The Local Context
South Africa is highly dependent on coal, with 90% of its electricity generated in coal-fired power stations, contributing to high per capita levels of CO2 emissions by global standards.The electrification rate is comparatively high for the region at approximately 85%, but South Africa has a very energy-intensive economy with low rates of energy efficiency. This, combined with increasing energy demand and a backlog of investment in capacity expansion and maintenance, has precipitated periodic rolling blackouts across the country. Furthermore, electricity tariffs have risen by more than 300% over the last 10 years, growing much more rapidly than the national inflation rate. The tariff increases have been driven largely by the national utility's investment in several large new power plants, which have resulted in ballooning debt. These conditions - unreliable power supply, escalating tariffs and concerns about carbon emissions - have driven many electricity consumers to look for alternatives.
THE COMMERCIAL & INDUSTRIAL SECTOR
Industrial users are responsible for approximately 41% of the electricity consumed in South Africa, which partly explains why 70% of all new rooftop solar PV installations nationally are in the C&I sector. South Africa has a highly competitive solar contractor market as well as some of the world's best solar irradiance resources. These two drivers, together with the increasing local electricity pricing and the continued reduction in the cost of solar PV hardware, make solar PV an increasingly attractive option within the C&I market. Despite the obvious advantages of solar PV systems, however, the market for C&I solar has only started to mature in recent years. Local challenges in this sector include access to financing for new projects, overall customer awareness and education, as well as regulatory uncertainty for larger projects(1MW+). Much of the solar PV development in the C&I sector has not been financed, as the financial sector has been mostly absent.As more customers become aware of the cost-saving potential of solar PV, and new financing models gain traction, it is expected that the adoption of solar in the C&I sector will accelerate.
The Approach of SolarAfrica
SolarAfrica targets financing for installations under 1MW, with an ideal average size between 100kW and 400kW to align with the needs of a typical C&I client. These installations carry no upfront capital costs or ongoing maintenance costs for the client,with their only cost being a monthly fee based on the amount of electricity used. SolarAfrica provides all administrative, monitoring,and maintenance services for the duration of the PPA, and retains ownership of the equipment until the end of the PPA. A streamlined process is essential for SolarAfrica's business model as it allows the company to provide competitive financing for relatively small-scale projects. SolarAfrica provides solar energy only via PPAs, rather than any outright purchase or sales of solar systems. By procuring solar system components in bulk for multiple installations and applying efficient administrative processes, SolarAfrica can ensure more economical pricing for each system financed by Commercial Energy. In general, projects are finalised in less than four months, from first contact with the client to the completed project installation.
The Unifii platform
SolarAfrica has developed a unique proprietary platform to facilitate their business model. This tool, "Unifii", enables SolarAfrica to connect with Engineering, Procurement and Construction (EPC) contractors and sales agents who are looking for financing to unlock projects and provide their own clients with a financed solar PV solution. It also allows clients to directly connect with SolarAfrica, who can then source EPC contractors for each project.The Unifii tool acts as both a connector and enabler to support Commercial Energy in providing financing for solar PV projects in an efficient and timely manner. The tool is used to run both technical reviews of projects, and credit reviews of clients to ensure financing is provided in a responsible manner. SolarAfrica has invested significant resources into this tool, developing it into a feature-rich platform, providing its users with access to sizing and pricing tools, electricity tariffs and load profile templates, as well as modules for credit and technical reviews. The result is a platform which supports all parties to deliver a fully financed PV solution to the end client.
SolarAfrica towards the Future
SolarAfrica offers both climate-friendly and cost-saving solutions to its clients. The majority of its installations are embedded generation, that is, they are "grid-tied" or connected to the national grid. The solar PV installations are scaled to provide a portion (usually around 25 per cent and up to 40 per cent) of a client's electricity needs, with the remaining power drawn from the grid. This model ensures that the PV system is utilised optimally - ensuring financial viability - and that the client can use grid power to meet peak demand and when the sun is not shining. The downside is that when the grid is offline (during power outages), the solar PV system also does not provide power. Currently the cost of battery storage is mostly still too expensive to provide cost-efficient stand-alone systems, but SolarAfrica is monitoring this opportunity carefully and expects to be able to offer a reliability solution for all clients within a couple of years.
Leadership in the Sector
The rapid increase of solar PV installations in South Africa over the last few years has highlighted the need for new national policies and regulations to guide and regulate the solar PV market.There is some general regulatory uncertainty, particularly for embedded generation solar PV installations larger than 1MWp, however the sentiment overall is moving in a positive direction towards solar PV systems, even if policy changes are slow to occur. SolarAfrica is committed not only to lead by example in its implementation of all applicable local and international legislative requirements, but also to contribute to improving the regulatory environment in which it operates. It does this through active membership in the local solar industry association, promoting the implementation of best practice standards within national policies and regulations.
A Progressive Employer
SolarAfrica is a young company which has grown from two employees in 2011 to 29 employees in 2019. Providing training and supporting staff development are important aspects of SolarAfrica's culture as a learning organisation. The company ensures that staff have the possibility to grow in their positions and the sector, to give and receive feedback, and to have the possibility to take on greater responsibilities. SolarAfrica also implements flexible workforce principles, including the possibility for staff to work from home on a regular basis. SolarAfrica has comprehensive human resource policies which cover its own operations and extend to its procurement of EPC contractors. The company ensures that all stakeholders in its supply chain comply with the labour and working conditions requirements described in IFC Performance Standard 2 (Labour and Working Conditions). The company is currently developing an E&S rating system for contractors and considering developing a more formal auditing system to monitor sub-contractors and EPC companies.
Value for EPC contractors
SolarAfrica is one of many operators within the large framework of the solar PV sector. SolarAfrica's financing solution facilitates not only the solar PV installation for their C&I clients, but also enables the work of the EPC contractors. This indirectly contributes to employment creation within these EPC companies,in an otherwise difficult environment for employment support and creation. In addition, SolarAfrica operates according to high technical standards, which provides its EPC contracting partners with guidelines, including Operational Health and Safety (OHS)requirements, to ensure the delivery of high-quality installations. In this way, SolarAfrica supports the improvement of standards across the sector. Recognising their work in this area, they were awarded the Africa Green Future Leadership Award and Best Practice Award in 2016.
Value for Clients
Clients of SolarAfrica sign up for solar PV systems both for the contribution to climate mitigation and the cost-saving opportunity. With SolarAfrica aiming to save clients between 20-40% of power costs in comparison to the national utility company's tariffs, and with clients being required to pay only for the electricity consumed, clients can save money from the very first day of the system's operation. The significant CO2 emission reduction also comes into play immediately upon each project's installation.