Updated: Jun 24
By Argon Poorun
One of the Team Mahali engineers, Argon Poorun, recently presented at the Green Building Council of South Africa (GBCSA) Conference on the developing market for rooftop solar, energy efficiency and storage interventions. In his capacity at GreenCape, he works with public and private actors to stimulate growth and investment into these green economic sectors. This is a summary of the increasingly attractive business case.
Image 1: Commercial rooftop solar PV system in Cape Town City Bowl
Context and Macro Environment
South Africa’s dependence on a vertically-integrated, ‘single operator’ model run by Eskom has decreased over the past ten years with the introduction of new technologies. Ones that are cheaper, capable of being decentralized and have less carbon emissions. The growth of this decentralized market is evidenced by the evolution of the small-scale embedded generation and energy storage. There are five main influences on the market and are listed below:
1. South Africa's above average inflation electricity price raises
The average standard Eskom tariffs have risen by almost 300% since 2007. Historical data from both Eskom and StatsSA shown in Figure 1, reveal that while inflation has almost doubled since 2009, Eskom prices have tripled over the same period. The average standard Eskom tariff will increase from 116.72 c/kWh to 128.24 c/kWh in 2021— an increase of 9.8%. This is on top of the 5.22% tariff increase the power utility has already negotiated for the same year, (2021) and will bring the total hike to about 15%.
Figure 1: Electricity prices rising trend. (2003-2022) Source: StatsSA
2. National energy insecurity
Research published by the Council for Scientific and Industrial Research (CSIR) shows that due to the woes in national energy supply, specifically relating to below expected energy availability factors (EAFs) of base-load coal plants cause by performance and maintenance issues. Load-shedding will be here to stay, for at the minimum of the next 3-5 years. This will vary between stages 2-6 depending on the efficacy of the national response.
Figure 2: Load-shedding in a Snapshot. Source: CSIR.
3. Decreasing technology costs
The global average price for solar photovoltaic panels (PV) in 2018 was R1.22 kWh, down from R5.33 kWh in 2010, a ~77% drop in eight years. As a result, rooftop solar PV has been accelerating in growth locally, given the competitive price, technical maturity, and ease of implementation. Storage, however, remains expensive. Figure 3 gives an idea of the relative costs to provide 2 hours of storage backup for a 300kWp commercial scenario with the current most promising option of Li-ion batteries.
Figure 3: Cost of Storage is Still High. Source: GreenCape
4. Supportive policies, regulations and tariffs
Municipalities have acknowledged the inevitability and necessity of the energy transition. There has been significant progress in the development of enabling policy and tariffs as evidenced by Figures 4 & 5 below.
Figure 4: Municipalities getting on board. Source: GreenCape
Figure 5: Feed-in Tariffs for Excess Generation in the Western Cape. Source: GreenCape
5. Well-adapted finance options
Commercial banks have seen significant growth of successful embedded generation projects on their loan books with portfolios tripling in the past two years. As a result, perceived risk is stabilising, and finance offerings are becoming more competitive. The commercial banks are also exploring new approaches to loan collateral. Whereas in the past security has been tied to the asset or balance sheet of the client, financiers increasingly prefer agreements which tie security to the property on which the asset is installed.
Net-Zero Housing: Understanding the Business Case
Given the above, the commercial, industrial and agricultural sectors will remain the highest growth sectors for energy interventions for the foreseeable future. This is due to the opportunity costs related to energy insecurity. Residential applications lag behind due to a weaker business case, the large commitment demanded relative to the average household and the nascent stage of the energy transition. Still, residential energy users can benefit from a 'staged proactive approach'. This approach includes demand-side management through energy efficient appliances, smart metering, and technologies such as solar water heaters and rooftop PV retrofits. This is one of the aims of Team Mahali: to develop cost effective architecture-energy designs that use both active and passive energy strategies. The result is extreme energy efficiency in new or existing buildings. By doing things differently, we work towards our vision, of a transformed residential market and an accelerated energy transition.
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