South Africa

Remgro’s big plan in the energy market

Remgro has launched The Energy Exchange of Southern Africa and is well positioned to become a big player in the country’s energy market.

Remgro’s entrance into the energy market started many years ago when the company realised that energy security poses a threat to its investee companies.

It invested in companies specialising in photovoltaic (PV) technologies and installations to provide onsite backup power to companies like Mediclinic, Distell and RCL Foods.

As Remgro started to solve its energy security problems, another problem emerged – large and unpredictable Eskom price increases.

Companies are struggling to cope with the lack of electricity pricing security, and Remgro’s next task was to create pricing certainty.

It also realised that there is strong demand from companies outside the Remgro stable who struggle with energy pricing and supply security.

It started working on an energy trading platform to bring together green energy producers and electricity consumers.

Through the exchange, energy consumers get access to a diverse supply of reliable, cost-effective renewable energy, and they can benefit from green energy initiatives.

How it works

The Energy Exchange of Southern Africa gives generators of energy a single market for their surplus capacity. It makes it easy for them to convert surplus capacity into revenue.

Energy consumers, in turn, are given more control over their energy costs, more certainty around future pricing, and potentially better defences against interruptions. 

Licensed energy generators feed their surplus electricity into the national grid, and the customer draws the requisite energy.

When energy is purchased from the Energy Exchange, the amount of electricity generated and consumed is measured in real-time.

Energy Exchange customers are then charged for the energy they consume at the agreed rate.

Customers can choose to purchase all their energy requirements through The Energy Exchange of Southern Africa, or only a portion.

The exchange’s blended supply and aggregation model brings greater savings than purchasing renewable energy from a single plant.

It also provides redundancy. If a single plant has a temporary reduction in load, the exchange can sell a client energy from another plant to mitigate or entirely avoid downside price risk.

The Energy Exchange of Southern Africa also has an arrangement with Eskom at an aggregated level to ensure clients do not have to pay for surplus energy.

Remgro’s advantage over other energy exchanges

Remgro is not the only company investing in an energy exchange, but it has a big advantage over its competitors.

The great demand from its own investee companies gives Remgro’s energy exchange a big client base from the start.

Mediclinic, for example, announced in September 2021 that it has entered into a £110 million agreement with The Energy Exchange of Southern Africa to procure renewable electricity.

Earth & Wire, in turn, signed a 12-year power purchase agreement (PPA) with the energy exchange to provide 5 MW of solar energy to Mediclinic and another large customer.

Another advantage Remgro has is that it has invested heavily in this project over the last six years, including building up skills and investing in the technology needed to make it work.

Remgro also acquired a 51% stake in Enerweb which has extensive engineering, business, and IT capability in the energy market.

Enerweb provides the platform that runs the Southern African Power Pool (SAPP), enabling daily electricity trading between SADC countries.

Remgro has also made significant progress in reaching agreements with large municipalities to distribute power from the exchange to the exchange’s clients.

The company’s good name and credibility have opened many doors to new potential deals and partners, which can be a challenge for unknown newcomers.

It takes years to sign up energy generators and clients to trade on an energy exchange, and Remgro has a big head start on its competitors.

Challenges remain, but good progress is made

Remgro is upbeat about the prospects of its new energy exchange, but many challenges remain.

The Energy Exchange of Southern Africa must negotiate agreements with every municipality individually, which is time-consuming.

Bypassing load-shedding is another problem as municipalities apply it per area rather than per client. Initially, buying electricity from the exchange will not protect against load-shedding.

The funding of private solar and wind farms is another stumbling block.

Although banks and private equity firms are starting to see potential in the private-to-private energy market, it is still new in South Africa with a lot of uncertainty.

Despite these challenges, The Energy Exchange of Southern Africa is making good progress.

It has reached agreements with two prominent municipalities in the Western Cape and Gauteng and will launch its first project on Eskom’s grid in the next few days.

With Remgro’s backing, The Energy Exchange of Southern Africa is likely to become the default platform to trade electricity in South Africa.

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