New energy company ready to take on Eskom and shake up South Africa’s electricity market
Blu Label Unlimited’s BluEnergy has secured a multi-year energy trading licence from NERSA and is ready to deliver renewable energy solutions in South Africa.
Blu Label Unlimited is well-known for its prepaid airtime and electricity vouchers, as well as for its acquisition of a large stake in Cell C.
The company is the dominant player in South Africa’s prepaid voucher and distribution sector, generating R108 billion in revenue.
“We do between 50% and 55% of all prepaid distribution in South Africa’s telecommunications market,” said Blu Label co-CEO Brett Levy.
“We also do around 65% of all prepaid electricity distribution in the country, and service 35 million customers monthly.”
Despite this success, Levy is particularly bullish about their new BluEnergy division, which he described as a unicorn.
BluEnergy’s new National Energy Regulator of South Africa (NERSA) trading license enables it to participate in South Africa’s power sector reform.
It can now deliver renewable energy solutions across municipalities and independent power producers (IPPs).
The company’s strategy is to roll out a large number of small-scale renewable energy power stations ranging from 10 MW to 20 MW.
This strategy has many benefits over the current model, where independent power producers build large-scale power plants.
Smaller power plants are quicker to build and can supply individual nodes rather than merely feeding into the grid.
“Our core goal is to, over time, build 1,000 MW through a combination of 10 MW and 20 MW small-scale power stations,” Blu Label co-CEO Mark Levy said.
BluEnergy’s plan
South Africa’s electricity is currently supplied by Eskom through a top-down pyramid with multiple layers of distribution.
Eskom and IPPs feed into the national grid, which in turn supplies South Africa’s nine provinces and all municipalities in these provinces.
Each municipality then distributes the electricity to households and businesses through various substations, which Levy described as nodes.
There are approximately 3,000 of these nodes across South Africa, which are run by the 257 municipalities.
It is planning to build small power stations, typically between 10 MW and 20 MW, which will provide electricity directly to the substations.
“We will go to a node and offer to supply 10 MW, 20 MW, or 30 MW, which frees up the municipality’s electricity for other uses,” Levy said.
“This will give the municipality a saving of 10% to 15% over the current rates and have the benefit of supplying green energy.”
BluEnergy is partnering directly with municipalities to bypass the complexity of feeding electricity into the national grid.
Blu Label already has an extensive prepaid electricity voucher system, which generates revenue and provides intelligence regarding electricity use in an area.
“Because you have the cash flow security of vending, you can have any bankable project with the cash flow to fund the capital expenditure,” Levy said.
This makes it easy for the company to allocate capital to build the new small-scale renewable power stations.
Levy added that if they need to meet the 400 MW demand, they can build 40 x 10 MW or 20 x 20 MW power stations within a year.
Building a 200 MW power station, in comparison, will take a company operating in the renewable energy space 3 to 4 years.
“Our speed to market is much higher, and we do not have concentration risk because we will go into different nodes instead of a single node,” he said.
Securing land and roof space for solar power
Mark Levy explained that it is a complex process to meet all the legislative and operational requirements to supply electricity.
He explained that very few South African municipalities have a Power Purchase Agreement (PPA) mindset, which makes negotiations difficult.
Another challenge is land. The company needs around 1.3 hectares of land per 1 megawatt of solar power produced.
Much of the land around municipal nodes is government-owned. However, municipalities lack dedicated leasing departments, which delays projects.
In these cases, BluEnergy will shift focus to private land, which then requires rezoning, which adds time and complexity.
Another challenge is node verification to ensure that there is capacity available at a sub-station to supply it with electricity.
All these factors create tremendous complexity to a project, which is why BluEnergy has selected the City of Ekurhuleni for its first project.
The City of Ekurhuleni has already issued power purchase agreements in 2017, but it has not secured any power.
BluEnergy has secured roughly 60 megawatts worth of roof space for solar installations, which equates to approximately 130,000 square meters.
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