A new study commissioned by the South African Wind Energy Association (SAWEA), against the backdrop of volatility and uncertainty in the current electricity landscape in SA, has revealed that the role of Distributed Generation Renewable Energy (DG-RE) in the SA electricity market is currently undervalued and that it has a significant role to play in supporting the delivery of clean, cost effective and reliable power to South African business.
Launched at the at Res4Med&Africa Innovation Conference in Cape Town on Monday, the
SAWEA study examined 14 different scenarios in five different SA municipalities. The study
found that wind and solar systems embedded in distribution networks could reduce
significant load on municipalities; lowering the price of electricity, preventing electrical
interruptions, reducing losses and providing an effective and efficient contribution to
resolving SA’s power crisis.
“Within the current regulatory environment, improvements in renewable energy technology
and falling prices are not reaching consumers directly and quickly enough and it is within this
context that the report should be considered,” says CEO of the South African Wind Energy
Association, Brenda Martin.
Distributed generation refers to a variety of technologies that generate electricity at or near
where it will be used, such as solar PV panels, wind and combined heat and power and may
or may not make use of existing electricity infrastructure for distribution to customers.
“Distributed generation can directly serve loads behind-the-meter as we have seen
increasingly in SA over the past years, but they can also make use of existing public network
infrastructure to supply offtakers that are not co-located with the energy plant. This type of
scheme presents a number of advantages at various levels, and this is what we wanted to
better understand through the study” explained Kevin Minkoff, chairperson of SAWEA’s
Technical Working Group.
He said Eskom tariff increases and continued struggles only strengthened the business case
for DG-RE plants and the role these could play in supporting the sustainable delivery of
power.
The report also highlights opportunities for investors. “This is an exciting time for current and
prospective investors in the growing South African renewable energy market,” said Martin.
“This is an important piece of work for entities interested in investment other than utility-scale
as it reveals opportunities and potential routes for corporate PPAs (power purchase
agreements) to step forward to become part of the solution to SA’s power woes by relieving
pressure on the grid.”
Minkoff explains that PPAs support the purchase of electricity at an agreed price for an
agreed period, typically 10-20 years. Instead of buying power directly from utilities (typically
state-owned as in SA), several businesses are now beginning to consider how to purchase
electricity from independent generators, as well as investing in generation assets
themselves – within the strict limits of the current regulatory framework.
“PPAs have economic and environmental advantages,” says Martin, adding that large
multinationals are beginning to apply their sustainability pledges to their global supply chains
and data centres, which has led to a significant uptick in corporate PPAs globally.
“However, in South Africa, current regulations are restricting the uptake of corporate PPAs.
To support growth of the industry, the SAWEA report calls for regulatory reforms to allow for
direct PPAs between municipalities and energy intensive users and details how this could
provide security of supply to heavy industry at lower tariffs,” said Martin.
“It important for local municipalities and utilities to revise planning methods, devise new
technical specifications and update commercial arrangements.”
Investing in DG-RE plants can help corporates to meet environmental targets, giving them
an instrument to evidence compliance with increasing climate change reporting and
corporate governance requirements.
Launched at the at Res4Med&Africa Innovation Conference in Cape Town on Monday, the
SAWEA study examined 14 different scenarios in five different SA municipalities. The study
found that wind and solar systems embedded in distribution networks could reduce
significant load on municipalities; lowering the price of electricity, preventing electrical
interruptions, reducing losses and providing an effective and efficient contribution to
resolving SA’s power crisis.
“Within the current regulatory environment, improvements in renewable energy technology
and falling prices are not reaching consumers directly and quickly enough and it is within this
context that the report should be considered,” says CEO of the South African Wind Energy
Association, Brenda Martin.
Distributed generation refers to a variety of technologies that generate electricity at or near
where it will be used, such as solar PV panels, wind and combined heat and power and may
or may not make use of existing electricity infrastructure for distribution to customers.
“Distributed generation can directly serve loads behind-the-meter as we have seen
increasingly in SA over the past years, but they can also make use of existing public network
infrastructure to supply offtakers that are not co-located with the energy plant. This type of
scheme presents a number of advantages at various levels, and this is what we wanted to
better understand through the study” explained Kevin Minkoff, chairperson of SAWEA’s
Technical Working Group.
He said Eskom tariff increases and continued struggles only strengthened the business case
for DG-RE plants and the role these could play in supporting the sustainable delivery of
power.
The report also highlights opportunities for investors. “This is an exciting time for current and
prospective investors in the growing South African renewable energy market,” said Martin.
“This is an important piece of work for entities interested in investment other than utility-scale
as it reveals opportunities and potential routes for corporate PPAs (power purchase
agreements) to step forward to become part of the solution to SA’s power woes by relieving
pressure on the grid.”
Minkoff explains that PPAs support the purchase of electricity at an agreed price for an
agreed period, typically 10-20 years. Instead of buying power directly from utilities (typically
state-owned as in SA), several businesses are now beginning to consider how to purchase
electricity from independent generators, as well as investing in generation assets
themselves – within the strict limits of the current regulatory framework.
“PPAs have economic and environmental advantages,” says Martin, adding that large
multinationals are beginning to apply their sustainability pledges to their global supply chains
and data centres, which has led to a significant uptick in corporate PPAs globally.
“However, in South Africa, current regulations are restricting the uptake of corporate PPAs.
To support growth of the industry, the SAWEA report calls for regulatory reforms to allow for
direct PPAs between municipalities and energy intensive users and details how this could
provide security of supply to heavy industry at lower tariffs,” said Martin.
“It important for local municipalities and utilities to revise planning methods, devise new
technical specifications and update commercial arrangements.”
Investing in DG-RE plants can help corporates to meet environmental targets, giving them
an instrument to evidence compliance with increasing climate change reporting and
corporate governance requirements.
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Eskom will also benefit from DG-RE projects as the loss of revenue is more than offset by a
reduction in the cost of distribution. Additionally, the practice of “wheeling”, whereby
renewable energy plants pay a fee to use the national grid to transport the electricity from
the production site to the end user can also benefit the state power utility.
“While government has reaffirmed its commitment to renewable energy and private sector
investment in renewable projects there is still much to be done to make these commitments
a reality,” said Martin. “This report confirms the potential of DG-RE in the South African
market and offers practical suggestions as to realising these. Renewable energy is
increasingly being accepted as the way of the future. We hope this report will make a
substantial and meaningful contribution to the growth of the sector in SA.”
The Res4Med&Africa Innovation Conference seeks to put the spotlight on innovation and
sustainability, specifically with regards to regulation, as well as new business opportunities in
the renewables sector.
reduction in the cost of distribution. Additionally, the practice of “wheeling”, whereby
renewable energy plants pay a fee to use the national grid to transport the electricity from
the production site to the end user can also benefit the state power utility.
“While government has reaffirmed its commitment to renewable energy and private sector
investment in renewable projects there is still much to be done to make these commitments
a reality,” said Martin. “This report confirms the potential of DG-RE in the South African
market and offers practical suggestions as to realising these. Renewable energy is
increasingly being accepted as the way of the future. We hope this report will make a
substantial and meaningful contribution to the growth of the sector in SA.”
The Res4Med&Africa Innovation Conference seeks to put the spotlight on innovation and
sustainability, specifically with regards to regulation, as well as new business opportunities in
the renewables sector.
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