"Dear Investor: Put your money in Solar Leasing to build new power in SA"
Energy Analyst David Lipschitz writes a letter to an international financial institution on ideas for projects in South Africa:
Thank you very much for your email and for your generous offer of mutual cooperation.
I am particularly interested in getting Solar / Energy Leasing For Small Scale Projects going in South Africa. Up to now, investors haven’t been particularly interested in Solar Leasing because of government rules, but thousands and perhaps tens of thousands of private people, companies and organisations are installing battery based renewable energy systems, or renewable energy systems which do not feed the national grid, and this is legal, up to 1 MW. Hundreds more want to install, but don’t want to have the finance in their bank accounts or in their homeowner bonds or on their balance sheets. It looks like a lot of money to pay R100 000 ($ 7200) for a homeowner or R10 million ($ 720 000) for a business owner, even if the project is cash flow positive from month one and/ or even if the investment means that load shedding (administered power failures) won’t affect the home or business owner.
One should note that the ANC government in their Integrated Resource Plan (IRP)2010 Update 2013 said that electricity users might install renewable energy and embedded generation with or without the consent of government and with or without government incentives. This is happening, mainly because of the three government “incentives” of overinflated electricity prices, load shedding, and lack of promised electricity supply, forcing electricity users to find alternatives.
Of course our target market would be anyone with a roof and with an existing electrical supply. The wires are already in place. And no Environmental Impact Assessments (EIAs) or big monetary tendering outlay are required.
It is also good for South Africa, as in my opinion, we should have 426 GW of electricity, and we have 33 GW. Eskom’s own projections show that we should have 50 GW by now, and other commentators are saying we should have between 50 and 100 GW by now.
Whatever the total is, it should be substantially more than it is now, and within the next 20 years, almost all of Eskom’s existing power stations will reach end of life, which implies a massive build out and requirement for energy in South Africa and Southern Africa. At least 100 GW of new build will be required in the next 20 years. Private people and capital can provide this build out at a third of Eskom’s capital cost; and it will be completed on time and to budget and to the desired quality.
We are also suffering from droughts, and it makes sense to use spare capacity in a renewable energy system (and even in a fossil fuel system) firstly for pumped storage, secondly for charging batteries, thirdly for making hydrogen, which can be converted to methane and easily stored and used in gas-engines (generators which use gas as the fuel source), and then for desalination. These energy storage options and desalination are essentially free in a Renewable Energy system, besides the capital and OMI (operations, maintenance and insurance) cost.
Furthermore there are private generators of energy (called Independent Power Producers – IPPs) in South Africa, who have built power stations, and who are being paid for electricity, but who aren’t physically delivering that electricity, because Eskom hasn’t built the Transmission and Distribution (T&D) network yet. The other problem with IPPs is that they are simply “off-balance sheet financing” for Eskom, where Eskom is still committed to payments for 20 years, just as if they had borrowed the money and built the power stations themselves.
Embedded Generation already has all the T&D networks in place. And it reduces the maintenance requirement on the grid. Our politicians don’t like it though as they believe that it will reduce their income, but imagine a grid with at least three times as much electricity as now, and where all that electricity flows via a nationally owned electricity grid. The carriers of the electricity (government) would make substantially more money than they make now, but they don’t listen to me, and perhaps they will listen to you or us?
I realise that you probably don’t want to invest in hundreds or perhaps thousands of small projects, but what of funding a New Specialist Local Finance House or New Bank, which specialises in Solar Leasing?
I believe that you could achieve substantially more than your desired 10% ROI (Return on Investment) for the project, or you could use the surplus to fund projects in underprivileged areas.
I look forward to your reply and to continuing our discussions.
– David Lipschitz FSAAEA, computer scientist, mentor and energy analyst with a Bachelor of Science Honours and an MBA, has run a Software Development business since 1994 and an Energy business since 2008. David motivates people to change the way they think about their environment and shows people that it is possible to live a sustainable lifestyle with minimal impact on the earth. Keynote, conference and workshop topics include energy efficiency, load shedding, and producing electricity.
photo credit: Axel Bührmann via photopin cc