Businesses are paying close to 34% more for their power than they did two years ago and these increases are not likely to change, says Brandon Horn, Head of Commercial at SolarAfrica. Wheeling offers benefits, particularly to the bottom line.
Small and medium enterprises collectively account for roughly 30% of South Africa’s GDP and employ more than half of the country’s labour force as more than 90% of its registered businesses. With the recent downgrade by the International Monetary Fund of its economic growth forecasts for South Africa to a meagre 1%, it has become crucial for businesses to carefully manage every cent.
Businesses are struggling to cope with a 450% increase in electricity tariffs since 2008, which is nearly four times the rate of inflation during the same period, forcing them to pass these increased costs on to their consumers.
Wheeling is an option that allows businesses to buy electricity directly from independent power producers (IPPs). The IPPs generate this power through utility-scale solar, wind or hydro projects, making it available for consumption through the national grid. The wheeled energy is credited against the company’s utility bill, essentially lowering the owed amount.
Wheeling tariffs offer electricity at up to 50% cheaper rates compared to utility power. A business operating for eight hours during the day could potentially replace 70-90% of its utility power consumption with wheeled electricity. For a 24-hour electricity user with an annual bill of approximately R190 million, potential savings in the first year could range between R40 million and R55 million, depending on the contract length that affects the wheeling tariff.
Businesses are also empowered to negotiate the tariffs they pay – something that has never been an option with utility power. By accessing other forms of electricity through wheeling, a business has more bargaining power and can leverage aspects like contract length and agreement size to influence their tariffs.
Beyond cost savings
Businesses can achieve greater energy independence by using a combination of wheeling and battery storage systems. With this setup, businesses can seamlessly switch to clean energy stored in batteries, ensuring uninterrupted operations during power outages. This means reduced downtime, fewer lost sales and a happier workforce.
The more businesses that sign up and use wheeling, the more support there is for IPPs to embark on utility-scale projects geared towards easing Eskom’s power generation burden. When a business signs a virtual power purchase agreement for wheeling, it has a transparent view of the amount of “green” energy being used – a major selling point for eco-conscious consumers. This “green” energy can be quantified by the amount of carbon credits received from the South African Revenue Service and renewable energy certificates.
As technology matures and regulations become more streamlined, wheeling is poised to become a game changer for the country’s energy landscape, giving businesses the autonomy to choose the best energy source and schedule energy consumption.
Securing South Africa’s energy future is not only a crucial step in contributing to the growth of our country’s economy but should be at the top of the priority list for building a sustainable operation that is more than adequately geared to power through the darkness in the long term.
SolarAfrica recently broke ground on its first utility-scale solar farm based in the Northern Cape, known as SunCentral, which will provide power on a one-to-many basis.
