Renewable energy — power in numbers
The growing global shift to renewable energy has an added layer of relevance in SA, where our concern is not only the need to accelerate the transition to clean energy and carbon neutrality but also to deal with the deteriorating reliability and increasing costs of our national electricity supply.
Load-shedding has been with us for more than a decade now and, given the current state of Eskom’s capacity, is set to be around for a long while to come.
The number of full days of load-shedding since January are already at half the total for the whole of last year, and even without breakdowns and cable theft, Eskom needs 40006000MW of additional capacity to meet demand while still being able to take plants offline for maintenance.
Electricity cuts are not only a frustrating inconvenience but come with costs to business including lost productivity, reduced trading hours, losses of perishable stock, and installing backup power supply or alternative energy solutions.
For energy-intensive manufacturing operations, delays in production ripple through the supply chain with negative impact on the reliability and competitiveness of local industry.
Ultimately, the cost to the local economy of this unreliability comes in lost opportunities for new investments or expansions of existing production facilities, translating into fragile job security and loss of new job creation opportunities.
If we cannot rely on the national grid for security of power supply, then industry must find its own solutions to remain productive and competitive, and in turn protect economic activity and retain jobs in our metro.
Self-generation of renewable energy, especially as part of a decarbonisation and carbon-offsetting strategy, offers a solution to achieving security of electricity supply but there are substantial hurdles in terms of the costs of investment and the scale required for viability that put this out of reach of most individual businesses.
The announcement last year that self-generation of up to 100MW is exempt from regulatory constraints was welcomed for the potential to unlock business opportunities in the energy generation space and add much-needed capacity to the constrained national grid.
However, at an estimated investment of R2 billion for a facility generating 100MW, such self-generation by a single user is only really feasible for huge operations such as mining, which have sufficient energy demand and a long project timescale of about 20 years in which investment payback can be achieved.
An alternative is an Independent Power Producer (IPP) supplying end-use customers by “wheeling” power through the municipal grid in a threeway agreement between the IPP, its customers and the municipality.
A renewable energy IPP investor, however, would need a scale of at least 100MW to provide competitive supply, as well as long-term offtake agreements with its customers for security of the investment.
Industry in Nelson Mandela Bay has a collective demand of about 250MW, but only a few users top 10MW.
This is where the Business Chamber believes that the solution to the power question lies in the power of collaboration between the metro’s biggest electricity users.
For this purpose, the Chamber launched a renewable energy cluster this week with the aim of attracting sufficient interest and support from industry to offer a viable business proposition to a renewable energy IPP investor.
A cluster of customers with energy demand and power offtake commitments offers the critical mass and scale to make an IPP investment viable, while diluting investor risk and creating an energy market between the participating companies to share costs and capacity.
More than 20 high energy industrial users in the metro have already indicated strong interest in exploring this option.
The cluster need not be limited to industrial energy users, and we foresee participation rolling out to shopping malls, small businesses and eventually households.
We believe this arrangement of businesses collaborating to form a clustered customer base for a renewable energy provider will be a first in SA and a model for others to follow, as well as an opportunity for Nelson Mandela Bay to get in on the ground floor of the emerging global renewable energy economy.
By adding generation capacity to our local grid, we also envisage that our solution will reduce the need for load-shedding in the metro.