Discovery sends message to South African businesses that want to cut electricity costs

Discovery Green CEO Andre Nepgen has highlighted how the increased adoption of solar generation should push large energy users to develop their energy strategies around time-of-use tariffs.

In a recent LinkedIn post, Nepgen explained that the so-called “Duck Curve” was emerging in South Africa.

The term refers to the deepening dip in grid energy usage during the middle of the day, due to increased adoption of self-generating solar power.

Solar generation is typically very low or non-existent in the early morning and early evening hours, when electricity demand is at its highest.

In addition, solar power performs at maximum capacity in the middle of the day, when grid demand is at its lowest.

While batteries can also help reduce demand during peak periods, the gap between midday and the morning and evening peak energy demand is still widening.

Nepgen explained that the trend was reshaping global electricity prices. “Power is increasingly cheaper during solar-rich midday periods, then rises sharply into the evening,” he said.

“In Queensland, Australia, prices fell by as much as 60% in the day and rose by roughly 50% at night over a period of eight years,” Nepgen said.

“In South Africa, our very own curve is beginning to take shape, and time-of-use tariffs are starting to reflect it.”

Nepgen said that ToU tariffs were changing the economics of wheeling and renewable energy procurement.

“As daytime prices fall, the value of solar-only coverage can reduce. At the same time, evening and nighttime exposure can become more expensive,” he said.

“Energy strategies can no longer be assessed on the price tag alone. They should be tested against changing market conditions, not just the market we have today.”

The graphs below show how Australia has adjusted its electricity tariffs amid a deep duck curve, and how South Africa’s electricity demand profile is starting to mimic it.

Time-based tariffs for households

Nepgen previously warned South African businesses against over-investing in solar power, as Discovery Green’s research found no industry’s electricity consumption profile perfectly matched solar generation.

The report analysed over 58 companies and their renewable generation facilities and found many were procuring too much solar, which could increase their total energy costs by more than 50% in the long run.

“With traditional, largely coal-generated electricity, you pay for what you use; with renewables, you pay for what was generated, regardless of whether your business uses the energy,” Nepgen said.

“It also explains why businesses shouldn’t assume they can solve for the remainder of their renewable energy needs in the future – it is more complicated than that,” Nepgen said.

If grid electricity becomes cheap during the day, the case of private solar generation becomes weaker. Higher prices at night could start to make greater battery investments financially sensible.

In recent years, Eskom and municipalities, including the City of Cape Town, have introduced ToU tariffs for residential customers.

These tariffs can be beneficial for people and businesses who can shift their demand through self-generation, backup batteries, or energy-efficiency tech, such as smart geysers and pool pump timers.

Electric vehicle and plug-in hybrid owners can also significantly reduce their running costs by charging during off-peak periods.

In Eskom’s case, ToU tariffs are compulsory for customers with small-scale embedded generation systems (SSEGs).

That move has been criticised by the Organisation Undoing Tax Abuse, which argued that users should have the right to choose flat or ToU tariffs.

Cape Town has opted to make the ToU tariff optional for its registered SSEG customers. However, its fees are significantly higher than Eskom’s, as shown in the table below.

Don't miss the latest news

• Add MyBroadband as a preferred source in Google Search
• Follow MyBroadband on Google News