Vodacom signs first “virtual wheeling” deal with Eskom

Vodacom has announced that it signed a “virtual wheeling” agreement with Eskom on Wednesday.

Former Eskom CEO André de Ruyter first revealed the initiative in September last year.

“[Vodacom wants] to start their own green power generation for their towers, but how do they get the electricity to the towers? That is where we will come in,” De Ruyter said during an interview.

Vodacom told MyBroadband that the pilot’s success would provide it with renewable power and a blueprint for other South African corporates to replicate.

This would let more companies add capacity to the grid, and help solve South Africa’s energy crisis.

“Vodacom’s partnership with Eskom is transformational in that our virtual wheeling solution will enable South Africa’s private sector to participate in resolving the energy crisis, which continues to impact the country’s economy,” said Vodacom CEO Shameel Joosub.

“The virtual wheeling solution has the potential to be fast-tracked, depending on the available licensed capacity of IPPs.”

Vodacom explained that virtual wheeling would play a significant role in helping the company achieve its goal of sourcing 100% of its electricity demand from renewable energy sources by 2025.

With the virtual wheeling deal signed, Vodacom said it could execute the next phase of the plan — securing independent power producers (IPPs) under the same terms and conditions that underpin its agreement with Eskom.

Traditional wheeling typically involves a one-to-one relationship between an IPP and a buyer, or off-taker, using the national grid to transmit their energy.

“While the concept of traditional wheeling is fairly common practice globally, it has certain limitations for companies with complex operating environments,” Vodacom stated.

“For example, Vodacom South Africa’s operating situation is unique due to the complexities associated with having over 15,000 distributed low-voltage sites across the country that are linked to 168 municipalities.”

Vodacom said this complexity has prevented it from accessing large-scale renewable energy from IPPs. Virtual wheeling addresses these challenges.

Vodacom has spent more than R4 billion on backup power systems, and R300 million in the past financial year alone on operational costs such as diesel for generators.

It said this is not only a massive financial burden but also poses a significant challenge for the company to achieve its broader environmental ambitions.

“Converting our existing fossil-fuel-based electricity supplies directly with on-site renewables is limited by technical constraints that are difficult to scale,” Joosub stated.

“We explored a traditional wheeling option, but this had numerous limitations, which we believed could be overcome by reimagining the problem and using technology to solve the issue.”

Joosub said they had four objectives when they approached Eskom with the solution: remove complexity, use technology to solve legacy limitations, access renewable energy with a sound business case, and encourage private participation to help solve the energy crisis.

After a successful pilot phase, which concluded last year, and following rigorous testing, Vodacom said the co-developed solution is now accessible to the public and private sector on a larger scale.

With the agreement signed, Vodacom said it could add more capacity to the grid without impacting Eskom’s balance sheet while helping to reduce its greenhouse gas emissions.

“Think of it like purchasing renewable energy certificates,” said Vodacom South Africa CEO Sitho Mdlalose.

“But most importantly, it also has the added benefit of positively impacting the supply deficit currently being experienced and nurturing the growth of renewable energy production in South Africa.”

Mdlalose said they estimate this initial phase would move around 30% of Vodacom SA’s power demand onto renewable sources.

“To make up the difference, we are working hard at exploring and developing additional solutions,” Mdlalose stated.

Vodacom said the future of virtual wheeling is looking bright and several parties from across industries are already showing commercial interest in the product, available through its subsidiary, Mezzanine.


Now read: Eskom reports R5-billion loss in three months

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Vodacom signs first “virtual wheeling” deal with Eskom