coal, says Dr Brian North, energy systems research group leader at the Council for Scientific and Industrial Research. “Historically, CCT has been aimed at reducing pollutants such as sulphur and nitrogen oxides and particulate matter,” explains North. “More recently, there has been concern about the emission of pollutants such as mercury, which

is often present as a trace element in coal. With the understanding that anthropogenic CO2 is the major cause of global warming, CCT now includes reducing CO2 emissions.” Clean coal is a divisive idea, however. Tebogo Kale, managing director of Gravitas Minerals, says the issue is controversial because many argue coal can never be clean. “However, if there are systems in place to minimise the environmental impact of coal waste, it can be said that the coal produced from such a system is ‘clean coal’.”

“Much of the existing coal fleet will continue to operate for a considerable time, and it makes sense to apply CCT where possible or viable to minimise the environmental impact.” – Brian North

CCT – a viable option for South Africa? Kale says the move towards clean coal in South Africa is crucial because coal and the coal energy sector will be around for many years to come. He argues that CCT provides benefits like decreased environmental liability and a possible export market. “The price of clean coal and our currency value make it favourable for the export market.” North disagrees, however. “From an economics viewpoint, new-build clean coal is not viable. It cannot compete with the price at which renewable electricity can be produced. However, much of the existing coal fleet will continue to operate for a considerable time, and it makes sense to apply CCT where possible or viable to minimise the environmental impact. “Although some of our existing coal-fired power stations are earmarked in the Integrated Resource Plan to be decommissioned, many will continue to operate for some time. The most recent builds, Medupi and Kusile, are planned to operate until at least 2040.” North adds that coal has the advantage of being an indigenous resource, granting South Africa some degree of control over price and supply security.

Is clean coal the answer to our problems? Kale argues that it is. “South Africa is already struggling to provide energy using systems and technologies with which we’re well acquainted. This struggle will only intensify if we try to meet the base-load demand with technology that we understand less, that is more expensive, and that is less reliable than coal-fired energy.” He emphasises that coal is needed to address our base-load demands, while additional energy needs could then be met using nuclear or renewable energy. While clean coal may offer the coal industry a solution to some of its environmental woes, the sector is still under threat nevertheless. According to statistics from the Minerals Council South Africa released in 2021, the local coal sector lost R2-billion in investment over eight years. Some might argue that’s a drop in the ocean, but it does beg the question: Can clean coal stop the slow puncture in the coal industry?

Tebogo Kale

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The uYilo electric vehicle charging hub

Is South Africa ready for electric driving? Despite a host of infrastructural challenges, electric vehicles hold great promise for South Africa’s future, writes JAMES FRANCIS

riving around in an electric vehicle (EV) is an exciting experience. In this case, it’s a JAC N55 EV truck imported by AEVERSA. The vehicle is quiet, the tap-tap-tap of a diesel motor notably absent, and the vehicle surges forward with deliberate ease. A workhorse currently used for deliveries, the truck holds its own against combustion contemporaries. EVs have captured our imaginations. Tesla rebuffed its critics and laid the groundwork for an electrically powered automotive future. A tide of EV start-ups has emphasised that the epoch of internal combustion engine (ICE) vehicles is waning. Yet while the future is electric, South Africa’s participation isn’t guaranteed. Our power supply is unstable and dirty, our vehicles are expensive, and infrastructure rehabilitation lags. How will these challenges affect our transition to EVs?

A pricey proposition While there are EVs available in South Africa, with more launching in 2022, all are expensive. It’s difficult to start revolution with vehicles that most of us cannot afford. “You encounter that attitude: these are just toys for the rich, so why should we support them? But that’s the wrong approach,” argues Winstone Jordaan, managing director of charge point developer GridCars. “Early adoption has always been expensive. The first PCs, smartphones, TVs, GPS units – if you go back to their origins, they were much more expensive than today. Early adopters helped pave the way for the rest of us. The same goes for someone buying an EV now. Yes, it’s expensive, but it’s an investment in the future.” With over 200 charging points located in major cities and along main highways across the country, GridCars has a front-seat view of local EV demand. “Back in 2019 when we

“That is the big revolution: how EV ecosystems can be much more effective and efficient through the use of software.” – Rick Franz 48

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CHALLENGES TO DOMESTIC EV ROLL-OUT • South Africa’s energy generation is far from clean • Government incentives have not yet materialised • Charging infrastructure is in its infancy

proposed a charging point at a popular Pretoria mall, they didn’t think there was demand. Three years later it’s one of the busiest recharge stations in the country. The market is out there; we just have to develop and encourage it,” Jordaan notes. Though high-end brands enjoy all the visibility, there is momentum behind expanding the market, adds Thabo Smouse, product communications manager for Lexus South Africa. “In South Africa, we are on a path to carbon neutrality, but the requirements are not all in place yet to provide a full-scale roll-out of EVs. Our strategy is therefore to introduce products progressively, in step with external factors. When the time is right, we will expand our alternative-powered vehicles to include plug-in hybrids, followed by full battery-electric vehicles. We just need to ensure the right fit for our market and customers’ pockets.” The EV long tail isn’t around luxury models. For example, AEVERSA provides EV solutions to commercial fleets (such as charging stations and solar warehouse refurbishment) as services that customers rent or co-finance. “EVs make a lot of sense to fleet owners,” says AEVERSA CEO Rick Franz. “We’ve shown that running an EV truck is 56 per cent cheaper than an ICE equivalent. It makes financial sense in areas like logistics and public transport.

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2022/03/14 11:07 AM

T R A NSP OR T

Popular EV models such as the Tesla Model 3 are not headed to South Africa yet, but experts predict an influx of EV brands could soon make electric vehicles accessible to larger parts of the market.

FAST FACT

South Africa’s first EV model, the Nissan Leaf, arrived in 2013. There has since been a trickle of new EV and hybrid models, and we can choose from six luxury models, the cheapest costing around R600 000. Nine more will launch in 2022.

The major barriers are perceptions around range and costs. AEVERSA’s model addresses those fears and risks by partnering with our customers rather than just selling to them.” Companies such as GridCars and AEVERSA are changing hearts and minds, and a glut of cheaper Chinese-made EVs might be on the horizon. But there is another barrier we could call “Eskom anxiety”.

IMAGES: TESLA, SUPPLIED

The power conundrum EVs represent a shift away from combustion, yet the vast majority of South Africa’s electricity comes from coal-burning power stations. Moreover, Eskom is struggling to meet existing power needs. How will we charge EVs when local generation can’t meet demand? “If you converted every car in South Africa to an EV, you’d only need about 10 per cent more generation capacity,” Jordaan points out. “The problem is not really capacity; it’s peak demand. If everyone in an area charged their EVs at 5pm, we’d have a problem. But you don’t need to do that. There is plenty of time through the night, with lots of available power. We simply have to plan.” EV infrastructure can improve energy efficiency. Modern charging stations aren’t just glorified plugs; they represent elaborate digital management systems calibrated to specific usage patterns. For example, delivery fleets and public transport charging schedules can be fine-tuned to fit specific business operations,

and photovoltaic systems provide alternative energy sources. There are more options than those Eskom’s dire state suggests. “The national grid’s problems are a big issue, but they are not insurmountable,” says Franz. “Modern technology lets us be much more efficient in how we manage electricity at charging stations. That is the big revolution: how EV ecosystems can be much more effective and efficient through the use of software. It’s a new paradigm for energy conservation. The important thing is to drive investment in that paradigm.”

An inevitable transition Investment is crucial. Even though EVs are often seen as an alternative to the ICE market, they are ultimately the replacement, with long-term consequences for South Africa’s economy. Vehicle manufacturing represents around 4.3 per cent of national GDP, according to the National Association of Automobile Manufacturers of South Africa. That’s roughly 600 000 vehicles, half of them for export. That entire industry is under threat of obsolescence. “If you look at some of the primary export markets for locally manufactured vehicles, such as the EU, many are phasing out ICE sales from as close as 2025,” says Hiten Parmar, director of the uYilo Electric Mobility Programme. “The growth of the EV market is an opportunity for South Africa to extend our existing automotive sector and keep serving those markets.

“The growth of the EV market is an opportunity for South Africa to extend our existing automotive sector and keep serving export markets.” – Hiten Parmar

We can also use this to address problems such as skills shortages and enterprise development. But if we do nothing, we will eventually lose our principal markets of exports for South Africa’s automotive industry.” Government realises this. Established in South Africa’s automotive heartland, Port Elizabeth, uYilo is an initiative of the Technology Innovation Agency to enable, facilitate and mobilise electric mobility, and it collaborates with public and private stakeholders. Yet attitudes seeing EVs as toys of the rich or optional to combustion remain entrenched. A healthy and growing local EV market would change those attitudes. Some want subsidies for local EV sales. Many want EVs to be taxed the same or less – not more – than ICE vehicle imports. There are also development opportunities: uYilo helps fund projects on technology localisation, and South Africa can grow an SME market to support a local EV manufacturing supply chain, just as the initiative funded GridCars in 2014. “What we really need in South Africa is an affordable EV for medium- and low-income households. I’m sure that within the next two to three years we should be seeing new market entrants in this area. It’s only going to get better once we have an improved enabling environment and specific policies to support EVs both for importing, and more specifically on local manufacturing. That’s going to be a game changer for the country,” concludes Parmar. Hiten Parmar

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FAST FACT

South Africa’s electricity grid is currently powered largely by coal, with a smaller percentage supplied by renewables and nuclear energy. With the status quo set to change, THANDO PATO looks at the pros and cons of our energy sources

According to the BP Statistical Review of World Energy 2021, coal was the second-most-used fuel in 2020, accounting for 27 per cent of total global primary energy consumption.

The power showdown

n South Africa, coal has the advantage of being an indigenous resource, over which we have some degree of control in terms of price, security and supply. It also currently accounts for 77 per cent of our base-load electricity supply, which is built around coal consumption. However, our coal resources are not infinite – like all fossil fuels, they are diminishing. It is no secret that coal has an environmental impact. Yet, says Tjaša Bole-Rentel, bioenergy programme manager at WWF South Africa, its impact is often underestimated. “The burning of coal emits sulphur dioxide, nitrogen oxides and particulates that contribute to acid rain, smog, haze, and respiratory illnesses and lung disease. It also emits mercury and other heavy metals, which have been linked to both neurological and developmental damage in humans and other animals. In South Africa, the burning of coal in Eskom’s thermal power plants causes an estimated 2 200 deaths per year [according to the Centre for Environmental Rights].” Fortunately, the global economy is decarbonising, says Bole-Rentel. Coal-powered processes and products are being rejected by consumers and risk being subjected to border carbon adjustments – duties on imports based on how much carbon was emitted during their production. “This means that if South African exports continue to use Tjaša Bole-Rentel coal-based energy, the country will get less and less competitive.” Bole-Rentel says that coal is being increasingly shunned by investors. “It is getting more difficult to raise finance to invest in new coal operations, as investors seek to limit their exposure to fossil fuels, especially coal. Large mining houses are also looking to divest their coal assets.”

“If South African exports continue to use coal-based energy, the country will get less and less competitive.” – Tjaša Bole-Rentel 50

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Renewables Globally, renewable energy has been touted as the future of energy of production because of its low carbon footprint. As part of its commitment to reducing carbon emissions, South Africa announced at the 2021 United Nations Climate Change Conference that it will increase its share of solar and wind energy by 25 per cent by 2030. Dr Karen Surridge, renewables programme manager at the South African National Energy Development Institute, says that renewable energy is particularly advantageous in South Africa, where supplies of primary fuel sources such as the sun and the wind are plentiful. Other advantages include the fact that plants can be deployed quickly. “A large-scale solar or wind plant can be installed within two years and has low maintenance requirements.” However, the disadvantages of renewable energy cannot be ignored, notes Surridge, especially when taking into consideration issues like capacity and efficiency. Dr Karen Surridge

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ENERGY S OURCES

“Renewable energy electricity generation capacity is relatively low and has low efficiency levels.” Its intermittency must also be considered, she adds. “The sun doesn’t always shine; the wind doesn’t always blow.” Perhaps most concerning is that renewable energy alone cannot provide electricity on demand, particularly during peak periods. And even if the capacity factor of renewable energy were increased, limited storage capabilities still present a challenge for energy suppliers.

Nuclear

IMAGES: TESLA, SUPPLIED

Some of the most appealing aspects of nuclear energy are the consistent capacity it can provide and the longevity of its plants. According to the World Nuclear Association, the global mean capacity factor for nuclear reactors was 82.5 per cent in 2020, while according to the International Atomic Energy Agency, the annual load factor for Koeberg nuclear power station unit 1 was 94.5 per cent in 2020. Pointing to the consistent reliability of nuclear power, Derik Wolvaardt, nuclear engineering specialist at Lesedi Nuclear Services, says, “In January 2022, Koeberg unit 2 was shut down for a refuelling and maintenance outage after 450 uninterrupted days of operating at full power.” In South Africa, where our energy crisis has been blamed on old and ailing fossil-fuel plants, nuclear presents an attractive proposition. Koeberg’s will reach its intended life span of 40 years in 2024, though most of these

FAST FACT

According to the Council for Scientific and Industrial Research, the 2020 annual capacity factor (total energy produced during a period of time divided by the amount of energy the plant would have produced at full capacity) for wind power in South Africa was 35.2 per cent, while solar was 26.4 per cent.

power stations globally have been extended to 60 years. “Eskom is in an advanced stage of completing the safety case and plant modifications that would allow operation for another 20 years,” says Wolvaardt. “Moreover, the design life for next-generation reactors is 6080 years, significantly more that the design life of solar and wind farms, which is 20-25 years.” What of the high capital costs of nuclear plants? Wolvaardt argues that the 60-year lifetime of a nuclear plant largely offsets the initial capital outlay over time. “The capital cost for a nuclear plant is typically paid off in the first 15-20 years of operation. Thereafter, due to the low cost of nuclear fuel compared to coal or diesel, the station typically becomes a generator of cash for the utility that owns Derik Wolvaardt it. For example, Koeberg is generating the cheapest electricity of all the Eskom grid power stations. It is also by a big margin the most reliable.” However attractive nuclear energy might be, one of its biggest drawbacks is the toxicity and storage of its waste. Wolvaardt says nuclear power generates low-, intermediate-, and highlevel nuclear waste.

“The capital cost for a nuclear plant is typically paid off in the first 15-20 years of operation.” – Derik Wolvaardt

Low-level waste consists of items like cotton gloves, plastic overalls and other consumables used during the maintenance and operation of the plant, while high-level waste consists of used nuclear fuel assemblies. “Low and intermediate waste are stored in drums in storage facilities such as Vaalputs in South Africa,” says Wolvaardt. “The used fuel is typically stored on site in the spent fuel pool for the life of the plant. These pools – 12m deep, 10m wide and 20m long – can store 35 years’ worth of fuel. Once the fuel pool reaches its storage capacity, the older fuel assemblies are removed and stored in dry storage casks for many decades. “In the long term the fuel assemblies can either be reprocessed to remove useful fissile materials, or they need to be stored in a permanent safe storage facility for several hundreds of years. Such facilities are in operation in Scandinavia and other countries. Typically, they consist of deep underground tunnels in rocks,” Wolvaardt concludes.

FAST FACT

The design life of Generation III nuclear power stations such as Koeberg is 40 years. The design life for the Generation III+ reactors currently under construction is 60-80 years.

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THE TRUTH ABOUT NUCLEAR Nuclear power has always had a swirl of controversy around it. We asked Dr Derik Wolvaardt, nuclear engineering specialist at Lesedi Nuclear Services, some key questions about South Africa’s nuclear strategy With Koeberg coming to the end of its initial 40-year life, is it feasible to extend this? Koeberg will reach the end of its initial 40-year lifespan in 2024, and will thus have to apply for a licence renewal from the National Nuclear Regulator. Such an application requires an extensive safety study, undertaken based on a standard methodology from the International Atomic Energy Agency (IAEA). This requires a comprehensive screening and analysis exercise where every one of tens of thousands of safety components and structures is carefully assessed. This includes looking at the conditions these components have faced over the past 40 years, their current condition, the state of corrosion and so forth. The Koeberg application has required close to 100 000 components to be assessed in this manner, utilising sophisticated software over an intensive two-year period.

facing a disaster for Eskom and the people of the Western Cape. After all, this power station contains the country’s two largest turbines, so not having these as part of the grid would create a massive impact that would take years to dissipate. Also noteworthy is that the larger percentage of European and United States nuclear stations have already had their lives safely extended, so a well-established methodology and approach is being followed. What is the role envisioned for nuclear power in a renewable-focused world? The Integrated Resource Plan (IRP) of 2019 suggests two contributions by nuclear to the future South African energy mix: the first of these is the Koeberg extension, while the second is 2500MW of new nuclear energy by

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“Koeberg is by far the cheapest plant on the Eskom grid and is also definitely the most reliable, typically running at around 80 per cent capacity.” – Derik Wolvaardt Are there any safety challenges we may face in extending Koeberg’s life, and if not, what impact might this have on South Africa’s energy situation? So it is worth noting that Koeberg’s safety analysis follows standard international best practice as defined by the International Atomic Energy Agency and implemented around the globe many times before. Moreover, if its life is not extended, we would be

Dr Derik Wolvaardt

2030. This is not a bad thing as renewables like solar can only provide peak production for around one-third of the day. In addition, a solar plant has a lifespan around one-third that of a nuclear plant, so there simply has to be room for nuclear in the mix. Also, even the best renewable energy requires a level of baseload power for security, and the nuclear, wind and solar mix is the only one that eliminates CO2 creation from the energy stream. I must also mention that although nuclear has a high capital cost, its operating costs are far less – this means that when the plant is paid off, it becomes a cash generator. Koeberg is by far the cheapest plant on the Eskom grid and is also defi nitely the most reliable, typically running at around 80 per cent capacity. If nuclear is part of the just energy transition, what can and should be done about the waste generated, and what sort of impact might a reasonable contribution from nuclear mean for electricity prices? Nuclear plants generate three types of waste: low-level, intermediate, and high-level. The first level of waste is equipment like gloves and cleaning materials, while the intermediate level encompasses things like resins, which are fi ltered out, and are slightly more radioactive, but not really dangerous to people. This type of waste is stored in concrete drums and taken to a facility in the Kalahari where it is stored and monitored to avoid potential groundwater contamination. Finally, the high-level waste – the actual spent nuclear fuel – can be dealt with either by sending it to the supplier for reprocessing or, if one has the capacity in the plant itself, as is the case at Koeberg, it can be stored initially on-site, with the ultimate end being geological storage deep in the earth’s bedrock. It is important to note that in the past 60 years of nuclear energy, not one person has been hurt or killed in the commercial nuclear industry by a used fuel assembly – simply because these are treated with such care.

➔ Scan this QR code to go directly to the Lesedi Nuclear Services website.

For more information: +27 21 525 1300 info@lesedins.co.za www.lesedins.co.za

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A sunrise

industry The use of solar technology in agriculture at the Graham Beck Wine Estate

With no end in sight to load shedding, consumers across all sectors are looking at renewable energy sources as a cost-effective and reliable alternative to grid power. ANÉL LEWIS considers the uses of solar power technology

aced with escalating electricity tariffs, consumers are considering solar power as a means to reduce their monthly costs, says Craige Williams, founder of Total Electric. Initially people bought low-cost battery backup systems as a quick-fix solution, but these soon failed or lost capacity. “Residential consumers are now looking to purchase systems that will ensure they are not dependent on the council electricity supply going forward. Municipal power has become more expensive and prices continue to rise, while solar ensures a fixed electrical cost with no escalation.”

Solar power uses Residential consumers also use hybrid solar inverters to power geysers and pool pumps during the day, to reduce their electricity consumption. Christiaan Hattingh of AWPower says cost saving is usually the main motivation for residential solar energy use. “It’s a game changer when clients see how much power they Christiaan Hattingh are saving.” He estimates an annual saving of upwards of 50 per cent for residential users who incorporate solar technology in the home. Hattingh adds that the term “off-grid” is not applicable to most residential uses.

“The reality is that without a connection to the grid, you will need to make large investments in batteries and generators to provide power at night or during winter. You will need to oversize battery capacity and your solar panel installation to ensure you have enough power during extended times of low solar generation. In addition, it is advisable to have generators available in case the solar system fails.” For this reason, many people choose hybrid solar systems, where the solar panels remain connected to the grid. The main components of such a system are batteries to keep essential power loads running when the grid is down, solar panels to generate power, and a hybrid inverter to manage the energy flow between the solar panels, batteries and essential electrical loads. Jean-Claude Lasserre, CEO of construction company Saint-Gobain, says an industrial solar photovoltaic (PV) system can reduce electricity consumption from the grid from 30 per cent at

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a basic level to 100 per cent if combined with robust battery technologies. The use of space is an important consideration for these sectors, adds Williams, and solar pump stations may use fixed structures or floating structures over water sources. According to GreenCape’s Energy Services Market Intelligence Report (2021), the growing need for energy independence during load shedding has bolstered the demand for backup power applications, especially in commercial, industrial and agricultural Jean-Claude Lasserre applications. Farmers, for example, are increasingly reliant on generators and renewable energy sources to maintain cold chains and irrigation systems. In the future, this will extend to electric tractors, combine harvesters and other agricultural vehicles as well, says Jaco Botha, CEO of renewable energy company Solareff. But for now, solar energy has a variety of applications in agriculture. “The beauty of

FAST FACT

Five years ago the efficiency rating of solar panels (the amount of solar energy converted to usable electricity) was about 15 per cent. Today it is 20 per cent under normal operating conditions. Source: Craige Williams, Total Electric

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S OL A R P OW ER

solar renewables and storage is that we can engineer a system to meet the farmer’s needs. It is also important to consider the seasonality of certain farming operations when designing these systems.”

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Latest technologies “Solar is considered a mature technology these days, and the industry is focusing less on adoption and more on efficiency and innovation,” says Williams. As a result, solar panels are now more efficient at converting solar energy than they were in the early days of use. Hybrid solar inverters are now used during the day, and batteries are more efficient and last longer. Installation costs have also dropped. “The greater adoption of solar by the residential market has brought down the price, which lets home owners enjoy a more cost-effective solution with a longer life span,” says Williams. Changes in battery technology have been the most significant innovation in the solar energy landscape in the past five years, notes Hattingh. “The commercial and telecoms sectors adopted lithium-ion batteries because they recharge rapidly, have a smaller footprint, enjoy a longer life span (15-20 years) and are considered safer.” He adds these batteries also have improved after-sale support and maintenance. Lasserre says that the ability to design systems and size them according to a site’s requirements is the real innovation, and that Saint-Gobain has invested in a grid-tied solar system to offset the power demand in its South African factories. Lasserre emphasises that by adopting “passive interventions” – such as insulating your home – to reduce energy demand, it’s possible to introduce the latest solar technologies using panels, inverters and batteries.

Challenges and opportunities The cost of battery installation and storage is among the main challenges in the use of solar technology, says Williams. In residential use, this means that operating six lights, a Wi-Fi router, laptop and TV – all of which draw 1kW of power in eight hours – requires an installation cost of roughly R5 000 per kW. With a batterylife expectancy of 15 years, this amounts to a cost of R333.33 a year and 91 cents per eighthour period. Botha emphasises that any solar installation has to follow due process, which includes working with the utilities and Eskom. “It is absolutely crucial to get the systems approved and regulated, and they must also be technically sound. The risk of being cut off because of non-compliance could be devastating for a farmer if this happened during harvest, for example.” Advances in solar panel, inverter and battery technologies benefit all users of solar energy, says Privat Foné, co-founder and chief financial officer of Granville Energy. “The all-in-one is a nimble solution that works well for the residential market, providing the flexibility that is required from a product that must be deployed easily and quickly for scalability. Commercial and industrial installations are much larger and require larger systems, from inverters to storage systems. No two clients are the same, and generally each requires a high level of customisation.” Williams says Total Electric helps residential users determine their daily power

“The risk of being cut off because of non-compliance could be devastating for a farmer if this happened during harvest, for example.” – Jaco Botha

FAST FACT

For solar energy storage, lead-acid batteries have been replaced by lithium-ion batteries that last longer and are more efficient. They also come with a 10-year warranty.

requirements so that they can meet their non-critical needs with solar power during the day and switch to the grid as needed at night. “These hybrid solar systems are plugand-play installations that can be expanded over time. Consumers can play their part by using LED globes, installing timers on geysers and opting for other energy-efficient measures around the home. Solar storage requires users to change their mindset about how they consume energy.”

Recycle and reuse Solar power systems have a life expectancy of more than 20 years, explains Privat Foné Williams. “We currently recycle older systems that are being replaced with hybrid systems through accredited recycling management companies.” Furthermore, end-of-life recycling will help finance future growth of the industry, notes Foné. “Granville Energy intends to play a significant role in the future, investing in recycling units that will create additional employment opportunities. We want to make PV panels ‘double green’ products, by serving as both a source of renewable energy generation and being able to be reused for the same or different purposes after their life cycle ends,” he concludes.

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Lights out,

South Africa Behind South Africa’s rolling blackouts lies another, altogether more frightening prospect: grid collapse. ANTHONY SHARPE looks at what is being done to stop the lights going out long term

s a nation, South Africans know blackouts well. Except we don’t, at least not long-term ones. Losing power for two-to-four hours due to load shedding is an inconvenience; losing power for two weeks is a catastrophe. And yet it is this scenario that South Africa potentially faces should our electricity grid collapse. That’s total collapse: when all power plants and distribution units nationwide fail. It’s a frightening scenario. In fact, were it not for the conscientious work of the Eskom National Control Centre (NCC) in Germiston, the grid would already have collapsed, says Prof Thinus Booysen, of Stellenbosch University’s Faculty of Engineering. “Eskom has a supply and demand problem,” explains Booysen. “On the one side is generation, which continuously generates energy regardless of how much is consumed. On the other side is demand, which changes throughout the day, peaking in the evening, with a slightly lesser peak in the morning, and remaining flat for the rest of the day. The balance hinges on the NCC.” The NCC continually monitors the difference between supply and demand, notes Booysen. “If the margin between these becomes too

small, the risk increases. Should a whole city switch on their geysers with ripple control, that will create a huge surge in demand, which could exceed supply.” The NCC’s job is to keep the margin sufficient that should this occur, or should a generator fail, the whole house of cards doesn’t come tumbling down.

What is grid collapse? To understand why this is so important, let’s take a quick look at what a power grid actually is. Booysen explains that the grid comprises generation (power stations), transmission (highvoltage power lines between major centres) and distribution (lower-voltage lines that transport electricity to businesses and homes). All these elements, including the power plant turbines, solar and wind farms, and the plugs and devices in our homes, are synchronised to an alternating current frequency of 50Hz. “When supply is too low and the NCC doesn’t reduce demand [for example through load shedding], then say the weakest generation unit needs to generate more than it safely can,” says Booysen. “In this instance, the frequency of the turbines in that unit will drop so low that it will fall out of synch with the rest of the grid. When that happens, the unit switches off automatically.”

“Should a whole city switch on their geysers with ripple control, that will create a huge surge in demand, which could exceed supply.” – Thinus Booysen 58

COMPLETE CAPACITY Dr Arnold Rix, senior lecturer in the Department of Electronic and Electrical Engineering at Stellenbosch University, explains that South Africa has a generation capacity of approximately 58GW, mostly supplied by Eskom’s coalburning power plants. Energy is transmitted to towns and cities via a network comprising 28 000km of high-voltage power lines and 325 000km of lowervoltage lines that deliver it to homes and businesses. The power lines and generation plants – including Eskom’s coal-powered fleet, Koeberg’s nuclear generation and all our renewable energy sources – form a grid, which supplies alternating current at a synchronised frequency of 50Hz.

The real problem is that if you’re already in a scenario where units need to produce more power than they can, if one shuts off, then the next one will shut off, and so on. “It produces a cascading effect across the entire grid,” says Booysen. “This would take anything from 30 seconds to two minutes.” The grid can shut down really quickly, but bringing it back online could take two weeks or more, explains Booysen. “When they start the grid back up, they need to synchronise all these units. They’ll start up one unit for the others to synchronise to, then the next, and the next. Every time this is done, there’s a chance that the synchronisation will be unsuccessful, which means restarting the latest or even already synched units.”

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GRID COL L A P SE

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The availability factor It’s a dire scenario indeed. But at least it is an unlikely one. That’s the view of the National Energy Regulator of South Africa (NERSA), according to full-time regulator for electricity Nhlanhla Gumede. “The NCC does a great job of managing the risk and ensuring we don’t experience widespread blackouts. As long as they keep doing their job, all that will happen is more load shedding and the price of electricity will continue to rise.” What isn’t rising is Eskom’s energy availability factor (EAF), which is how much power its generators can actually supply. This is due to maintenance issues and plants being run poorly, says Gumede. “From 2011, there was an increase in renewables alongside new Eskom capacity coming online. Despite that, the EAF dropped from 86 per cent in 2008 to 67 per cent now, because the plant availability dropped.”

get a situation where you have plant capacity,” says Gumede, “but it’s inappropriate capacity.” To meet this demand, Eskom has been using base-load plants, which aren’t designed to change their power output quickly. “In terms of engineering and thermodynamics, the last thing you want to do is treat your boiler tubes in this way,” says Gumede. “Ramping them up and down will cause them to fail eventually.” Which would obviously further reduce EAF. To this end, the power utility also uses opencycle gas turbines to address peak demand. These are flexible, fast-starting plants that burn diesel, which is expensive. “If you compare solar during the day, it’s 43 cents per kilowatt hour (kWh),” says Gumede. “Open-cycle gas turbine costs R4/kWh. Solar is cheap, but the sun rises and sets. You can deal with the peaks using energy storage, but that by its nature is very costly: around R18/kWh.”

Peak condition

The price must be right

The other issue is that demand for electricity has evolved, shifting from industrial towards residential. “It used to be that 56 per cent of Eskom’s power went to industry, followed by 13-18 per cent to residential, 8-10 per cent to commerce, then agriculture and other,” explains Gumede. “Nowadays, only 40 per cent goes to industry, while residential demand has increased to 31 per cent.” The problem with residential demand is that it operates in morning and evening peaks, which require a certain type of plant to meet it. “You may

Gumede says it’s essential to set the price of energy in a way that reflects the new reality of electricity consumption patterns. “Most people don’t understand the pricing approach we’re trying to create, which represents an unbundling of services. If you clearly identify this peak power consumption as a service and price it accordingly, then people know it will be supplied either by batteries, diesel, or gas turbines. That needs a specific dispensation – a recognition that it’s a separate service from the electricity that you consume the rest of the day.”

“If you clearly identify this peak power consumption as a service and price it accordingly, then people know it will be supplied either by batteries, diesel, or gas turbines.” – Nhlanhla Gumede

FAST FACT

Between 2008 and 2018, South Africa’s real average electricity price saw an approximate annual increase of 33 per cent. These increases have significantly altered the weight of electricity costs in business budgets, as well as the attractiveness of the country as an affordable production destination.

Differential pricing can send a signal to people to make better decisions about how they use energy and consider whether or not they could do the energy-consuming things at night earlier in the day, when cheap solar energy is available. Gumede says NERSA is also advocating for differential pricing in order to avoid driving the price of electricity up across the board, so as not to increase the burden on industry or agriculture, and to avoid overcharging people who use less peak power. South Africa’s not in the dark just yet, but it’s clearly not a sustainable situation. Booysen says the crux of the matter is that recognised by Eskom CEO Andre de Ruyter: adding renewables as quickly as possible. “If you look at the bigger picture, we simply need more generation. Given that South Africa has abundant sunshine and wind, we need to invest in renewables, but they can’t be the whole picture. I think we’ll be stuck with load shedding for a while, but if we focus on maintenance, then we can get through this.”

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