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South Africa is an appealing market to storage companies considering international expansion.
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South Africa is encountering increasing instances of Energy requirements outstripping supply. ‘Load shedding’ occurs when power is cut from sections of the electricity grid, in order to relieve the system of loads it cannot process.
This is necessary for two reasons. Firstly, South Africa, a nation dependent on coal for the vast majority of its power, cannot generate enough energy to meet demand at all times. Whether this is about generating capacity or coal supplies is a matter of constant controversy. Secondly, the transmission and distribution infrastructure cannot process the flow of that power reliably, and is in urgent need of major upgrading. When the demand from consumers is too high, the surge in flow can cause black outs. Black outs may take days to restore, as power facilities have to re-start their units, which is difficult for enormous boilers, turbines and compressor systems.
However, whilst necessary in the context, load shedding is a highly undesirable scenario for social and economic development. In 2019, ‘Stage 4’ of the utility’s scheduled power cuts showed no sign of improvement. This had a significant impact on business productivity and was highlighted as a key factor in South Africa’s stalling economic growth. Small businesses in the manufacturing sector are particularly impacted.
Eksom Holdings, is a South African government owned utility that generates, transports and distributes approximately 95% of South Africa’s electricity , as well as suppling to the grids of neighbouring countries. Around 85% of Eskom’s electricity is generated from coal. The organization supplies approximately 6,000 industrial and mining, 51,000 commercial, 82,500 agricultural and 5.6 million residential customers.
With rolling power cuts affecting the population more and more deeply, to the point that cutting power to areas is now a fundamental part of Eskom’s operating strategy, it is underserving the country for a variety of reasons.
Ultimately, irrespective of the complex reasons behind the problem, people are unhappy with having disrupted energy supply. Those who can afford to – both residentially and commercially speaking – are becoming more and more likely to consider a degree of independence from the grid. The best method for that is installing Solar PV panels, and having suitable battery storage to hold the energy for times it is needed. Hybrid solutions, utilising solar and storage in conjunction with a diesel generator, also represent a suitable solution. Robben Island, for instance, implemented a fairly well-publicised hybrid diesel-solar PV-battery pilot project, which went live in late 2017.
For investors, there is ample opportunity in the South African market to solve the generation and storage problem from both a commercial and a residential perspective. However, thus far, there have been a variety of issues that have slowed demand pick-up in the private market.
The more affluent in South Africa have sought residential battery storage solutions, such as the Tesla Powerwall.
Tesla have had problems in the market due to factors both within and beyond their control:
As one Expert told us,
Expert Bio:
Expert has over a decade of in-depth work experience in the clean energy industry and has been based in South Africa for 9 of those years. His work has ranged from a solar plus storage product strategy in Africa for a solar PV/battery manufacturer, to working with government on enabling regulations for the distributed generation sector.
Since founding his own consulting company in 2010, the Expert has worked with leading clean-tech companies and managed a number of energy studies across the continent. Projects have included tariff studies, renewable energy policy, solar market entry strategy, energy economics, forecasting, market overviews, and legislative/regulatory reforms in various countries.
Other background: Expert obtained an Energy Systems Engineering B.S. degree at Stanford University; and also volunteers in his spare time to run an educational sporting non-profit for kids in South Africa.
In the absence of major manufacturers with direct presence on the ground,
Expert Bio:
Expert has been involved in renewable energy in South Africa since career began in 2011, working as consultant in the sustainability division of a leading consultancy. Expert was involved in multiple strategies for investigating in short, medium and long term renewable opportunities (clients included large manufacturing, ICT, construction, retail and other JSE listed clients).
Career then moved to a turnkey energy and renewable energy company, where Expert was involved in multiple areas of the company including: completing tenders, proposals and detailed designs for renewable energy projects. Expert was also a project manager for the construction of and commissioning of Solar PV plants not greater than 1MW. During his time in that role, Expert was involved in developing off grid strategies for residential estates and hotels with chalets. This required detailed investigation of small scale roof tops (less than 5kW) with multiple options for introducing battery storage technology.
The overall picture seems to present a market that is now primed and reaching a level of maturity that makes it an attractive proposition for major manufacturers to take up a direct presence.
Penetration of rooftop solar and storage in the residential sector over the last 5 years has been a story of slow uptake. Primarily, this has been due to regulatory issues and municipal implementation of policy, alongside a consumer base that could just about accept the impacts of a small amount of load shedding.
However, according to an Expert we know who specialises on African Sustainable Infrastructure Sectors, “the coming years will see an expansion as a result of significant Eskom price increases and poor long-term energy security. Better relative economic returns and supply reliability in the context of a worsening performance from the utility looks likely to result in a period of strong growth for the sector.”
One South African Renewables Investment and Strategy Expert told us: “The local battery suppliers I spoke to a couple months ago were all out of stock due to a rise in consumer demand after the rolling blackouts started again in South Africa.”
The regulatory landscape is something currently being refined by the South African government. It is a relatively new area of the market, and is in development.
In terms of “smart” storage, selling back to the grid is possible in two municipalities. Experts we know who specialise in this area have stated:
– “There is opportunity for wheeling of energy between users; using smart systems is well received for majority of potential client base (middle/high earners).”
– “There is a requirement for individuals and companies to register all systems with municipality under 1MW. Over 1MW will require licensing to operate.”
Pangea Strategic Intelligence has several Experts who can guide clients through the nuances of this if they are considering expansion into South Africa.
Contact Mr Callis on 020 7551 0782 or by email [email protected] to connect with an Expert.
