The solar photovoltaic industry has experienced rapid growth in South Africa due largely to the Renewable Energy Independent Power Producers Programme (REIPPP), yet the programme results in intermittent cycles of activity for the industry with bursts of revenues.
Localised roof-mounted energy production systems, as opposed to table-mounted, grid supply systems, offer regular revenues for the industry and are growing in popularity. Demand from businesses already exists and is growing due to government and utility incentives that make the solutions financially rewarding. The net result is a growth industry creating local employment, new revenue streams contributing to GDP and potentially exportable products based on local manufacturing.
Chief among government and utility incentives driving growth in the sector is Eskom’s incentive, the Standard Offer Programme (SOP) based on its Integrated Demand Management (IDM) initiative, for businesses producing their own energy or employing energy-saving technologies.
According to Eskom’s programme, businesses receive R1.20 per kilowatt hour (kWh) that they produce themselves for three years. Eskom audits the company’s plant plans and calculations prior to implementation and remunerates at rates of R1.20 against expected power supply. At commencement Eskom pays up to 70% of the total expected value over the full three-year period. At the end of the first year it pays another 10% and 10% every year thereafter until the three years are up. Then, if the plant has performed to expectation, Eskom pays an additional 10%. It means that companies can get 110% of what was saved. There is also an applicable tax write-off that saves companies further finances.
Eskom allocated 10 MW for this programme and we have already submitted plans for three separate customer plants totalling nearly 4.0 MW. Programmes like this cut back the capital expenditure burden placed on companies to invest in renewable energy and based on current prices this means that companies can reach parity with Eskom rates immediately.
The project has surpassed Eskom’s expectations and the utility received 89 project requests between April 25 and May 2 of 2013. One of those submissions was from Euro Steel with plans to erect a 650 kW plant based on solar photovoltaic panels above its car park and on its head office roof. Interest ranges from the commercial to retail, steel, port authority, aviation, financial services, property development and telecommunications sectors.
Our business already has orders for 4.0 MW with more than 1.0 MW approved and installed.
Eskom’s inability to meet demand for electricity consumption that resulted in rolling blackouts in 2008 first highlighted the critical power issues facing the country, and the REIPPP has served to reinvigorate awareness. These two factors served to draw many renewable energy businesses into the country and solar photovoltaic solutions have become the first choice from government and businesses due to their decreasing costs, improved energy output and rapid deployment schedules.
While the REIPPP served to stimulate investment in the country, irregular revenues were a hindrance, but Eskom’s ground-breaking SOP that, in various guises, has operated since as far back as 2003 and which receives regular updates, is serving to stimulate support from new markets. These ensure sustainable business for the growing industry that results in GDP growth, more employment, new business opportunities and potentially exportable, locally manufactured products.
By Bernhard Suchland, managing director at Schletter South Africa