The alleviation of load shedding at the beginning of 2024 has been a welcome relief, particularly as we approach the high-demand winter. The reasons behind this respite, given the known challenges of our country’s energy sector, are important for businesses as they consider their future energy procurement plans. 

By comparing weekly electricity demand in 2023 (about 4,200GWh) with the current weekly demand in 2024 (about 4,100GWh), it is evident that economic activity, as gauged through electricity use, has remained consistent. There is also no significant improvement in the national energy availability factor in 2024 compared with 2023, which is a positive indication considering the ongoing maintenance and ageing of Eskom’s fleet.

It is likely that the private market for renewable energy also played a role. Despite the limited number of new utility-scale wind and solar facilities commissioned in 2023, the embedded or rooftop solar market has installed more than 3GW of generation capacity. The cost savings of solar over Eskom and municipality tariffs, as well as diesel generation, have therefore helped to provide some relief for the country.

But is this strong reliance on solar the right strategy for businesses in South Africa?

Since the inception of Discovery Green in October 2023, we have analysed more than 300 business locations and assessed more than 30 renewable energy generation sites. Our findings indicate a prevalent error in renewable energy procurement strategies among businesses aiming for a clean energy transition. Whether the driving force behind the transition is for commercial or ESG reasons, a common misstep involves an initial rush towards solar energy procurement with an assumption that future energy needs can be seamlessly and cost-effectively integrated at a later stage. While solar allows businesses to initially offset up to half of their grid-drawn electricity consumption, it is not a comprehensive long-term solution.

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Businesses often reach a tipping point of wasted generation after meeting half of their total energy needs through solar capacity. At this point, leftover consumption patterns shift dramatically to a heavy off-peak profile, which renewable energy technology can either not match, or can only match at a prohibitive cost. As a result of this tendency to procure solar first, South African companies are winning the battle but losing the war when it comes to running fully on renewable energy. Once a business is heavily invested in solar, future procurement of renewable energy becomes more expensive and difficult. 

A solution that is often suggested is the use of batteries to store excess solar energy, with distribution of stored energy during the evening off-peak period. The economic outlay, however, for implementing a battery and solar combination to cover 70% of energy requirements, is more than twice the cost of traditional utility power from Eskom. A solar and battery storage solution is more viable in high load shedding scenarios where the reliance is on diesel, but it is still not a cost-effective solution. Wind generation, although more cost-effective than batteries, presents a similar economic challenge, since it can only cover about 65% of needs before energy is wasted. South Africa also lacks a liquid market for renewable energy, further complicating the procurement of renewable energy to offset shortfalls.

Solution

There is, however, a proposed solution that is simple yet profound: diversification. By combining industries that have different consumption patterns, and renewable energy technologies we can create a portfolio that optimises renewable energy use. This approach not only reduces costs but also enhances competitiveness and sustainability as it unlocks the future for greater private procurement. For instance, a manufacturing company that halts operations during summer holidays could partner with the hotel industry that experiences increased demand during this period to use its excess energy. By combining different industries and different consumption profiles, we have found that a portfolio can achieve a much higher percentage of renewable energy use for everyone, without generating wasted energy. 

Our analysis reveals that while one industry might achieve 50% renewable penetration individually, collaboration among three diverse industries can elevate this figure to about 75%. The incorporation of more industries further amplifies these percentages, ensuring more reliable and price-certain renewable energy.

Embracing a diversified portfolio approach to renewable energy procurement can unlock the potential for higher renewable energy percentages, benefiting both individual companies and the economy. DM