South African companies are over-investing in solar power – and face risks by doing so
Discovery Green recently conducted extensive research into how South African companies are investing in sustainable energy.
The study, which included over 300 business properties across 58 companies, discovered that in many cases the current approaches to sustainable energy are short-sighted and risky.
In particular, Discovery Green noted a worrying trend of overinvestment in solar energy systems.
This trend can be attributed to the considerable immediate value smaller embedded solar systems generate and the decrease in solar panel prices in South Africa in recent years.
“We believe there is currently a pronounced bias towards solar energy and while the immediate financial benefits of solar energy are clear, there is a tendency to overlook the long-term consequences, opting instead for short-term gains,” said Andre Nepgen, Head of Discovery Green.
Long-term risks
Discovery Green’s study found that companies over-investing in solar – particularly embedded systems – may experience weaker long-term value due to “wasted” power.
Embedded solar systems often run without extensive battery storage, meaning they cannot bank enough of their excess generated energy for use when the sun goes down.
This leads to power generated by solar panels not being used by the company – reducing the financial value it receives from its solar system.
Furthermore, when the sun is down, and solar energy cannot be used, a company must still source electricity from other sources. This will include the national electricity grid.
Much of this externally-sourced electricity will be required during off-peak periods, which is late at night and early in the morning during the week, significant parts of Saturday, and the whole of Sunday.
To provide insight into how much “off-peak” electricity a company will use, Discovery Green stated that if an organisation can service around 60% of its total electricity demand with solar, 85% of the company’s remaining electricity requirement will comprise off-peak use.
This is up from 48% for companies that don’t have their own embedded solar generation and shows that solar primarily replaces a business’s peak electricity consumption – and does little to address “off-peak” electricity costs.
Making matters worse is that electricity from the national grid is more expensive during these off-peak periods – compounding the lost value from an over-investment in renewable energy.
Wheeled solar
A solution available to South African businesses to combat their need for power from the national grid is to use wheeled solar.
Wheeled solar can complement their embedded solar system and help the company avoid expensive electricity tariffs employed by Eskom and local municipalities – particularly during off-peak periods.
Companies must note, however, that providers of wheeled solar are also likely to use time-of-use billing.
This is because they offer a limited supply of battery-stored electricity during off-peak periods, as opposed to the actively-generated solar power they can wheel during the day.
Discovery Green’s research found that businesses which replace 45% of their energy needs with solar typically face a 77% premium to fulfil their remaining power requirements with renewable energy.
The solution
Discovery Green said that investing in solar systems is still a good idea, as long as it done in a measured approach.
It stressed the importance of embracing a diverse range of renewable energy sources, too, including alternatives like wind power.
This way, a company can adapt to environmental concerns and won’t be as severely impacted by future changes to power tariffs.
The full Discovery Green report offers many insights into renewable energy – click here to download the report.
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