JOHANNESBURG — Just before his pre-Davos press briefing this week, President Cyril Ramaphosa met with an Eskom task team to try deal with the headache that is our country’s state-owned power utility. Eskom has been terribly run for years and after it asked for another massive price hike from regulator Nersa, it’s set to continue to entrench itself as the most hated company South Africa has probably ever had. Eskom is also an outdated machine, relying heavily on dirty coal to provide what electricity is left in the country. But strong alternatives are emerging in the solar space and if regulations were relaxed a lot more, especially amid ever-improving battery technology, the ability of solar to provide SA’s energy needs could become more significant in years to come, according to Manie de Waal, the CEO of Energy Partners Solar. Here is what he has to say. – Gareth van Zyl
It’s a pleasure to welcome Manie de Waal, who is the CEO of a company called Energy Partners Solar. Manie, thanks for joining us on the podcast today.
Thanks a lot, Gareth.
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So, am I right in thinking that your business, essentially helps other businesses kind of bypass Eskom to get their power? Interestingly, you’re also part of the PSG Group, right?
Yes, PSG has walked a long road with us. They made their investment in 2010, and we, Energy Partners Solar are then part of the larger Energy Partners group, actually Energy Partners – they also do steam generation, refrigeration cooling, water, desalination, etc. My part of the business focuses on solar power generation and we are interestingly now looking into battery and battery technologies that are developing and, as you said, working with businesses to see how solar generation can aid and possibly cut costs and do a couple of other things.
Now, you’ve also written an article, in which you explain how businesses in SA can, in fact, already tap solar to meet their energy need on-premise. But there are limits on this if your needs go over 1MW. Can you explain that?
Yes, let’s certainly say that renewable generation and traditional generation, i.e. Eskom, should not compete with each other, as they are currently doing in SA. If we look internationally, renewables and traditional generations should work together. What I mean by that is that there are different agendas coming from both sides and if all the parties can sit around the table, they can definitely work out something that will be to the benefit of the end consumer. We haven’t got that situation in SA for many reasons, but let’s not go into that. Secondly, I think there’s a misconception out there amongst businesses, but also homeowners that once you’ve put solar on your roof that when Eskom is down, you’re going to have a little bit of solar power. That’s a very common misconception and especially for businesses, it’s important to realise that if you look at renewable power generation and have a solar system on your roof – that solar system works with the Eskom grid. In other words, if you have solar generation, when solar generation is up and you are generating power, you’re going to be first using that solar power and then when you need further power, you’re going to be using Eskom or the grid. So, that’s an important thing to understand, but what we are seeing is that solar generation can now be done at a 50% reduction of what you could be buying power from Eskom. So, the ultimate scenario is to then generate some of your power with solar or renewables, but work with Eskom and that combination can significantly lower your costs of electricity at your business.
Manie, are you finding that businesses out there are increasingly looking to tap that type of option?
Yes, what we’re seeing in the market is, year-on-year, for the last 3 to 5 years even, is that segment is growing between 30% to 40%, especially if we look at the total installed footprint of what we call rooftop-solar. So, these are solar systems that are installed on the roofs of factories and large shopping malls, etc. There is definitely an accelerating uptake, year-on-year of solar power, but if we look at the total roof space… If we just talk about roof space in SA, we’re only about and we estimate about 5% of roof space has been utilised so, there is still a massive opportunity out there.
Let’s also talk about these power purchase agreements and again, touching on that 1MW threshold. There’re also third-party suppliers that you can tap as well?
Yes, so I think you’ve mentioned two things there. Firstly, the power purchase agreements and then secondly the 1MW limit that Nersa put in place in November 2017. Let’s maybe just quickly talk about power purchase agreements. It’s an internationally very accepted model. In fact, it’s exactly what Eskom is doing with the large-scale utility projects in the Northern Cape for instance, or the wind projects in the Eastern Cape. These are independent generators or companies that put up these solar farms then sell power to Eskom under a power purchase agreement. So, Eskom literally goes and buys the power from these large-scale utility renewable generators. Now, up until about 18 months ago that was not legal in SA but then with the change in legislation, on a commercial scale, it is now legal for businesses to also enter into a power purchase agreement, which means literally, somebody like us, would come, look at a business, look at what are the constraining factors and normally, it’s actually the roof that’s too small, i.e., you can’t put up enough solar power to satisfy the need of the business. But be that as it may, we do a design. We then install, or somebody like us, would install a solar system, start generating power and we sell that power to the client at a predetermined rate and obviously, for this all to work that rate needs to be lower than what the client can buy power from Eskom. The contract length can be anything from 10 years up to 25 years. So, the one immediate benefit is that the client does not have to risk any of his own capital, firstly. Secondly, he can look at, and say ‘is this working?’ He can look at the actual generation from the system and then what you should have in these contracts and what we definitely try and build into them, is flexibility. So, if the client wants to take over the solar system at any time in the future, from the beginning, we make it very clear and easy for the client to then invest his own capital into that system. Otherwise, some of our clients just say, ‘I never want to own this solar system – I’m just going to let you run it and I’m going to be buying green, affordable power from you,’ which we guarantee will always be lower or equal to an Eskom rate.
So, this still sounds a lot to me like you’re competing against Eskom. I know that you said that businesses technically can’t get away from Eskom but it looks to me like this is a real alternative that is emerging in SA.
Yes, we are competing against Eskom but there should be, and internationally, ways around it. For instance, a levy could be charged by Eskom… If you have a solar system on your roof, through tariff structures, Eskom could charge a levy for the availability of the Eskom grid because remember, when the sun doesn’t shine and it’s a grid-type system, which is what goes onto businesses the business still needs the Eskom grid. So, for that availability of the Eskom grid we could suggest that there could be a charge for that but then by the same token, Eskom and Nersa and everyone else should not impose these limits on the industry saying, for instance, you can only put up 1MW, etc. so, on both sides I feel the parties could move closer to each other and say, solar or renewable generation can help alleviate the burden of Eskom and make it work for everyone concerned. Whereas, at the moment, it’s not like that and that’s the situation in SA. However, internationally we see renewable generation and traditional generation working more closely together than what we’re seeing down here.
So, we all know that Eskom is in huge trouble. It’s got big debt problems. It also, essentially has another power crunch. We’ve seen reports that suggest when businesses largely get back online from next week onwards and throughout January that there will be load shedding again. Do you think that the pressures that are on Eskom — and particularly on NERSA — will probably bring everybody closer to the table to perhaps loosen some of those tighter regulations that you’ve just mentioned?
Yes, we’ve been watching this obviously, for the last 10-years already, since we started Energy Partners. We hope it does. Every year when load shedding comes through or when it does come through or every year, when there’s talk of these huge increases in the Eskom grid prices – we get a lot of comments that ‘it must be very good for you’ or for companies like us. But we’ve reached the stage where globally renewable generation can be done more affordable than traditional generation. So, we don’t need this chaos anymore, even in our industry. I think that’s the first thing to really, understand. It’s not like we look from the sidelines and find any joy in the difficulties that Eskom face. I would say, as an industry, we’ve been engaging more and more with Eskom to see how can we solve this? But more than anything, Eskom would need to think very seriously about what kind of business they want to run and there are options on the table. It’s in the press where, for instance, you split the generation business of Eskom from the distribution business of Eskom, i.e., Eskom can keep their distribution network, which is incredibly valuable and potentially, start outsourcing generation. But those, for us, the solar industry on the sidelines – we have little influence on those kinds of decisions. All we can say is, ‘we hope that we can work with Eskom, and the country, I suppose, to come to solutions, which we are ready to contribute to.’
Just as a final question, in 5 to 10 years’ time do you think that we, as South Africans, will be more reliable on providers such as yourselves for our energy use?
You see, this is exactly what could happen if Eskom does not come around, if they don’t solve the quite significant problems they have. What is happening, and what we are seeing is battery technology is also rapidly developing. You’ll know of Elon Musk and Tesla, and all of those kinds of things, the gigawatt factories, etc., now once the battery cost has come down to a level where businesses can generate and store power – you’ll start getting into a situation where people will say, for instance, I have the land, I’ve got a factory – I can put up my own solar farm, I can put in batteries. I can store all of that and I don’t need Eskom anymore. Now, this will be interesting to watch. At the moment, grid-tied solar still needs the grid, (as I’ve explained). But with the development of battery technology, you could look at a situation where people say, ‘I don’t need the grid anymore. I’m going to go off-grid.’ We’re not there yet and this is the thing where, for the future, I would like to see the renewable industry work with Eskom and the traditional generators and see how do we, together, approach the future because if it doesn’t get solved… If I think of South Africans and how they’re known as people who make a plan. Then in the future, you could get scenarios, and we’re already seeing it… We’ve got clients who say, ‘I don’t want Eskom anymore. Put in the batteries. I’ve got the land. I’m going to generate my own power.’ I guess, those are two potential scenarios you could look towards in 5-years from now.
Manie de Waal, thank you so much for chatting to us today – it’s been interesting stuff.
Thanks a lot.
