Company secures R400m to build commercial and industrial solar projects in South Africa

The SOLA Group has secured R400m in order to build commercial and industrial solar PV facilities across Southern Africa. The renewable energy fund will enable 40 MW of solar PV projects to be built without capital expenditure by the electricity off-takers.

The deal is a result of a partnership between the SOLA Group, African Infrastructure Investment Managers (AIIM), and Nedbank Energy Finance, who have partnered to provide affordable solar PV solutions for businesses that are in dire need of electricity security.

“This partnership brings together three highly experienced entities whose combined skills offer consumers clean energy solutions at a time when our country desperately needs it,” says Chris Haw, Chairperson of the SOLA Group.

The SOLA Group, who have an extensive track record of building solar PV plants in Southern Africa, have already signed 15 MW of solar PV projects through the fund, including several breweries and other industrial facilities around South Africa. The consumers pay for their clean energy through a tariff that is typically 20% lower than Eskom or their municipal provider’s rates.

“The model of electricity generation that incorporates both centralised and distributed electricity will improve the ability for South Africa to meet energy demand, reduce electricity costs and strengthen resilience to outages,” adds Haw.

The partnership comes shortly after Eskom’s announcement of a R20.7bn loss for the 2019 financial year and finance Minister Tito Mboweni’s announcement of a R59bn financial support package for the embattled utility.

“Investing in clean energy infrastructure is a key aspect to bolstering the African economy,” says Mitesh Pema, Investment Director at AIIM, the infrastructure arm of Old Mutual Alternative Investments. “Funding these renewable energy projects will enable industrial facilities to access secure and cheaper power, freeing up capex for investment into their core business activities.”

Over the last few years, reduced costs of embedded electricity generation such as solar PV have interrupted the traditional model of electricity production. For large commercial and industrial companies, these agreements enable flexible procurement of electricity, allowing them to consume the cheapest electricity available at a given time whilst also reducing their carbon footprints.

Earlier in the year, President Cyril Ramaphosa admitted to the dire state of Eskom and the imperative for a resolution to ensure that South Africa’s economy continues to grow in his State of the Nation address.

However, the historical structure of electricity provision in South Africa has relied on a large, centralised energy utility providing the bulk of electricity, heavily dependent on cheap coal and with little flexibility.

Earlier this year, Former Energy Minister Jeff Radebe granted permission to the National Energy Regulator of SA to license Small-scale embedded generation projects from 1 MW – 10 MW in size before the Integrated Resources Plan (IRP) is finalised.

“Allowing small-scale embedded generation of electricity is a key lever for the government to enable flexible electricity generation, and ultimately the transition to a low-carbon economy,” says Duncan Abel, Principal for Energy Finance at Nedbank CIB. “The private sector also has a role to play in investing in electricity infrastructure and making a contribution to the energy mix.”

Nersa’s ability to license the projects comes at the perfect time for consumers interested in Power Purchase Agreements, as projects can be expanded based on the body’s approval of electricity generation licenses between 1 and 10 MW, further reducing costs for the off-taking entities.

Supporting the further deployment of small-scale embedded generation (SSEG) plants, according to Council for Scientific and Industrial Research (CSIR) Energy Centre, will also create thousands of full-time jobs and help to grow hundreds of small businesses across the country. The SOLA Group currently employs 50 full-time staff members for its South African operations, and the construction of 40 MW of solar PV projects through the fund is likely to create an additional 880 jobs in the coming years.