Eskom has objected to Discovery Green's application to trade renewable energy, citing the National Energy Regulator of South Africa regulations that prevent issuing licenses to private traders in areas where Eskom's distribution entity operates.
According to Business Day, Eskom's distribution division stated last week that approving Discovery Green's application, along with others, would result in dual power suppliers in some areas, which the rules do not accommodate.
Discovery, a JSE-listed financial services group, launched its renewable energy business in September last year, aiming to provide renewable energy to enrolled businesses by 2024.
Discovery Green recently published insights from a report of over 300 connection points, 58 companies, and various renewable energy facilities, highlighting that current business strategies for procuring renewable energy are short-sighted and risky.
The report showed that businesses are over-reliant on solar energy, which could increase their total energy costs by over 50% in the long run due to the rapid growth of the solar industry in South Africa.
In a time of load shedding, a surge in electricity costs, and looming global carbon penalties, businesses are prioritising renewable energy procurement. South Africa's abundant renewable resources add urgency to these efforts, but current strategies may not be scalable or appropriate.
Andre Nepgen, Head of Discovery Green, said: “While with traditional largely coal-generated electricity, you pay for what you use; with renewables, you pay for what was generated, regardless of whether your business uses the energy or not. This is the fundamental difference between the procurement of renewable energy and utility-supplied electricity - the point of payment."
The research indicates no industry’s consumption profile matches solar generation perfectly, complicating future renewable energy procurement. The analysis reviews five common renewable strategies and their long-term financial benefits across seven industries, testing them against various future scenarios like national solar oversupply and carbon taxes.
Nepgen warned of a strong bias towards solar energy, driven by its immediate financial benefits but neglecting long-term consequences.
Typically, after replacing 45% of their energy needs with solar, businesses face a 77% premium to fulfil the remaining 55% with renewable sources.
This is because businesses must find a supply of renewable energy only for their leftover night consumption, which is an extremely expensive product to offer for any renewable energy supplier.
This cost dynamic is often overlooked during sales processes.
The report highlights the underappreciated variability in renewable generation and business consumption. Solar output can fluctuate by more than 14% month-to-month, and wind by up to 33%.
Consumption variability among industries can be as much as 6.5 times. Ignoring these factors means the perceived value of renewables might not materialise.
Nepgen suggested diversification in energy generation and consumption as the solution. “By pooling together renewable energy from various sources, you have the ability to create a diversified energy portfolio that is more resilient to fluctuations in generation."
A portfolio of diverse business consumption profiles can create an ecosystem that achieves a higher percentage of renewable coverage, with a negligible risk of wasted generation.
The results showed that where a single business can achieve a 49% renewable energy coverage level before energy becomes wasted, a portfolio of five businesses from different industries acting together can increase this coverage level to 78%.
“Importantly, businesses can use this model to replace at least 90% of their energy consumption with renewables in a single transaction, eliminating the risks presented by low coverage solar-focussed strategies” said Nepgen.
For homeowners, data from Nersa showed that the regulator registered 124 solar generation facilities in the last three months of 2023 – October to December – capable of generating 605MW of energy and representing R7.8 billion of investment.
Absa however, noted that going off-grid is less of a priority due to recent energy-supply recovery. Despite the importance of reducing electricity costs, affordability remains a barrier to alternative power solutions.
Eskom recently achieved 100 consecutive days without power cuts, marking a significant achievement after years of blackouts. This has driven a boom in small-scale solar installations, although high costs limit this option to affluent families.
Banks are now offering loans linked to alternative power solutions.
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