INTERVIEW - S Africa's grid-for-all dream fades as decentralised energy lights up

June 14 (Renewables Now) - The “grid-for-all” mantra in South Africa has been hurting energy entrepreneurs but there is an increasing realisation that the current approach, extending the grid, is no longer feasible and decentralised solutions are required, Felix Philipp tells Renewables Now.

Felix is a manager at Impact Amplifier, a Cape Town-based advisory firm that works with “high-impact” businesses. The company’s recent report “Energy Provision at the Base of the Pyramid” says that about 31% of the South African population lives in rural areas where more than 60% of households have no access to electricity. South Africa’s off grid energy ecosystem is actually very immature in comparison to other African countries.

Felix spoke at the Energy Revolution Africa event in May and later discussed with Renewables Now the current South African energy picture and the potential for decentralised solutions.

FIGURES SPEAK FOR THEMSELVES

South Africa’s electricity generation capacity stands at 44.2 GW, of which about 92.6% is from coal and 5.7% from nuclear, while the rest comes from renewables and gas turbines, according to “Energy Provision at the Base of the Pyramid”. There is a renewable energy target of 17.8 GW by 2030 to meet nearly 20% of the projected demand for that year.

Currently, it is estimated that 3.5 million households in South Africa do not have grid connection.

Electricity prices in the country have increased by 270% since 2000, or by an average of 11% per year. The electricity grid is not quite stable, with more than 100 days of nationwide load shedding experienced in 2015.

THE GRID

The government’s promises to, one day, ensure universal access to the grid have been detrimental to the energy entrepreneurs and also to consumers, Felix says. Leaving aside the fact that the current grid is fragile and heavily reliant on fossil fuels, extending it is often expensive and uneconomical, and the costs will be rolled over to the clients in the form of higher prices.

“This further exacerbates the current energy poverty - more than 40% of the SA population spends upwards of 20% of their monthly disposable income on energy needs.”

Because of the “grid-for-all” dream many off-grid solutions are seen as inferior to the “real” energy coming from the grid, and community members fear that accepting off-grid solutions would result in a lower priority of being electrified by the government.

“In addition, energy entrepreneurs face an additional uncertainty whether the grid may be extended exactly to their area of operations and thereby undermine their businesses model in the local market.”

At the same time there is vast opportunity for the private sector to develop and implement other solutions using biogas, solar home systems, mini/micro-grids, energy kiosks, solar appliances and more of the kind.

CHANGES

Felix says people and decision makers in developing countries, and to some extend in South Africa, are starting to realise that extending the grid might not be the best option and that decentralised solutions are needed. The fact that capital requirements for off-grid energy solutions are decreasing rapidly is helping.

“Simple and incremental payment solutions, offering energy as a service on a pay-as-you-go model, are gaining traction and there is an increasing number of commercially viable business models throughout the continent.”

Impact Amplifier works with pilot and post revenue ventures in health, renewable energy or smallholder agriculture, to refine their business models and growth strategy and get them ready for investments to scale their business. The thing these businesses share in common is that they address fundamental social or environmental challenges using market-based approaches, delivering solutions that primarily benefit the poor and disadvantaged.

A GOOD BUSINESS CASE

“For Impact Amplifier, a good business case is based on a few fundamental principles: It can provide an affordable service to a previously un-served market, it can be scaled and/or replicated and generates recurring revenues (rather than a once off sale).”

Entrepreneurs must have a pilot up and running to collect real market data, test and refine their businesses model before they can start looking for investments to scale.

The energy ventures with which Impact Amplifier worked include EcoV, a firm that has created the Green Tower offering residential water heating and lighting through a combination of solar heat pumps, thermal collectors, and photovoltaic (PV) panels. It supported also the iShack project in Stellenbosch, which is providing a Solar Home System for informal households in Enkanini, and Solar Turtle -- a containerised solar station to charge batteries and power small businesses. The company is currently raising grant capital for Zonke Energy, an urban nano-grid solution to electrify urban informal settlements with direct current (DC) nano-grids.

Another company in the list, Ducere, has created the MISER technology -- a hydraulic hybrid transmission system designed for all vehicles to recover and store the kinetic energy typically lost while braking. Impact Amplifier also worked with Biogreen, which offers waste-oil-to-biodiesel solutions.