Tag: Green Economy

Climate risk is our reality and we need actions today to shape the future of business and society

We operate in an interconnected system that requires a healthy society for it to achieve sustainability in profits and business. This is against a dire backdrop in which the world has now recognised that trillion-dollar losses could occur due to inaction on climate change.

By Jehaan Anthony

Economists have warned that the potential economic costs of damage from climate-related disasters and extreme weather could be staggering. In 2018 the US alone incurred a loss of around $160 billion due to such disasters, and these numbers are only expected to increase as hazards become more complex and unpredictable.

In Africa, the energy crisis coincides with the dual threat of climate change, which is driving the imperative for renewables, not only to plug energy gaps but also to deliver power to drive sustainable economic growth as the continent has seen a rapid escalation of extreme weather events such as tropical cyclones, severe droughts, wildfires and floods. Already, climate change in Africa has caused an estimated $38 billion damage in two decades. Adding to this is a heavy reliance on fossil fuel – South Africa, which relies on coal for 80% of its power, is also said to be warming twice as fast than the rest of the world.

Rolling power outages are red flagged as a high-risk scenario that’s expected to continue until at least April 2023 and probably a lot longer. In June last year, President Cyril Ramaphosa raised the licensing threshold for self-generation power to 100 MW, with an option to sell into the grid, which will allow residential estates, shopping centres, mines, factories and other providers to not only generate their own electricity, but also to power nearby communities and help support economic recovery. This will help reduce dependency on Eskom and the government, and the first power-generation project in the private market has recently been approved by the National Energy Regulator of South Africa.

As the green bank, which has been on a sustainability journey for some years, Nedbank has fine-tuned our solutions for the market and offer specialised finance structures such as longer payback periods, structured repayments around the savings that the infrastructure provides, and offtake deals where the user does not own the equipment.

That said, going green encompasses far more than turning to renewable energy, and our first recommendation is to find ways to operate more efficiently before investing in costly systems.

There are always ways to use electricity more efficiently, reduce water use in operations, recycle water wherever possible and process waste in a more resourceful manner. Understand what your goal is. If you are planning to go off the grid, understand the size of the inverter (how much power you are going to need) and then build your system by buying components and adding more as and when required or as budget allows.

While it is inescapable that there is a need for urgent action to mitigate the risks associated with climate change, as failure to act now could result in huge financial losses and irreversible damage to the planet, businesses must take the lead in the fight against climate change by adopting sustainable practices and reducing their carbon footprint.

That is why funding solutions become an integral part of the solution. Nedbank Commercial Banking, for example, offers term debt funding for its commercial and agriculture clients. This provides for funding of capital expenditure to expand public access to safe and affordable drinking water, provide access to adequate sanitation facilities, improve water quality to be fit for human consumption, and increase water use efficiency through water recycling, treatment and reuses.

In short, this solves for rising water costs, mitigates against water interruptions due to drought, water scarcity or failing infrastructure, prevents unnecessary or preventable wastage and avoids business downtime.

Another is funding provided for construction, maintenance, manufacture and other components for clean energy to generate or transmit energy that would include wind, solar, hydro, biomass and geothermal power, or funding of energy efficiency initiatives that include energy efficient technologies in new and refurbished buildings, energy storage, district heating, smart grids and appliance products.

The benefits are that this would enable businesses to generate sufficient energy for own use, thereby mitigating the impact of rising energy costs, minimising the impact of power interruptions, and ensuring income generation capacity for the company and employees during power cuts. Both options could take the form of an extended repayment term of up to 10 years, considering the savings when calculating cash flow or affordability, competitive pricing and direct ownership versus third-party ownership.

Nedbank Commercial Banking also provides term debt funding for commercial and agriculture clients to invest in environmentally sound technologies and processes that promote the recycling of post-consumer products, the upgrading of infrastructure and retrofitting of industries to facilitate increased resource efficiency, substantially reduce waste generation through prevention, reduction, recycling and reuse and promote sustainable agricultural practices. This addresses the rising energy and raw material costs hindering businesses from sustained growth, enabling community upliftment through job creation and the prevention of missed revenue opportunities.

In this regard, structured solutions are tailored to each business, with competitive pricing and off-balance sheet financing.

South Africa is not alone in facing energy and water scarcity challenges – it affects the whole world. Businesses must prioritise awareness around energy challenges and water scarcity in their operations and supply chains to mitigate against climate risks, while ensuring that clients derive value that will ensure that they are on a sustainable path while reducing their carbon footprint.

Do not miss GREEN ECONOMY JOURNAL ISSUE 77 (APRIL/MAY): we talk climate finance.

SAPVIA launches NERSA registration data portal

SAPVIA has begun to track the uptake of embedded generation for different technologies.

“As a start, we are tracking the NERSA registered projects. We’ve already observed exponential growth in the registration of generation facilities. We anticipate that amendments to Schedule 2 of the ERA will further catalyse deployment of RE technologies,” says Dr Rethabile Melamu, CEO of SAPVIA.

“We are proud to publish a link to the data portal for your interaction.”

Some highlights from the data portal are:

• Solar PV dominates the embedded generation market, with a 78% share for all registered projects, with the highest concentration in the Northern Cape, Free State and the North West province.

• 1 MW licence threshold exemption has been catalytic: Registered projects from August 2021 stands at 547 projects and have a combined capacity of 2839 MW.

• Removal of licencing threshold unlocks 100 MW private projects: Since December 2022, 5 renewable energy plants that are larger than 100MW were registered. Three of those, all Solar PV technologies, amount to 552 MW were registered in February 2023. The largest of which is 283 MW plant.

The data portal access link is https://www.sapvia.org.za/nersa-registered-plants-dashboard/ Please send any comments, queries or recommendations regarding the portal and data contained therein to

Technology helps achieve ‘Water for All’

This year’s National Water Week drives the agenda of ‘Water for All’, an objective which SRK Consulting has supported in many ways – one of which has been through its application of isotope technology.

Ismail Mahomed, principal hydrogeologist at SRK Consulting, has recently used isotopes to identify the source of water contamination, as a first step in resolving this threat to water security. South Africa is classified as a semi-arid country, emphasised Mahomed, and cannot afford the pollution of its scarce water resources.

In a recent address to the conference of the Network for Industrially Contaminated Land (Nicola), he explained how isotopes had proved a valuable and cost-effective technology to help resolve a contamination issue at a metals processing plant.

Fingerprinting

“A particular environment will acquire a characteristic isotopic composition or signature by virtue of the hydrogeochemical processes involved,” he said. “We can use this isotope signature for ‘fingerprinting’ – giving us clues to trace the source of water, and hence of the contamination.”

In his case study, he explained how spatial variations in deuterium and Oxygen-18 occur in the hydrological cycle – leading to a lower proportion of these isotopes in rain that falls inland than in rain falling at the coast.

“These are among the variables we can use to identify whether the source of water is from surface dams or from groundwater – as the signature from the rainfall will be retained in groundwater,” said Mahomed. “Evaporation also has an impact on this signature as preferentially lighter isotopes will evaporate from the oceans and surface water.”

Tracing groundwater

One of the aspects of the case study was considering the evaporation signature of some of the ponds on the client’s site – a signature which was different to the groundwater. Data analysed during this project suggested that there was some mixing of water from different sources in the underdrain of one of the ponds. He explained that hydrology can benefit greatly from using isotopes in the tracing of groundwater, to help determine the vulnerability and sustainability of water resources.

“The technology helps hydrologists to determine factors affecting water quality such as sub-surface processes, geochemical reactions and reaction rates,” he said. “It can also be used to better understand the relationship between surface and groundwater, and even to detect leaks.”

The United Nations’ World Water Day is also being celebrated in March, with the organisation warning that countries are not making enough progress in meeting Sustainable Development Goal (SDG) 6. This goal aims to ensure safely managed water and sanitation by 2030 for all the world’s population. The UN has said that there is an urgent need to accelerate change, by going beyond ‘business as usual.

Must move faster

“The latest data show that governments must work on average four times faster to meet SDG 6 on time, but this is not a situation that any single actor or group can solve,” reported the UN. It has called upon global citizens to “be the change you want to see in the world” – by taking action on how they use, consume and manage water.

Among the approaches for accelerating action in water management that SRK Consulting has promoted in its engagements with clients is water stewardship. With water management becoming a key risk for industries like mining, consulting firm EY has rated water as the leading environmental, social and governance (ESG) risk in mining for 2023. SRK Consulting principal consultant Fiona Sutton explained that water stewardship offered a practical process for companies in mining and other sectors to collaborate more closely with partners and stakeholders in managing their shared water resources.

“This approach is also supported by valuable best practice tools like the International Water Stewardship Standard from the Alliance for Water Stewardship (AWS),” said Sutton. “The AWS Standard offers a globally applicable framework for major water users to understand their catchment and their own water use and impacts, with practical guidance on how to effectively manage these impacts.”

Water security

Growing concerns about South Africa’s water security saw Finance Minister Enoch Godongwana announce – in his recent Budget Speech – planned expenditure on national water infrastructure of R121 billion over the medium term. This included R3,7 billion in municipal water infrastructure, through the National Budget facility for infrastructure.

SRK Consulting has been extensively involved in water infrastructure, including facilities for rural water supply points. Gert Nel, principal hydrogeologist and partner at SRK Consulting, explained that these water points were vital in providing water to communities, schools and clinics which could not be reached through bulk water supply systems.

Rural support

“However, there is a need to provide more support for these stand-along supply points, to ensure they are reliable and sustainable,” said Nel. “After the installation of these facilities – such as boreholes and water treatment systems – there is seldom any backup support or funding to sustain their continuous operation.”

When such facilities are planned, it is necessary to also include aspects such as training, awareness raising, mentoring and on-going support. For instance, there needs to be ready access to technical support for breakdowns, and training on how to regularly maintain or service the equipment. This will extend the life of the installations and improve their value to the community – while reducing the risk of water-borne diseases.

SRK Consulting works with both the public and private sectors in their water management interventions, and applies a range of scientific and engineering disciplines to help achieve the goal of ‘Water for All’.

Body corporates and your solar panels: don’t find yourself uninsured

Finance Minister, Enoch Godongwana’s announcement regarding the launch of the National Treasury’s rebate scheme for new rooftop solar installations on private homes from 1 March 2023, has further increased the demand for renewable energy solutions by homeowners and in particular that of solar panel installations.

“There is however currently confusion and uncertainty amongst some body corporates and homeowner’s associations (HOA’s) when it comes to insuring solar installations. Some are not aware or have not been advised that they are able to cover solar panels under their existing building insurance policies. There are various cover options available and unless specified, the cost implications are minimal,” explains Hermanus van der Linde, CEO – IntegriSure Brokers.

For body corporates and HOA’s some of the options in the market are to insure a typical rooftop solar system or fixed generator by increasing the building sum insured with the replacement value of the system, which can be added to the Participation Quota (PQ). “The system will be covered in full for typical building risks such as fire, hail, impact and accidental damage.”

Other cover options include increasing the power-surge and/or exterior theft first loss limit to ensure that they are covered for all losses up to the chosen amount on a first loss basis. Another option that has been seen in the market is to add the solar system as a specified item with an additional premium payable which includes full building cover without limitations on theft and power-surge. “In this instance, the system should be specified at full replacement value.”

Those who live in residential estates or complexes need to obtain approval from body corporates or homeowners’ associations when looking to install solar. “As this is a new subject matter to deal with, combined with the current reality of unprecedented load shedding, it is very important to add this insurance matter to the agenda at upcoming AGM’s for members to understand the cover they will enjoy for solar panels, what it excludes and if there are any limitations.”

But, what are your options if your body corporate or HOA does not want to increase the sum insured of your building? “We are currently seeing reluctance from some body corporates and HOA’s to add installed solar panels to their building insurance, even though owners should insist that building sums insured be increased.”

If there is still resistance, residents and owners living in estates or complexes will need to take out cover for their solar panels on their personal policies. “We have seen various cover options in the market ranging from adding these solar panels to contents cover, to specifying it as an all risk item.”

Van der Linde cautions consumers as well as body corporates and HOA’s to ensure that solar systems are installed by a qualified, accredited installer who is able to issue a certificate of compliance as insurance companies and manufacturers may reject claims if the system is not installed by an accredited installer. “Reputable installers should have liability cover, product liability and cover against defective workmanship. When contacting solar installers ask to see their proof of liability cover.”

“We will continue to keep a close eye on the market for further trends and developments on this front and remain committed to providing comprehensive advice on the best insurance solutions for solar panels.”

“If you plan on investing in renewable energy installations ensure that you are adequately insured by talking to your broker for the best product options for peace of mind should something go wrong,” concludes van der Linde.

Dear Mr Ramokgopa: Ending the energy crisis shouldn’t stop our Just Energy Transition

After much anticipation, President Cyril Ramaphosa has announced the appointment of South Africa’s first Minister of Electricity, Kgosientsho Ramokgopa. With the new position introduced during the President’s State of the Nation address in February, Ramokgopa has now been given the thankless task of solving the country’s burgeoning energy crisis – or what Ramaphosa has termed an “existential threat” to both the country’s economy and the very foundations of our society. Considering how every hour of loadshedding costs the South African economy some R500-million in lost revenue, the pressure is on for Ramokgopa to make good on the President’s promises.

But as the debate over national leadership’s response rages on (i.e. the state of disaster, Karpowership, Eskom bailouts, etc.) it is important to consider that, while the energy crisis is indeed a foremost priority, so too is the need for a Just Energy Transition. What’s more, we recognise that these two focus areas are not mutually exclusive. On the contrary, the crisis has shown that renewables are playing a key role in fast-tracking additional supply. As a result, they are making important socio-economic contributions in a period of great market uncertainty, and in-turn accelerating South Africa’s progression towards a green(er) economy.

An obvious example of this is the explosive uptake of solar energy in recent weeks, propelled by households and businesses looking to get themselves off the grid. Supported with policy reform and new tax incentives, the sector is now unlocking new commercial opportunities for industry and consumers alike, with the construction of solar factories also resulting in new job opportunities for South Africans. With the proper support, similar outcomes can come from other renewable sources such as wind, which could deliver an additional 250 000 jobs and more than R150-billion in gross value-add to the economy over 25 years^[1].

Likewise, the CEO of Anglo American – one of the leading coal mining operators in the country – believes that green hydrogen can add up to 14 000 jobs per year and unlock synergies with the platinum mining sector (which currently employs more than 170 000 people and would be expected to increase, thanks to platinum group metals being a key ingredient in the manufacture of hydrogen engines and batteries)^[2].

Together, these findings signal how the introduction of renewable energy can usher in not only advantages for the environment, but new revenue opportunities for businesses and new job opportunities for the unemployed too. Furthermore, the adoption of renewables stands to bolster South Africa’s economic security and competitiveness for the long-term, as our leading trading partners like the European Union threaten to impose significant import duties on goods manufactured in high-carbon energy markets where coal and non-renewables remain dominant^[3].

More importantly, these developments show that while energy insecurity is an immediate crisis that demands a swift response, it does not dictate that South Africa abandon its efforts aimed at introducing a Just Energy Transition (JET). In fact, Ramokgopa can take direction from both the President and Minister of Forestry, Fisheries and Environmental Affairs, Barbara Creecy, who have publicly shared their alignment in this regard.

In his address to the nation, President Ramaphosa stated that South Africa “will continue [its] just transition to a low-carbon economy…” further adding that this would be done in a way that accounts for the current crisis and opens up the possibility of new investments, new industrialisation, and new jobs^[4]. This was echoed by Minister Creecy, who, during a panel discussion at the Mining Indaba in Cape Town, explained that national government remains committed to balancing the needs of the energy crisis with those of a just transition^[5].

Admittedly, this will be no easy task for the new Minister, with opponents already calling on him for a laundry list of next steps. To this end, it would be wise for Ramokgopa to consult and partner with industry, which has the working knowledge, resources and networks needed to more efficiently solve the crisis and achieve JET. As a start, the Minister can simply tap into the partnerships already happening between players in the industry.

A good example of this is the ‘Innovation Partnership on Energy’, an initiative driven by Global Alliance Africa – a UK-Aid-funded project delivered by Innovate UK KTN. Over the past few months, Innovate UK KTN has organised several ‘Energy Advisory Brainstorms’ which brought together a group of representatives from energy producers and, among others, the likes of the CSIR, the Presidential Climate Commission, the South African National Energy Association, and the Department of Trade, Industry & Competition, and Department of Environment, Forestry & Fisheries. Together, they are exploring how innovation and international collaboration can be harnessed to unlock new opportunities for energy production and usage in South Africa.

Already, the group has identified several energy-innovation focus areas in which the public, private and civil sectors can collaborate towards:

First, innovation partnerships should be leveraged to support efforts aimed at developing a mix of small energy businesses and large corporations. A good mix of businesses will create space for more low-trained jobs, while leaving room for highly technical opportunities down the line. Second, that innovation partnerships should tap into global expertise and look to energy solutions from multinationals and foreign markets, where we are more likely to find successful use-cases and adaptable solutions to energy security and job creation. And third, that innovation partnerships can enhance policy redress, thanks to improved coordination across regulatory bodies and improved collaboration and knowledge sharing between industry players.

In doing so, the Innovation Partnership on Energy has also identified several first steps which South Africa should take in this regard:

Among these is the establishment of a ‘project help hub’ where businesses looking to enter the renewable energy space can receive technical and capacity-building support to equip both their operations and staff with the knowledge, resources and training they need to establish ‘green’ foundations. Another focus area is the development and implementation of new funding models (such as off-take agreements, project preparation grants, kick-starter funding, concessional debt funding, and other financial streams) to ensure that this process is well financed.

Additional priority areas include a focus on decarbonising hard-to-abate industrial sectors and creating new hydrogen commodities for export, such as green ammonia, sustainable aviation fuel, green steel, and green LPG, among others. Also, the development of South Africa’s workbench was also stressed, which entails identifying and attracting strategic foreign intellectual property rights holders to set up production houses in South Africa. Finally, we need to take active measures to stabilise the national grid on a smaller scale using many smaller solutions. Doing so will relieve the national utility of the sole burden of power generation, while also affording greater competition and stimulating innovation across energy fields.

These are just a few of the areas being investigated by Global Alliance Africa and the Innovation Partnership focusing on a JET. Their next step is to assist industry in the building-out of project plans, gathering of stakeholders to execute on them, and exploration of new funding mechanisms to enable movement. However, progress can only be achieved if we catalyse engagement from across the energy ecosystem. To this end, we call on Mr Ramokgopa and other players in the industry to collaborate with us, should working towards solving South Africa’s energy crisis and Just Energy Transition meet your mandate.

You can get involved in these initiatives with the South African JET Global Innovation Network by contacting alana.kruger@iuk.ktn-global.org

This article was written by Alana Kruger, Knowledge Transfer Manager for South Africa at Innovate UK KTN Global Alliance Africa.

Do not miss GREEN ECONOMY JOURNAL ISSUE 57 (APRIL/MAY) featuring the Just Energy Transition

^[1] https://www.engineeringnews.co.za/article/south-africangreen-energy-transition-can-create250-000-morejobs-over-25-years-gwec-2022-02-17

^[2] https://businesstech.co.za/news/energy/666539/south-africas-hydrogen-valley-could-create-14000-jobs-ceo/

^[3] https://www.businesslive.co.za/bd/national/2022-12-05-exports-will-suffer-if-power-sector-sticks-to-coal-creecy-warns/

^[4] https://www.gov.za/speeches/president-cyril-ramaphosa-2023-state-nation-address-9-feb-2023-0000

^[5] https://africaclimatereports.org/2023/02/south-africa-seeks-to-balance-addressing-energy-crisis-just-transition/

Electricity Minister launches Resource Plan to accelerate Energy Action Plan implementation

Minister in the Presidency for Electricity, Dr Kgosientsho Ramokgopa, says collaboration between government, business and society is imperative if South Africa is to overcome the current electricity crisis gripping the nation.

The Minister was speaking during the launch of the Resource Mobilisation Fund (RMF) on 9 March. The RMF is a collaborative effort between government and Business Unity South Africa (BUSA) to provide resources and expertise that will assist government to fully implement the Energy Action Plan.

“The establishment of the Resource Mobilisation Fund is a significant step in this regard. It is only through a collective national effort that we will be able to end loadshedding and enable our economy to grow.

“The RMF is an example of the collaborative approach between government and social partners which the President has always prioritised. Most importantly, it shows what we can achieve if we roll up our sleeves and go beyond debate and discussion to engage in real, practical action on the issues that confront our society,” he said.

Ramokgopa explained that the fund is expected to play a critical role in assisting government to implement government’s Energy Action Plan (EAP) with more drive.

“The RMF will provide crucial expertise and resources to turbocharge the work of NECOM [National Energy Crisis Committee] and ensure that we put the best minds in our country and indeed across the world to work on this problem.

“The tremendous support which this initiative has already received from businesses and philanthropies alike is evidence that we can work together as Team South Africa to get our country back on track. We look forward to a strong partnership with the RMF as we move to ensure swift and full implementation of the President’s plan,” he said.

Minister Ramokgopa said although the RMF comes as a boon for turning around the current energy crisis, government has already been hard at work to bring more urgently needed megawatts onto the power grid.

Some of the work done includes:

Eskom is implementing a detailed Generation Recovery Plan to improve its performance, focusing on six power stations that contribute the most to load shedding.
The licensing threshold for embedded generation projects has been removed which has opened the way for private investment in electricity generation.
A new determination for close to 1 5000MW of new generation capacity from wind, solar, and battery storage has been published and project agreements for 2 800MW from bid windows 5 and 6 have been signed.
A Request For Proposals for 513MW of battery storage has been released which will be followed shortly by the release of Bid Window 7.
The Minister of Finance has announced significant debt relief for Eskom totalling R254-billion, as well as a substantial fiscal support package, which includes tax incentives for businesses and households to invest in rooftop solar.
Red tape has been cut and the regulatory requirements for energy projects has been streamlined to reduce the time that it takes for new generation capacity to the grid.

Article courtesy SAnews.gov.za

Securing funding for the installation of rooftop solar for commercial enterprises

The large capital outlay for solar installations will require many businesses to approach financial institutions which, in turn, will need to consider the most suitable way to secure their investment.

By Mashudu Mphafudi, director and head and Michael Bailey, associate – Finance & Banking practice

It is estimated that stage 6 loadshedding is costing the economy as much as R900 million per day. Many businesses are looking to self-generate power through the installation of rooftop solar as a way to reduce the impact of loadshedding and possibly avoid retrenchments or, at worst, closing their doors.

Rooftop solar

In the 2023 state of the nation address, President Cyril Ramaphosa announced various measures to combat the country’s existential power crisis, including the declaration of a state of disaster, a new Minister of Electricity, and loans and incentives to move South Africans onto solar energy. The President said that the Government was “going to proceed with the rollout of rooftop solar panels”. The bounce back loan scheme, implemented initially to assist with the impact of COVID-19 pandemic, will now be used to assist with the rooftop solar rollout and allow banks and development finance institutions to borrow directly from the scheme to facilitate the leasing of solar panels to the customers.

The Minister of Finance announced in the 2023 Budget that from March 2023, businesses would be able to reduce their taxable income by 125% of the cost of an investment in renewables. The Government will guarantee solar-related loans for small and medium enterprises on a 20% first-loss basis, meaning that the Government will carry 20% of the loss on defaulted loans, so institutional lenders will not have to carry the entire loss. This has created a perfect storm of necessity and incentive for businesses to invest in self-generated renewable energy.

Security of the loan

As discussed in a previous alert, the initial capital cost risks being exclusionary without funding assistance. While clarity is sought on implementing the bounce back loan scheme to be launched in April 2023, lending institutions will play an integral role in assisting businesses to mitigate against the impact of ongoing loadshedding to allow businesses to own, install and operate rooftop solar.

It is common for lending institutions to require security for the loans to be advanced if a borrower defaults under a loan agreement. Although the Government will guarantee 20% of the defaulted loans, without additional security, a lender may not (in certain circumstances) be able to recover all the money borrowed under the loan agreement. It would be pragmatic to consider the circumstances of the borrower in order to assess the appropriate security to be provided by the borrower to the lender in a funding arrangement.

In our view, we would recommend that the lender consider the following securities when advancing loans for rooftop solar (the list below will have to be specific to a particular transaction and may differ from one to the other).

Special notarial bond

A special notarial bond (once registered) constitutes real security in the mortgaged property as effectively as if it had been expressly pledged and delivered to the holder of the right. A special notarial bond for tangible movable property must identify and describe the rooftop solar secured in a manner that makes the rooftop solar readily recognisable. A special notarial bond must satisfy the requirements outlined in the Security by Means of Movable Property Act 57 of 1993.

It must be noted that rooftop solar installation and construction will ordinarily occur after the lender advances the monies to the borrower. Accordingly, the special notarial bond will only be registered when construction has been completed and the rooftop solar is “readily recognisable”. If the borrower fails on its obligations under the loan agreement, the lender may have the property sold without having to approach a court for an order to that effect. The lender is regarded as a secured creditor, which means that no other creditor may attach the property serving as security specially. However, if the rooftop solar is not properly identified, the lender will rank as a concurrent creditor on the insolvency of the borrower.

General notarial bond

Unlike a special notarial bond, a general notarial bond is a mortgage by the borrower of all of its tangible movable property in favour of the lender as security for a debt or other obligation. However, a general notarial bond does not (in the absence of attachment of the property) make the lender a secured creditor of the borrower. It is not a true mortgage of movable property, but is a means of obtaining a limited statutory preference above the claims of concurrent creditors in the borrower’s insolvent estate.

Guarantee or suretyship

Guarantees and suretyships are a form of security for a principal obligation i.e. the due performance of the borrower for, inter alia, the repayment of the loan.

The decision to require a guarantee or suretyship will need to be considered on the basis of assets or balance sheet of the individual or company, respectively, providing the guarantee or suretyship to ensure that any enforcement on the guarantee or suretyship will cover the balance of the loan outstanding.

Cession in security

A cession in security is an agreement to be entered into between the borrower and lender in which the borrower will grant security over intangible movable property in favour of the lender. For more information on the different types of cession in security structures, see this previous article. The lender should consider a cession in security over:

· Bank accounts: The borrower will maintain bank accounts for managing its business and all amounts standing to credit of the accounts should be ceded.

· Project documents: Rooftop solar will need to be constructed and, eventually, it will provide a revenue source for the borrower or be used by the borrower to meet its electricity demands. The decision as to which project documents should be ceded will depend on the nature of the borrower’s business and the purpose of the rooftop solar.

· Debts: The borrower can cede all book debts, claims or receivables of whatsoever nature and howsoever arising (whether in contract, delict or otherwise).

Shareholder pledge and cession

As a company, the borrower is investing in its business through the installation of rooftop solar. This benefit is ultimately for the shareholders of the borrower. The lender should consider the pledge and cession of all the share capital held in the borrower and all claims of whatsoever nature which the borrower shareholders may have against the borrower.

Additional security

Although less common, a lender may consider a (i) hire purchase transaction which usually includes an option for the lessee to purchase the rooftop solar for an agreed (and sometimes nominal) amount at the end of the period of the lease or (ii) an instalment sale where the borrower (as buyer) takes possession of the rooftop solar, but the title to the rooftop solar remains with the lender (as seller) until the purchase price (including the interest ordinarily associated with the loan agreement) has been paid in full. The major risk associated with a retention of title arrangement is ensuring that the lender takes the title to, and becomes the owner of, the rooftop solar from the supplier.

Conclusion

Security ordinarily required for a loan agreement such as a guarantee (or suretyship), a cession in security and shareholder pledge and cession should, at a minimum, be provided. Additionally, for:

· smaller rooftop solar projects with completion within one year of advancement of the loan, a lender should consider the registration of a special notarial bond; and

· larger rooftop solar projects where construction will take longer than a year from the advancement of the loan, the lender should require a general notarial bond until a special notarial bond can be registered.

Although the Government has intervened to incentivise rooftop solar installations through beneficial tax breaks and a partial guarantee, a lender must consider how best to protect the entire amount to be loaned to a borrower. The decision as to the exact security to be provided by the borrower must be considered on a case-by-case basis.

First utility scale commercial and industrial wind farm in South Africa

The ACED-IDEAS-REATILE Consortium has reached financial close with its lender Rand Merchant Bank on the 69MW Msenge Emoyeni Wind Farm.

This marks the effective date of the Power Purchase Agreement (PPA) between Sasol South Africa Limited (“Sasol”) and Msenge for the supply of renewable energy to Sasol’s Sasolburg site via a wheeling arrangement. The power Sasol is purchasing from Msenge will be used to secure renewable energy supply for green hydrogen production.

African Clean Energy Developments (“ACED”) represents a consortium of co-sponsors and equity investors consisting of ACED, African Infrastructure Investment Managers (“AIIM”) and Reatile Renewables (Pty) Ltd (“Reatile”). ACED and AIIM are co-sponsors and the equity in Msenge is owned 62% by AIIM, through its flagship IDEAS Fund, and 38% by Reatile. Rand Merchant Bank, a division of FirstRand Bank Limited (“RMB”), has partnered the consortium as sole Mandated Lead Arranger for the project.

The Msenge Wind Farm is the first utility scale private wind farm in South Africa with its power wheeled across the national electricity grid. It is also the first of several renewables projects that the consortium intends to bring into construction in 2023. ACED is a leading renewable energy developer that has already spearheaded the delivery of more than 1 200MW of renewable energy under the Department of Minerals and Energy’s REIPPPP process and 30MW in the commercial and industrial market.

The energy will originate from Msenge wind farm, located near the town of Bedford, about 200km North of Gqeberha in the Eastern Cape province of South Africa. The farm was originally developed by Windlab South Africa but has been acquired, further developed and financially closed by ACED and AIIM. ACED will also manage construction and another AIIM affiliate, Energy Infrastructure Management Services (EIMS), will manage operations once construction is complete.

Aside from needing to resolve the country’s power crisis, the South African government has prioritised the manufacturing of green hydrogen for strategic industrial usage. Sasol, the ACED-IDEAS-Reatile Consortium and Msenge Wind Farm are playing a role in both. Green hydrogen is a key component of a low carbon energy sector which will enable the decarbonisation of critical sectors of South Africa’s economy. Sectors that will benefit include hard-to-abate industries such as transport, refining of metals and cement, heat generation and back-up power supply.

James Cumming, ACED’s General Manager, highlights: “ACED are very proud to have reached financial close and construction commencement on this much needed South African first, and we look forward to getting to the commercial operation date on Msenge for Sasol. It’s an amazing achievement by a large team of many businesses and advisors, that comes with a huge amount of hard work and sacrifice that we are very grateful for. We look forward to doing more of that in 2023 and beyond!”.

AIIM Investment Principal Sechaba Selemela noted that the transaction was significant as it represented AIIM’s ongoing commitment to finding alternative energy solutions to South Africa’s current electricity crisis.

“It also enables South Africa’s transition towards greater energy security based on clean energy production,” Selemela said.

Through the IDEAS Fund, AIIM has funded projects which together contribute around 25% of the renewable energy currently powering South Africa’s grid and abating higher levels of load shedding on a daily basis. The Fund currently has a renewable energy portfolio valued at more than R 10-billion.

Renewable energy a catalyst for prosperity in SA

South Africa’s energy crisis has a devastating impact on the country’s economy, with GDP declining by 0.7% in the 2^ndquarter of 2022, according to Stats SA[ii]. Loadshedding is affecting food security, infrastructure and communication networks, as well as various key economic sectors, like mining, tourism, and manufacturing. Jan Fourie, Executive Vice President for Scatec in Sub-Saharan Africa, has described the conundrum as not just an energy crisis, but a fossil fuel dependency crisis.

Jan Fourie, Executive Vice President for Scatec in Sub-Saharan Africa.

“With abundant sunlight and wind resources, renewables present the optimal solution to our energy woes in SA. The urgency of the situation calls for increased private sector investment in renewable energy projects to fast-track the Department of Mineral and Energy Resources’ Integrated Resource Plan (IRP)[iii] and accelerate our economic recovery, by embracing the worldwide transition towards clean energy,” he asserts.

“The energy transition in South Africa has gained widespread public support, and the market may be looking to secure the necessary raw materials to fuel this shift in 2023.”

The significant upscaling in the production of lithium-ion batteries has made renewable energy price-competitive with fossil fuels, further driving the shift towards clean energy sources, Fourie adds, cautioning that the Covid-19 pandemic and the Ukraine war have seen supply chain spasms affecting commodities like nickel – a key component for Li-ion battery production.

“This could present an opportunity for SA’s metal producers to fill the global supply gap, potentially emerging as a key player in the new global metals market, and simultaneously driving a just energy transition locally,” he suggests.

In addition, innovations in storage technology have allowed renewable energy plants to produce stable, consistent, and dispatchable power, dispelling the myth that renewable energy is intermittent, or unreliable.

“Widespread investment into renewables, driven by strong tailwinds will offer businesses far more than a safety net against load-shedding,” Fourie advises, citing brand differentiation, stable energy prices, and the opportunity to fulfil corporate sustainability targets as just a few of the other potential benefits for the private sector.

“Embracing renewables is a key component of many successful businesses’ corporate social responsibility strategies, and tends to herald strengthened stakeholder relations, including with the local community, customers, and employees,” he expands.

New energy wheeling legislation and power purchase agreements such as the Renewable Independent Power Producer Programme, or REIPPPP (RMIPPPP) – under which Scatec are currently constructing three projects in Kenhardt in the Northern Cape with a combined solar capacity of 540 MW[iv] – Alleviating pressures on the nation’s energy mix.

Furthermore, the introduction of the green finance taxonomy (GFT) is bringing a measure of standardisation and transparency to the process of classifying and scoring SA’s green economic activities, helping facilitate a smooth equitable transition to a low-carbon, net-zero emissions economy,” adds Stian Kalsen, Communications Manager for Scatec.

In conclusion, the private sector in South Africa has a crucial role to play in driving the transition to renewable energy and leading the charge towards a cleaner, more sustainable future. With the growing public push for sustainability and the incentives and opportunities offered by new legislation, 2023 presents a golden opportunity for businesses to embrace renewable energy.

This will not only bring environmental benefits, but it also “has the potential to drive economic development, create jobs, enhance energy security, and buffer against the threats presented by load shedding, which is not going away in the foreseeable future,” Fourie states.

“Dispatchable renewable energy is available in South Africa right now, and it makes sense for businesses to invest in it. Already massive projects are underway that promise to protect early adopters from load shedding-related risks and help bring South Africans clean power for the future.”

“Renewables are a safe investment option for businesses at the microeconomic level, and at the macro-level, harnessing the country’s abundant sun and wind resources could hold the key to future-proofing South Africa’s energy sector,” he suggests.

“As we move into 2023, we hope to see the private sector in South Africa shift gears and stake their claim in a cleaner, more sustainable future with significant buy-in to renewables,” Fourie says.

[ii] https://businesstech.co.za/news/business/627280/how-load-shedding-is-tearing-through-south-africas-economy/

[iii] https://www.energy.gov.za/irp/2019/IRP-2019.pdf

[iv] https://scatec.com/2022/07/19/scatec-is-starting-construction-of-solar-and-battery-project-in-south-africa-after-reaching-financial-close/

Thinking of buying a battery to help power your home? Here’s what you need to know

Batteries are undoubtedly part of our energy future. Should you put one in your home now to store solar output, manage your energy use and cut costs? It really depends on what you want to achieve.

Studies in 2017 and 2021 identified key motivations for installing home batteries:

using your own solar energy
good for environment
independence from the grid
saving money

With these goals in mind, our research suggests it’s hard to justify buying a battery right now on cost savings alone. If other reasons also matter to you, it might be justified.

Using your own solar

One way you can avoid curtailment is by shifting some of your energy use to the middle of the day. Significant loads that could be shifted include:

water heating
pool pumps
air conditioning
appliances such as dishwashers, clothes washers and dryers
electric vehicle charging.

If you still have surplus generation, it can be stored in a battery and used later to reduce the energy you import from the grid to cover loads you can’t shift. The energy you could transfer via a battery each day will be whichever is the minimum of your excess generation and the amount you normally import. For example, if you have 3 kilowatt-hours (kWh) of excess generation in a day but import only 2kWh to meet your overnight loads, the maximimum energy you can transfer via a battery is 2kWh.

The battery itself will limit rates of charging and discharging. If you are generating more power than it can handle, some of the surplus will be exported or the solar output could be curtailed. If your load is more than it can handle, you will need extra power from the grid.

Environmental benefits

Storing surplus solar energy and using it instead of fossil-fuel energy from the grid will have environmental benefits.

Most home batteries are lithium-ion batteries. Despite concerns about the environmental impacts of a lithium-ion-led energy revolution, efforts are being made to reduce these impacts.

Other ways to reduce environmental impacts without a battery include:

use less energy, and shift your load to match your clean energy supply
choose a green retailer

Independence

A 2017 study found nearly 70% of respondents wanted to eventually disconnect from the grid. Remote households have done it for decades, but need large solar systems and large batteries backed up by diesel generators and gas for heating and cooking.

Being connected to a grid has significant benefits. When not generating enough solar power you can get energy from somewhere else. And when generating more than you need, you can send the surplus somewhere else that needs it. Connecting many loads to many generators increases flexibility and efficiency.

A home battery can let you run your home when the grid fails, but you may need extra equipment to isolate it from the grid at such times. Being off-grid means you may also need to manage your battery differently to keep enough energy in reserve to meet your needs during outages.

Saving money

You could use a battery to reduce costs in two ways:

store surplus solar energy during periods of a low feed-in tariff (the money you receive for exporting energy to the grid), then use it later instead of importing energy when the price is high
join a virtual power plant (VPP).

Let us explain further.

The cost of electricity varies throughout each day, depending on demand and on available generation. If you have a meter that records when energy is used, time-of-use and dynamic tariffs will allow you to make the most of price fluctuations.

The payback period is better for smaller batteries, which cost less, and for houses with larger annual export.

The other way of reducing the payback period, and supporting the grid, is to join a virtual power plant (VPP). A VPP is a network of home solar batteries from which the electricity grid can draw energy in times of need.

Other options might be a better bet at this stage

Understand why you want a battery before you start looking. There are other options for making better use of your solar generation, getting clean energy and reducing your costs.

If you have a large solar system, high grid imports and can get a good subsidy, or if you just want cutting-edge energy technology, then you might be able to justify a battery.

If you don’t have solar already, the economics of a solar system with a battery can look attractive. But the solar panels will provide most of the savings.

Article courtesy The Conversation

Authors

Peter Pudney Associate Professor of Industrial and Applied Mathematics, University of South Australia
Adrian Grantham Adjunct Research Associate, University of South Australia
Heather Smith PhD Candidate, Industrial AI Research Centre, University of South Australia
John Boland Professor of Environmental Mathematics, University of South Australia