South Africa’s best university is kissing Eskom goodbye

The University of Cape Town (UCT) has signed a long-term renewable electricity supply agreement with Discovery Green to reduce its reliance on coal-fired power plants. 

This agreement will see Discovery Green convert 70% to 90% of the electricity consumption of UCT’s main and health sciences campuses to renewable energy. 

The transition will take just under a decade and will see South Africa’s highest-ranked university significantly cut its greenhouse gas emissions.

This is the first such agreement between a private energy trader and a public institution in South Africa, with UCT joining around 50 organisations that wheel electricity via Discovery Green. 

Wheeled electricity is the process of transporting electricity from a private generator to an end-user in a different location using existing transmission and distribution grids. 

In this case, Discovery Green invests and constructs renewable energy generators and will transfer the electricity via the national grid to UCT. 

The transfer towards renewable energy sources will begin in 2027, UCT said in a statement. It estimates that the agreement will reduce the university’s emissions by 33,200 tonnes a year. 

It will also see UCT’s exposure to soaring electricity prices reduced, with above-inflation increases set to be the norm in the coming years. 

Electricity prices have risen by more than 600% since 2009, with Eskom’s historic mismanagement and inefficiency driving above-inflation increases.

This has significantly increased the cost of operating large institutions, manufacturing sites, or mines, with electricity price increases eating away at operational budgets. 

“UCT is thrilled to have entered this groundbreaking agreement with Discovery Green to wheel renewable energy,” UCT Vice-Chancellor Professor Mosa Moshabela said. 

“At the same time, collaboration that supports research and skills development strengthens our ability to contribute meaningfully to South Africa’s long-term sustainability goals.”

Diversifying electricity supply sources has become increasingly important in recent years to mitigate against supply interruptions, reduce emissions, and cut costs.

Discovery Green CEO Andre Nepgen explained that shifting towards wheeling agreements with renewable generators has become increasingly important for companies and institutions.

“For universities operating in an increasingly complex energy environment – characterised by electricity supply constraints, rising costs, and environmental impact – this shift is essential,” Nepgen said.

In the case of UCT, wheeling also makes sense because of its own limited potential for rooftop solar generation, given the heritage status of many of its buildings. Thus, it has to procure renewable energy off-campus. 

Companies moving away from Eskom

Private companies have led the way with regard to wheeling agreements with renewable energy generators in recent years. 

These companies are typically among Eskom’s largest customers and most reliable payers, with many manufacturing giants and mines looking to reduce exposure to rising electricity costs. 

Increasingly, these companies are also looking to slash emissions to be able to export products to the European Union under its new Carbon Border Adjustment Mechanism. 

One such company is Tiger Brands, South Africa’s largest food producer, which recently announced an electricity wheeling agreement with Apollo Africa. 

Tiger Brands said the agreement will begin with its manufacturing sites in Gauteng and will commence in 2028, with other locations following. 

It explained that the process involved Eskom electrons being swapped for renewable energy electron supplies by Apollo Africa.

This enables Tiger Brands to access clean energy without being limited by the physical location of generation plants, giving the business greater diversity of sources. 

The food producer expects its sites in the Ekurhuleni Municipality to receive approximately 60% of their electricity supply from wheeling by 2028. 

“Importantly, our business grows, cost efficiency is maximised, all while reducing our carbon footprint,” chief manufacturing officer Praveen Balgobind said. 

All of this crucially increases Tiger Brands’ operational efficiency by reducing its cost base, which has become one of the few ways in which it can grow its bottom line. 

In a stagnant economy, demand growth for the company’s products has been relatively flat in recent years, with CEO Tjaart Kruger focusing on making it more efficient. 

The growing trend of companies and institutions shifting away from Eskom puts the utility in a difficult position, as it has to recover revenue from a dwindling customer base. 

While Eskom needs higher tariffs to recover its costs of producing electricity, they are increasingly having a destructive effect on energy demand in South Africa. 

Higher electricity prices result in companies and households increasing their energy efficiency and, increasingly, pushes them to invest in alternative electricity sources. 

This creates a negative spiral for Eskom, with it reducing the size of the customer base from which it can generate revenue to cover its costs. 

As a result, it is hiking prices to generate more revenue from a shrinking customer base, which, in turn, pushes more of those customers to use less electricity from Eskom.