Helping your complex slash electricity costs or kiss load-shedding goodbye

Complexes with many residents who don’t have the financial means to buy their own solar power equipment can consider a private power purchase agreement (PPA) for lower electricity tariffs or shared load-shedding backup.

Among the independent power producers (IPPs) that have offered these types of PPAs is Solar Africa.

The scrapping of the requirement to obtain a licence from the National Energy Regulator of South Africa (Nersa) for larger self-generating systems that don’t feed back into the grid has made selling and buying private power more attractive.

IPPs not only endure significantly less difficulty in building private generation capacity for businesses and large residential areas.

Where they previously had to wait several months for a licence approval, their systems can now quickly be registered by Nersa.

Some IPPs offer commercial PPAs to complexes and estates, enabling them to reduce their reliance on Eskom’s electricity without any capital outlay.

This could be of particular value to sectional title schemes, where the body corporates have collective ownership of all property outside the enclosed walls of dwellings.

That includes valuable open rooftop space on homes that can be used for installing solar panels.

With majority support from owners, a body corporate can enter into PPA with the IPP to supplement its electricity demand.

The IPP carries the initial cost of the equipment, installation, and approvals.

It then recoups this investment through the tariffs it charges to the complex or estate over a long-term period.

Solar reduces tariffs

By primarily using their own solar power, these IPPs can offer a lower tariff on electricity than municipalities or Eskom Direct.

It has been substantially cheaper to generate electricity from solar than coal in South Africa for several years — even more so at commercial or utility-scale.

By 2021, the cost of generating 1MWh of power with PV solar generation was already 63% cheaper than coal. In the years that followed, the prices of solar panels and inverters have dropped even further.

Municipalities source most of their electricity from Eskom, which relies primarily on fossil fuel-based generation.

Approximately 44,043MW of Eskom’s total installed capacity of 51,867MW comes from coal.

During periods of capacity constraints, Eskom also relies on even more expensive diesel to fuel its open-cycle gas turbines.

The IPPs that offer their services to complexes and estates still have to buy some electricity from the distributor that previously provided the complex or estate with power.

However, with a larger part of the generation coming from solar, the tariffs are significantly lower than when using only Eskom-sourced electricity.

Some companies have started offering PPAs with battery storage for complexes that wish to have backup power during load-shedding or other power interruptions.

This solution will push up the tariff of solar-only systems but provide residents with load-shedding backup without the expensive upfront cost.

The monitoring, maintenance, and insurance of the system are also often the responsibility of the IPP.

Check contract conditions carefully

There are several factors to consider before proceeding with a PPA, which will be a binding contract with a term typically starting at 10 years.

Body corporates should carefully peruse these contracts to ensure they are getting a good deal for their residents.

The first big focus should be the tariffs residents will be paying under the PPA and how they compare to the municipality or Eskom’s prices.

The contract will also provide for annual price adjustments. The terms of these increases should preferably be better than those in recent years.

Some PPAs also require customers to buy a certain minimum amount of electricity every month.

Complexes can reduce the risk of a customer not meeting this minimum amount by the provider performing a demand analysis beforehand.

This typically measures the complex or estate’s total power consumption over several weeks.

Lastly, installing the solar plant could negatively impact a resident’s autonomy.

Unless sufficient roof space is available on parking bays or other general-use buildings, the IPP will have to use resident’s home rooftops.

While the body corporate would be lawfully allowed to do this if the PPA receives support from the majority of owners, conflict can best be avoided by ensuring all residents understand the benefits of installing the system.

Solar Africa provides more details on PPAs for businesses, which can be similar to agreements with residential areas, on its website.