While the lights have stayed on after the national elections, businesses across the board are paying close to 34% more for their power than they did two years ago. Brandon Horn, Head of Commercial at SolarAfrica, cautions that these increases are not likely to change any time soon, and highlights the benefits of wheeling for a brighter bottom line.
It has been estimated that SMEs collectively account for roughly 30% of South Africa’s GDP and employ more than half of the country’s labour force, making up more than 90% of the registered businesses in South Africa. With the International Monetary Fund recently downgrading its economic-growth forecasts for South Africa to a meagre 1%, it’s never been more crucial for these businesses to stretch every cent as far as possible.
However, businesses are battling to beat rising electricity tariff costs that have increased by 450% since 2008. Let that number sink in. That is almost four times as much as inflation over the same period, leaving many with no choice but to pass these costs down to their consumers.
To avoid the financial repercussions and ripple effects, many businesses are trying to mitigate tariff hikes by trying alternative energy options, particularly when it comes to solar. While solar does provide a cheaper power alternative, buying a full system in cash comes at a hefty cost and requires long-term maintenance and insurance that falls on the business owner’s shoulders. Renewable energy companies have taken the solar game a step further and made it more accessible by offering it on financed terms. This is known as a Power Purchase Agreement (PPA) that typically requires no upfront investment from the business side and offers substantial savings over the long term.
But what happens when on-site solar isn’t enough? What if a business needs more renewable energy to boost its sustainability or reduce its electricity bills, but it simply doesn’t have the space or capabilities for more solar at its premises?
Enter the option of wheeling. Wheeling allows businesses to buy electricity directly from Independent Power Producers (IPPs). The IPPs generate this power through utility-scale solar, wind, or hydro projects, making it available for consumption through the national grid. The wheeled energy that a business uses is credited against their utility bill – essentially lowering the owed amount.
The cost-benefit? Wheeling tariffs are up to 50% cheaper than utility power. Looking at SolarAfrica’s wheeling solution, a day-time business that operates over an 8-hour period can replace 70% to 90% of its utility power consumption with wheeled electricity. These numbers can have a significant impact on operational costs. A 24-hour user of electricity that has a bill of roughly R190 million a year, could typically see savings between R40 – R55 million in the first year, depending on their contract length which affects the wheeling tariff.
The benefits of wheeling extend beyond just cost savings. Businesses really start to see a new dawn of energy independence unfold when they take a layered approach to the power they use. When businesses couple wheeling with a battery storage system, they gain an additional layer of security and cost control.
How? The ability of a business to seamlessly switch to the clean energy stored in batteries ensuring uninterrupted operations during power outages is priceless. It would mean less downtime, fewer lost sales, and a happier workforce. Plus, with time-of-use tariffs, there is room to strategically charge batteries during off-peak hours when electricity is cheaper, optimising energy costs even more. It’s all about getting the cheapest form of electricity for specific times and applications, whether it’s from wheeling, solar, batteries or the grid.
With South Africa – and the world – facing a climate crisis businesses have a responsibility to do their part. SolarAfrica, for example, has recently broken ground on its first utility-scale solar farm based in the Northern Cape, known as SunCentral, that will provide power on a one-to-many basis, meaning more South African businesses can access cheaper, cleaner energy via wheeling.
By choosing wheeling, businesses are directly contributing to the development and growth of the renewable energy sector in South Africa. The more businesses that sign up and use wheeling, the more support there is for IPPs to embark on utility-scale projects geared toward easing the power generation burden off Eskom. When a business signs a Virtual Power Purchase Agreement (VPPA) for wheeling it has a transparent view of the amount of green energy being used – a major selling point for eco-conscious consumers. This green energy can be quantified by the amount of carbon credits they receive from SARS and renewable energy certificates (RECs).
It is clear that wheeling holds massive cost-saving potential for South African businesses. As the technology matures and regulations become more streamlined, wheeling is poised to become a game-changer for the country’s energy landscape giving businesses the autonomy to choose the best energy source and schedule energy consumption. Businesses are also empowered to negotiate the tariffs they pay – something that has never been an option with utility power. By accessing other forms of electricity through wheeling, a business has more bargaining power and can leverage aspects like contract length and agreement size to influence their tariff.
Securing South Africa’s energy future is not only a crucial step in contributing to the growth of our country’s economy but should be at the top of the priority list for building a sustainable operation that is more than adequately geared to power through the darkness for the long term.
Opinion piece by Brandon Horn, Head of Commercial at SolarAfrica.
