What digitalisation acceleration means for sustainability

By Jaco du Plooy, product manager for Eaton Africa

Last year took a truth which people working in the technology sector were well aware of and threw it into sharp relief for society as a whole. While the global Covid-19 pandemic has caused a level of disruption to daily life, at a level not seen for a generation or more, it’s clear that that disruption could have been significantly more challenging were it not for the digitalised nature of much of daily life. Data has now moved beyond being the bedrock of industry and is now – like water and power – an embedded and indispensable factor for modern life.

Our networked era means that colleagues have continued to collaborate through cloud productivity tools, that vulnerable customers have continued to shop through online grocery services, that vital medical information has continued to be shared with those who need it, and that friends and family have continued to see one another’s faces even under the strictest of lockdowns.

Many businesses – and especially those involved in professional services – have reaped the benefits of digitalisation by continuing to operate virtually as though their offices are still open. This is not to say, however, that every business was well prepared for this unforeseen event. Many had to rapidly bring forward plans that were on the horizon, moving services to the cloud and creating ways for staff to access vital data, and achieving virtually overnight what was road-mapped for the coming years.

In a global survey by law firm Baker McKenzie, 78% of Technology, Media & Telecoms businesses, along with 74% of Financial Institutions and 65% of Consumer Goods & Retail businesses, accelerated their digital transformation plans as a result of Covid-19. As Microsoft CEO Satya Nadella put it in April, we saw ‘two years’ worth of digital transformation in two months.

The confluence of trends around data and power

While this pace of change is worth remarking on in itself, it’s possible that we haven’t yet begun to truly reckon with the consequences of this digitalisation acceleration. While it might seem grandiose to say, it seems likely that digitalisation is just one of an interconnected set of trends that will truly change how our world operates – and the pandemic has brought the timeline for that change markedly forward.

To understand why, we need to consider the fact that, as well as replacing or reworking existing systems with data centre-based technology, digitalisation is always also a transfer of energy from one system to another. The rise in home working is a perfect example of this: while the energy demands of cloud computing likely rose as a result of home working, and those powering videoconferencing services certainly did, this replaced commuting, which was to a large extent directly powered by burning oil.

Likewise, online grocery shopping enables more efficient delivery routes rather than many individual trips, on-demand retail eliminates the energy expenditure of over-production and warehousing, and online banking reduces the need to power and maintain financial real estate.

Digitalisation of systems, then, is also an electrification of systems. A stable supply of electricity is critical for digitalisation to flourish in South Africa. With the population estimated to continue growing until 2082, and reaching just over 80-million people, this will result in a steep increase in electricity demand.

While this may, on the face of it, sound like bad news for our climate goals, the truth is that shifting demand towards electrified systems will stimulate the need for adopting renewable energy, which is now generally cheaper per watt than fossil fuel alternatives. As well as being inherently more power efficient, thanks to the hyper-efficient nature of modern silicon, digitalisation opens avenues for carbon reduction as its emissions are directly related to the emissions of the grid as a whole.

From digitalisation, to electrification, to renewable energy: this cycle closes back on itself in the fact that renewable energy requires digitalised systems for its effective generation, transmission, storage, and usage. While wind and solar are now highly efficient and economical ways of generating electricity, they are by their nature less predictable and consistent than fossil fuel-based generation.

Digital systems will be required to rapidly react to fluctuations in production, and the power held in those systems will also play a role in managing the grid’s performance. Already, stores of power like data centre backup systems and electric vehicle batteries are being used to help support the grid’s frequency and performance.

As digitalisation, electrification, and renewable adoption accelerate, these interconnections will become deeper and more dynamic: this confluence of trends is a virtuous cycle that speeds itself up.

Digitalisation and sustainability at once

As this cycle continues, I would predict that we will see the distinction between these trends start to fade away. In its earliest days, when digitalising a system meant building on-premise data centre infrastructure, decisions around digitalisation were taken largely independently of power considerations.

Over time, data centre applications became mission-critical, such that those decisions became dependent on the quality, availability, and reliability of power to ensure continued operation. Today, data and power have become co-dependent considerations: governments make policy decisions around power with data centre rollouts in mind, and data centre operators in turn plan construction in accordance with grid capacity.

Tracing that shift into the future, we may see digitalisation and sustainability become, in many regards, synonymous terms. The share of overall power needs going into data centres and networking is growing rapidly, and this will drive and support the acceleration of renewable adoption. Far from being competing concerns, the cloud will be the route to decarbonisation, and vice versa.

At the beginning of 2020, much of the digital transformation that occurred existed only in the form of medium-to-long term planning – an ideal business goal that was still subject to capacity and favourable conditions. The pandemic brought all that forward and made it an immediate necessity in ways that nobody could have predicted.

Today, electrification and renewable adoption similarly exist on a planning horizon, subject to checks and milestones as they are patiently brought into reality. Over the coming years, we will see how the ripple effect of accelerated digitalisation cascades through all our essential systems, leaving us with a very different, much greener approach to the world.

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If you’re looking for renewables, look no further than wood

The theme for this year’s International Day of Forests (IDF) is “Forest restoration: a path to recovery and well-being” and it’s one that resonates with the local forest industry.

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REN21’s new report shows that cities across Africa demonstrate progressive leadership to deploy renewables

The 2021 edition of REN21’s Renewables in Cities Global Status Report, shows that one billion people live in cities with a renewable energy target or policy.

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New fund focusing on renewable energy answers a need in South Africa

FUND FOCUSING ON RENEWABLE ENERGY, A SOUTH AFRICAN FIRST

With the saving and retirement industry recognising the important role it can play in bringing about social change by supporting South Africa’s infrastructure needs, there is a dearth of viable options available. As listed companies with a pure or major focus on the South African economy struggle to deliver returns to investors, the managers of retirement funds and other savings are now looking for alternative asset classes to obtain sufficient returns.

Says Dr Hendrik Snyman, chief investment officer at Gaia Fund Managers: “With the local stock exchange having underperformed over the past number of years and with limited options available, it is necessary for asset managers to be innovative in obtaining returns for their investors. Globally, there has been a trend whereby asset managers are looking to alternative assets to provide resilience to negative market movements, price irrationality or a lack of returns.”

“We are proud to offer a novel investment opportunity that combines assured, solid returns with sustainable energy, infrastructure and community ownership.”

Hein Kruger, managing director of Kruger International

Through the Kruger Ci Prudential, Balanced and Equity funds, clients can now invest in the operational wind farm in a safe, regulated and tax-effective way where the impressive returns inherently adjust by inflation each year.

“Kruger’s co-investors in the wind farm near Humansdorp in the Eastern Cape include the Tsitsikamma Development Trust (9%) and Cennergi (75%), a wholly-owned subsidiary of listed company Exxaro Resources. This is a true ESG (environmental, social and governance) investment. The community trust receives investor returns for their shares. The construction has already benefitted the local community through infrastructure upgrades, a new community centre, cattle fencing and bush clearing. Since then, the wind farm contributes 2.1% of its revenue quarterly to enterprise and socio-economic development in the surrounding communities.”

The wind farm is a renewable energy project with an installed capacity of 95 MW, situated near Humansdorp in the Eastern Cape’s Koukamma Local Municipality. It became operational on 17 August 2016, offering a measurable track record in output performance. This project and its various service providers have met and exceeded expectations with the power produced since operations started, surpassing the P50 (base case) forecast. The performance of the project to date reflects the quality of the wind resource, equipment and service providers, according to Snyman.

The listing of the Company’s preference shares, with its focus on clean energy, takes place as the South African Government ramps up the supply of renewable energy to the national electricity grid. On 25 September 2020, the Minister of Mineral Resources and Energy, Gwede Mantashe, gazetted a key determination under national legislation to procure a total of 11 800 MW of electricity, of which 6 800 MW will be from renewable sources.

“This investment contributes to much-needed infrastructure in South Africa and investment diversification in an alternative asset class for us as the investors. We are proud to include Gaia Fund 1, with the wind farm as its first asset, in the Kruger funds,” says Kruger.

Collective Investment Schemes and retail investors have struggled to directly access infrastructure investments for several reasons. First, they are not readily available. Second, they are not usually listed on stock exchanges. Lastly, those options which are listed are subject to deflated prices owing to the lack of a readily traded market that understands the underlying principles of the asset class.

Snyman explains: “Infrastructure as an asset class can provide investors with stable inflation-linked cash returns while preserving their capital. However, the current means of gaining access to these projects includes a daunting and protracted process requiring, among other things, negotiating lengthy contracts. This process is far removed from investors’ ordinary means of acquiring shares on a trading platform and, therefore, acts as a significant investment barrier to entry and exit. In addition to the process, the unlisted equity available in the projects precludes certain Collective Investment Scheme portfolios from acquiring interests in the projects. A listed security removes many of the entry and exit barriers for investors and allows infrastructure to take up its rightful place as an asset class in many investor portfolios.”

As a listed entity, the Fund will enable collective investment scheme portfolios to increase their allocation to infrastructure from an unlisted instrument threshold of 5% to 10%, yet retain the benefits of being unlisted through price stability. The ability to do this will open a unique market opportunity for future collective investment scheme-compliant portfolios to invest in 4AX-listed infrastructure projects through new issuances of preference shares in the Gaia Fund 1.

“Kruger International as an innovative fund manager collaborated with Gaia Fund Managers as a pioneer in the infrastructure investment space in South Africa to come up with a solution to access infrastructure investments for their investors,” adds Snyman. “Kruger International’s funds will hold all of the preference shares, allowing them to accurately mark their value on a daily basis; meaning that as an asset manager, they are less exposed to market irrationality and/or information asymmetry.”

Gaia Fund 1’s A preference shares will be 4AX’s seventh equity listing. 4AX, as a new low-cost, fully licensed equity and debt exchange, took up the challenge with Kruger International and Gaia Fund Managers to list these industry-first preference shares. 4AX provides security for investors, giving the required financial transparency and regulatory oversight without the obstructive burden and costs associated with legacy exchanges. As such, the cost and admin associated with listing are no longer prohibitive.

According to Eugene Booysen, CEO of 4AX: “4AX brings to the market an efficient and alternative regulatory model which reduces regulatory costs and inefficiencies but promotes and adheres to the highly regarded financial regulatory standards in South Africa. 4AX focuses on being a safe and simple digital marketplace redesigning finance and access to capital and thereby enabling inclusive growth.”

Gaia Fund Managers and Kruger International Asset and Wealth Management are pleased to announce the listing of South Africa’s first preference shares with an infrastructure focus on 4 Africa Exchange (4AX).

Gaia Fund Managers, together with Kruger International, plan to list Gaia Fund 1 (the Fund), which complies with Collective Investment Scheme regulations next week Thursday (22 October). The Fund’s A preference shares will trade under the ticker 4AGF1A (ISIN: ISIN ZAE400000101) on 4AX.

The preference shares will be bought by Kruger International’s various funds. The proceeds of the listing will be used by the Company to buy a 16% indirect shareholding in the Tsitsikamma Community Wind Farm.

For more information, visit http://www.gaia.group.

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VIDEO | How we can turn the cold of outer space into a renewable resource

Aaswath Raman| Ted2018

What if we could use the cold darkness of outer space to cool buildings on earth? In this mind-blowing talk, physicist Aaswath Raman details the technology he’s developing to harness “night-sky cooling” — a natural phenomenon where infrared light escapes earth and heads to space, carrying heat along with it — which could dramatically reduce the energy used by our cooling systems (and the pollution they cause).

Learn more about how this approach could lead us towards a future where we intelligently tap into the energy of the universe.

Aaswath Raman is a scientist passionate about harnessing new sources of energy, mitigating climate change and more intelligently understanding the world around us — by better manipulating light and heat using nanoscale materials.

Why you should listen

Aaswath Raman is an assistant professor of electrical and systems engineering at the University of Pennsylvania. He is also co-founder of a clean energy startup, SkyCool Systems, where he is its chief scientific officer. He initiated and led the development of radiative sky cooling, a technology that he originated as a research associate at Stanford University, beginning in 2012. 

Raman is deeply interested in the intersection of science, technology and development work, and he has previously collaborated on projects to redesign refugee camps with UNHCR and to rethink governance in rural Sierra Leone. In recognition of his breakthroughs in developing radiative sky cooling, in 2015 he was named one of MIT Technology Review’s “Innovators Under 35.”

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Zeerust Solar joins the North West Province’s green power map

Zeerust Solar, situated in the North West Province, has commenced its commercial operations, having achieved full compliance on 1 January 2021. This 100% South African-owned PV project, joins Bokamoso and Waterloo Solar plants, putting the North West on the map as a player in the renewable energy sector, not only delivering additional power to the country’s national grid, but also benefiting the rural communities through impactful economic development programmes.

“Extensive economic development projects kicked off during our project’s construction period to provide Covid-19 relief, in addition to Enterprise Development training and accelerator programmes, skills development training and other welfare initiatives.”

Isaac Mmushi, CEO of Zeerust Solar

In partnership with the Ramotshere Moiloa Sub-District of the Department of Education, Zeerust Solar has also supported education. “The implemented programmes, including specific support for Stinkhoutboom Primary, have helped rural learners gain confidence to succeed despite the challenges they face.  This is in addition to a Grade 12 excellence awards programme, aimed to stimulate and honour academic achievements of Matriculants, in schools across the Sub-District,” said Dr BKM Molokoe, Sub-District Manager.

The focus of Zeerust Solar’s Economic Development programme is to empower and strengthen local communities in and around the Zeerust area, namely Ikageleng, Henryville, Olienhout Park, Shalimar Park, Welbedacht (Lehurutshe Town) and Groot Marico, as well as extending to 40 villages located within the Ramotshere Moiloa Local Municipal area.

The 75 MW Zeerust Solar is currently the largest solar PV power project in the Province, with 250 080 solar panels harnessing the intense North West sun. The solar plant began generating the much-needed green electricity estimated to reach 180GWh each year, which is enough to satisfy the needs of around 84 000 average South African households.

The project, which commenced construction in January 2019, is constructed on a 179-hectare project site and is connected to Eskom’s Kameeldoorn switching station, which feeds the generated power into the country’s national grid.

Around 1 000 people from the local beneficiary communities were directly employed on the project during construction. This is in addition to the employment created through the contracting out of various services. 

Zeerust Solar’s socio-economic development projects are focused on education, youth development, health, food security and welfare. The programmes have been chosen following research and engagement to ensure that they are well informed and will strengthen the beneficiary communities. Additionally, a percentage of the revenue generated each year will be committed to implementing Enterprise Development initiatives, to build resilience and accelerate the growth and success of entrepreneurial businesses, ultimately stimulating the local economic growth and creating opportunities for the economic participation of previously disadvantaged groups.

The focus is on small and micro enterprises, designed to enhance growth. To deliver on this objective, the establishment of a local resource centre, for use by local SMMEs and communities at large, will support this drive to support development, whilst the provision of accredited skills training will be provided to start-up businesses.

Zeerust Solar is owned by African Infrastructure Investment Managers (AIIM, a member of Old Mutual Alternative Investments) through its IDEAS Fund, Reatile Solar Power (RF) (Pty) Ltd, Phakwe Solar (RF) (Pty) Ltd, AREP (African Rainbow Energy and Power) and Cicada Community Trust.

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Gas-to-power options emerge on South African energy scene

As South Africa races against the clock to fill an electricity supply gap of some 2 000MW between 2019 and 2022, gas-to-power projects will play a significant role.

Government’s recently launched risk mitigation independent power producer procurement programme (RMIPPPP) has stirred the interest of a number of private players in the gas-to-power sector, according to Nicola Rump, principal environmental scientist at SRK Consulting.

“While the longer-established renewable energy independent power producer procurement programme (REIPPPP) is delivering considerable results in solar and wind energy generation, we are now seeing an exciting start in exploring the potential of gas in South Africa’s energy mix,” says Rump.

She notes that the field of gas-fired generation in the country has previously seen little activity from private developers. This was now changing fast, as the Department of Mineral Resources and Energy prepares to begin evaluating RMIPPPP project bids by the end of 2020. With South Africa’s power system being so constrained, government is wanting these projects to start feeding the national grid by mid-2022. SRK is currently conducting a number of environmental impact assessments (EIAs) for gas-to-power projects in the Eastern Cape and KwaZulu-Natal.

Key aspects of the planning process for these projects, she says, include EIAs and related licencing requirements. Within the tight timeframes envisaged, these need to be carefully managed to avoid becoming stumbling blocks.

“The introduction of strict timelines for the EIA process in recent years means that while EIAs are generally completed in less time than before, the process leaves very little time for accommodating any changes to the project design.”

Nicola Rump, principal environmental scientist at SRK Consulting

It also requires that a significant amount of work must be completed before the application is actually lodged with the regulator. “Gas-to-power projects need to submit a final scoping study to the Department of Environment, Forestry and Fisheries (DEFF), and this must be approved before the EIA phase can begin,” Rump says. “Once the final environmental impact report (EIR) has been submitted, DEFF would decide on the conditions applying to the authorisation.”

While an important attraction of gas is its lower carbon footprint than coal, South Africa’s dominant fuel source for energy, it is not without its environmental impacts. These include carbon emissions, for which projects would require an air emission license before proceeding.  

“Climate change impacts are also becoming an increasingly important consideration in these assessments,” said Rump, “especially in the light of South Africa’s commitments to global climate change and greenhouse gas emission agreements – and its emission reduction targets.”

Other impacts include noise and traffic, as well as effects on the marine ecology of those projects requiring marine infrastructure. Currently, gas-to-power projects tend to be close to ports to facilitate the supply chain from sea-borne liquified natural gas (LNG).

She noted that current projects will have to overcome South Africa’s lack of gas pipeline infrastructure, basing their viability on LNG sources being shipped in. Among the advantages of developing a fledgling gas-to-power sector through the RMIPPPP is that this would contribute to the growth of local gas markets – helping pave the way for the installation of costly gas infrastructure. This is turn would hopefully reduce the cost of gas as a fuel and spur the uptake of this cleaner fuel in South Africa’s energy landscape.

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Bouncing back in 2021

There is little doubt that 2020 has been the year that has severely tested our mettle and has left many an industry imperilled and in urgent need of a reboot. But experts believe that the economic slump and consequent expected government investment into infrastructure is one of few positive spinoffs of the catastrophic outbreak and can be a silver lining for rebooting failing industries and organisations.

According to Igor Hulak, partner at global management consultancy, Kearney, these investments could present massive opportunities in digital transformation; transitioning to renewable and cleaner energy; and, an outcome-based ecosystem of collaboration between operators and suppliers.

Energy

A re-imagined energy supply is among the key shifts that will shape our new resilient, future-proof business mindsets.  Internationally, the pandemic has seen several European countries taking advantage of the slump in demand for energy to wean themselves off coal and into renewables.  Nationally, an accelerated implementation of a mixed energy supply, in which renewables and liquid natural gas (LNG) will play a much greater role is on the cards.

“The dearth in demand for oil, and the reduced cost of solar and wind technologies has resulted in a favourable investment landscape for renewables. Government has come on board to facilitate these transitions, and Eskom is poised to purchase power from independent renewable energy producers for use in the national grid.”

Hulak adds that, in the renewables sector as well as other industries, we’re seeing an emergence of novel restructuring of projects so that they become scalable, executable modules. “This flexible, iterative approach obviates the need for lump-sum upfront investments and is congruent with innovative modern business paradigms.”

In South Africa, the fifth round of bidding for independent energy supply is currently underway and government and corporates alike are investigating the recent innovations in battery technology and how to best procure these for greater storage capacity of energy gleaned from non-traditional sources.

Digitisation

For forward-thinking organisations, the Covid-19 pandemic might well be the watershed moment that drove broad-based digitisation and spearheaded the Fourth Industrial Revolution (4IR). Hulak urges businesses that have not yet embraced digital transformation to do so swiftly or risk obsolescence in the face of agile disruptors.

According to Hulak, the promised future of digitisation and 4IR is already upon us and is expressed through the greatly increased carrying capacity of the cloud, the ubiquity of reliable connectivity and greater numbers of people going online and becoming digitally active. 

“The customer of tomorrow fully expects automated, instantaneous access to a wide variety of basic, and more nuanced services and transactions.” 

Igor Hulak, partner at global management consultancy, Kearney

This recognition will drive innovation and expansion and will enable companies to emerge stronger, nimbler and more resilient to future disruptions.

Collaborative partnerships

It is widely acknowledged that strategic partnerships, when done right, add mutual value through a less-siloed approach and enhanced efficiencies of operations. Hulak explains that the constrained business climate brought on by the pandemic has necessitated a radical shift toward tactical alliances based on the outcome, rather than adversarial competition focused narrowly on cost and position.

“Rather than the traditional contracting methods of the past, which saw lump-sum risk being pushed onto suppliers, the risk is now shared proportionally, incentivising outcomes and driving towards a common goal”.  Hulak adds that in the new reality, data will enable an aligned view of what ‘best’ looks like thereby building trust, as well as prompting realistic, auditable costs and timelines.

Rishad Khan, the South African operations manager for engineering, procurement, construction, and maintenance company, Fluor, believes that early and effective resource-loaded portfolio planning and identification – and engaging strategic alliances upfront – will help mitigate and manage risks associated with key performance drivers of safety, cost, schedule, and quality.

“An example of this early engagement is applying a construction-driven execution approach to enable better-build techniques that drive the engineering and design process, instead of following the traditional engineering and design sequence, and then finding a construction solution and developing an execution strategy. The same methodology can be applied to suppliers. Significant cost savings have been achieved with this approach,” says Khan.

“These shifts toward holistic leadership reflect the increasing sophistication of governance globally and enable the management of often finite resources in a more responsible way with greater oversight. This stands in stark contrast to the adversarial, myopic paradigms of yesteryear,” concludes Hulak.

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Out of the coal age and into the stor-age

Seydou Kane, managing director for South Africa at Eaton, considers the shift away from coal towards renewables – and the potential for a future microgrid energy market in South Africa

South Africa’s energy generation capacity is dominated by fossil fuels, with this source accounting for 91.2% of the country’s energy, according to the 2019 Integrated Resource Plan. While the country is likely to continue turning to coal as its main source for generating electricity, plans are well underway to diversify South Africa’s energy mix. With multiple solar projects already operational, along with numerous wind farms producing energy too, it’s clearer than ever before that South Africa is well on its way to sourcing as much as 25% of its energy mix from renewables by 2030.

If the future of South African energy is going to depend increasingly on renewables, effective storage will be vital to better connect these energy sources to the grid. Energy storage will also be key to making our national energy infrastructure more resilient and, importantly, enabling it to increasingly rely on clean energy sources.

Learning to rely on renewables

Renewable energy has long been treated with skepticism. Some policymakers argue against renewable energy sources as unreliable, and this has resulted in a roller-coaster market for renewables as policies sometimes shift rapidly – seemingly without consideration for the impact to benefits such as jobs and energy independence. Yet, the ever-decreasing cost of renewables as technology advances has kept the South African market growing, albeit more slowly than is required to meet stated commitments for carbon reduction.

One major argument against renewables is that they do not produce a consistent baseload power like fossil fuels. The common refrain is that the wind does not always blow, and the sun does not shine at night. Of course, these are true, but it must be remembered that we are in a transition to a cleaner future – it is not an overnight change. It will take time, but the day will come when we run completely on renewable and clean power. 

This is being accelerated by the falling cost of battery storage which helps optimise the use of intermittent renewable energy on the grid – further opening up the possibility of powering South Africa with clean, renewable energy while shifting further away from our reliance on fossil fuels.

When renewable energy sources generate more energy than businesses or homes require, the excess can be stored securely. This energy can then be released during times of peak demand, which means less need for conventional fuel generation. This reduces the carbon footprint of South Africa’s energy supply. Even better, this energy can be located anywhere on the grid or in private consumer homes, so that businesses and houses can help eliminate harmful emissions and save costs.

To meet global emissions reduction targets and drive forward a nationwide low carbon economy, we will need to learn to rely on renewables.

The deployment of pioneering energy storage solutions will be crucial in this process as we attempt to embed sustainability within the national energy grid.

Creating a more resilient grid with a ‘behind the meter economy’

Another increasingly interesting application of storage is in microgrids which can efficiently and economically plan for local energy generation and distribution, while increasing reliability. The implementation of local, distributed power generation and storage can be designed to allow portions of the grid and critical facilities to operate independently of the larger national grid when necessary, helping reduce the potential for unforeseen blackouts. The storage systems that are part of these microgrids – whether large or small – can also provide ancillary services to the grid, again strengthening performance and reducing the use of carbon generation.  

Energy storage gives businesses and consumers the power of choice to optimise their energy costs and provides them with flexibility for the future. We are already seeing advanced aggregators working with businesses to educate and inform them on the extra money to be made while supporting the transition to a smarter, environmentally-friendly energy grid.

The investment opportunity

Investment in storage still needs to increase to ensure renewable energy sources can fully step into the breach created by the decline in coal use.

The ever-falling price of energy storage technology today is creating an increasingly viable and attractive investment opportunity – but many South African businesses are still not aware of this potential.

Energy storage technology can be complicated to understand from a commercial perspective when it comes to exactly how it will save money for a particular site. However, the option to sell surplus energy back to the grid through ancillary services opens up new revenue streams that help offset the cost of electricity and dramatically strengthen the business use case. Adapting the South African regulatory framework to remove barriers to entry in the ancillary services market will facilitate this option and better support the development of a healthy energy grid.

The shift to a cleaner future is already taking place as South Africa moves away from coal and towards renewables. Eskom CEO Andre de Ruyter affirming that renewable energy will have to have a place in the country’s energy portfolio if the utility is ever to provide reliable energy, along with recognising that the company cannot continue to violate environmental laws.  Energy storage will accelerate this trend and help ensure a clean, stable, and cost-effective supply of electricity for the country.

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Renewables in the times of COVID-19: More than a hiccup?

The Covid-19 pandemic’s abrupt arrival has disrupted the trajectory of many an industry and ushered in an unprecedented new socio-economic era. Seismic shifts in human behaviour have catalysed a major disturbance within the energy sector, on the sides of both supply and demand. 

According to a recent report released by global management consultancy Kearney, global lockdowns have highlighted the need for universal clean electrification, as the natural environment has seemed to rejuvenate spectacularly in the wake of reduced human activity and offered a glimpse of what a cleaner world could look like. 

“This glimpse will undoubtedly spur the already significant traction toward renewable energy supply that we had seen in the pre-Covid years.”

Prashaen Reddy, a partner at Kearney.

Reddy explains that pre-pandemic, the renewables complex, especially wind and solar, in Europe had finally achieved equalised cost with conventional non-renewable sources like fossil fuels.  “Financing flowing into these projects was supported by low capex, low interest rates, and growing future power price curves, thereby incentivising Purchase Power Agreements”, he says.

However, the combined shock of the virus and the global jolt sustained by the oil and gas industries has been a significant speed bump in the transition to clean energy. The economic slump, which resulted in wide-spread liquidity pressures for many companies that had hitherto been focussed on their transition to renewable energy, forced them to respond by cutting back to ‘survival-mode’ and as such, were preoccupied only with their own immediate viability.

“Although commitments for the transition to green energy remains firm, the plummeting oil price has removed incentive and contributed to the delay in final investment decisions”, says Reddy.  “The situation is further exacerbated by the generally tumultuous state of supply chains globally.” 

On the other hand, renewable energy was declared by the International Energy Agency to be the most resilient supply of energy during the Covid-19 lockdowns. Therefore, in spite of the lockdown-induced downturn, there is more enthusiasm for sustainability-driven investments as energy production around the world is being decarbonised. “This is an era in which consumers are loyal to earth-conscious brands, and players across all echelons are now incorporating environmental considerations heavily within their road-maps to economic recovery,” said Reddy.

According to Kearney, governments may even decide to conditionally attach Covid-19 relief grants (or ‘stimulus packages’) to climate-change mitigation objectives, in favour of subsidising fossil fuel-based initiatives, as they have in the past.

“All of this may see the sector agitated into taking the necessary steps to gain the lion’s share of the flow of capital from the ‘investment wallet’ going forward”, says Reddy.

Along humanity’s road to a decarbonised society and the meeting for the sustainable development goals recommended in the UN’s Agenda 2030, the Covid-19 pandemic could prove more than a mere hiccup. But with a strong basis and sound strategic decision-making the renewables industry could emerge as one of the more confident sectors in future, although many players would be wise to consider the benefits offered by high-level financial guidance and expertise in avoiding liquidity problems.

Traditionally one major criticism with renewables has been its unreliability – the dips and surges in energy supply we experience due to fluctuations of the elemental forces of sunshine, wind and water. To mitigate this, Kearney recommends strategies to handle the impact of these natural peaks and troughs, like increased access to various markets; more sophisticated pricing models; acquisition of more efficient power-storage technologies; and streamlined mutually beneficial strategic partnerships between players.

But the shift towards renewables will not solely be driven by self-centred profitability decisions.  In the era of conscious capitalism, there is far more transparency and information spreads very quickly.

“There is therefore a greater incentive than ever before to make altruistic decisions, and focus on investments which are sustainable, conscientious, and geared towards the greater good. Indeed, in this new paradigm and the economic environment that is emerging around it, such decisions may prove to be the most profitable ones,” concludes Reddy.

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