AFRICA’S RE­NEW­ABLE EN­ERGY ARE IN­VESTORS KEEN?

There has been a strong in­vest­ment case for re­new­able en­ergy world­wide for a num­ber of years now, and this case has sig­nif­i­cantly gained mo­men­tum in the last two years. Africa too, es­pe­cially South Africa, has in­di­cated a ro­bust ap­petite for the up­take of

Nomad Africa Magazine - - Focus Africa | Solar Powered Future - Words: JUSTIN SCH­MIDT

Much of the ini­tial de­mand was driven by height­ened in­ter­est fol­low­ing the wide­spread load-shedding that was ex­pe­ri­enced across South Africa in 2008, and con­tin­ues due to the sharp in­creases in elec­tric­ity tar­iffs. Con­sumers and busi­nesses alike be­gan to search for ways to be­come more en­ergy in­de­pen­dent in or­der to mit­i­gate the risks of be­ing caught with­out elec­tric­ity and as well as find ways to ini­ti­ate cost-cut­ting mea­sures by hedg­ing their elec­tric­ity costs. While the ac­tual so­lu­tion, and costs thereof, may dif­fer some­what be­tween house­holds and busi­nesses – be they small, medium or large – the un­der­ly­ing mo­ti­va­tion re­mains the same: Be­ing the ‘en­ergy ef­fi­ciency jour­ney’, an en­ergy jour­ney that has the ad­di­tional ben­e­fit of cut­ting down on the en­vi­ron­men­tal foot­print.

So­lar, in par­tic­u­lar, has taken off as a vi­able and af­ford­able way of de­liv­er­ing power both to house­holds and en­ter­prises. This is due to the abun­dant sun­shine that South­ern Africa re­ceives: It has one of the high­est so­lar ra­di­a­tion rates in the world, mak­ing in­vest­ment into this form of en­ergy a log­i­cal propo­si­tion and one that is not depen­dent on sub­si­dies.

Within the so­lar land­scape, there are a va­ri­ety of op­tions avail­able and cer­tain trends have emerged in the res­i­den­tial and com­mer­cial mar­kets. So­lar wa­ter heat­ing is a popular option for house­holds for its rel­a­tive af­ford­abil­ity and quick pay­back pe­riod, and it has seen big­ger up­take than So­lar PV res­i­den­tially. So­lar PV though is a growth area com­mer­cially, particularly for shop­ping cen­tres, man­u­fac­tur­ers, whole­salers and the agri­cul­tural in­dus­try.

There has been much in­ter­est and up­take from the agri­cul­tural sec­tor, and the bank has ap­proved fund­ing for a num­ber of dy­namic deals in the past few months; with an olive and wine farm in the Western Cape area of South Africa in­vest­ing in a So­lar PV in­stal­la­tion in or­der to pro­vide the en­ergy re­quire­ments for the wine har­vest­ing, cel­lar and olive press­ing ac­tiv­i­ties. While busi­nesses tend to look at in­vest­ment in­di­ca­tors, such as Break Even, In­ter­nal Rate of Re­turn and Net Present Value, they of­ten take a view on their en­ergy costs against the cost of loan re­pay­ments. If fund­ing is struc­tured correctly, cus­tomers have not only seen their So­lar PV pro­duc­tion in cost par­ity with the elec­tric­ity they’re off­set­ting, but also re­alise a cash flow neu­tral po­si­tion by lend­ing to fund this in­vest­ment. This in­vest­ment case is fur­ther sup­ported by the fact that in­stal­la­tions less than 1 megawatt (MW) can be de­pre­ci­ated in one year for tax pur­poses.

This is only one of many ex­am­ples of a So­lar PV in­stal­la­tion that is re­spond­ing to en­ergy de­mands and mov­ing busi­nesses – and in­di­vid­u­als – from util­ity to own pro­duc­tion. Growth of these re­new­able en­ergy so­lu­tions will un­doubt­edly

spur on in­dus­tries across South­ern Africa and the con­ti­nent, but cur­rent reg­u­la­tory un­cer­tainty and a neg­a­tive news cy­cle in South Africa cre­ate an un­nec­es­sary un­cer­tainty around the sec­tor. How­ever, once the draft reg­u­la­tions on Small-Scale Embed­ded Gen­er­a­tion in South Africa is passed, re­new­able en­ergy for in­stal­la­tions less than 1 MW will gain trac­tion thanks to the greater cer­tainty on is­sues like li­cens­ing, bank­ing, net metering, and wheel­ing.

Al­ready, the in­dus­try it­self is work­ing to over­come the un­cer­tainty through ini­tia­tives like the PV GreenCard, which was launched by the South African Pho­to­voltaic In­dus­try As­so­ci­a­tion (SAPVIA) on 26 May and il­lus­trates the com­mit­ment of the in­dus­try in introducing stan­dards that will move the coun­try for­ward on its clean en­ergy jour­ney by en­sur­ing com­pli­ance of So­lar PV installers.

With Tesla Pow­er­wall 2 land­ing in South Africa soon, we are ex­cited for the next stage in the re­new­able en­ergy jour­ney. What the so­lu­tion marks is the rise of lithium ion bat­tery stor­age, which al­lows the en­ergy to be stored and used at a later stage. As we see the mas­sive ramp up in man­u­fac­tur­ing ca­pac­ity glob­ally, the out­come will be for prices to drop and in time, the in­vest­ment case for these types of so­lu­tions will gain pop­u­lar­ity.

We have seen greater in­ter­est from our cus­tomers in So­lar PV, which is be­ing driven by a strong in­vest­ment case. As this move by house­holds and busi­nesses con­tin­ues to ramp up in South Africa, we will see the im­ple­men­ta­tion of more in­no­va­tive and seam­less so­lu­tions that en­able house­holds and busi­nesses to un­lock the po­ten­tial of cleaner en­ergy. As such, banks and financial ser­vices providers across the con­ti­nent ul­ti­mately need to fo­cus on build­ing value propo­si­tions that al­low their cus­tomers to har­ness the prospects that re­new­able en­ergy pro­vides by mak­ing house­hold and busi­ness op­er­a­tions more cost-ef­fec­tive and en­ergy ef­fi­cient.

There has been much in­ter­est and up­take from the agri­cul­tural sec­tor, and the bank has ap­proved fund­ing for a num­ber of dy­namic deals in the past few months; with an olive and wine farm in the Western Cape area of South Africa in­vest­ing in a So­lar PV in­stal­la­tion.

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