Power purchasing agreements – the way forward for solar energy
Solar energy provides a long-term saving to commercial and industrial (C&I) players. Most solar plants amortize themselves within 5 – 7 years.
Africa faces highly complex energy problems with approximately 600 million people (approximately 48%) living without electricity. Solving these is key to enabling the continent to reach its full potential and basic human rights. Alongside this, a vibrant, entrepreneurial and competitive industry is emerging to unlock the potential of renewable energy.
The solar industry is made up of hard working, ambitious people who are embracing the opportunity that solar provides and we are all learning as we go along, all of which are contributing to the Just Energy Transition.
Our vision is to play a role in accelerating the adoption of renewable energy and providing solutions to all aspects of the process. By doing so, we can help expedite economic growth and improve quality of life for all Africans. The fact that most countries in Africa are well primed to leverage solar energy with sunny climates and excellent irradiation levels provides a win-win situation. For instance in South Africa, we receive an average of 2,500 hours of sunshine per year. Our average solar-radiation level ranges between 4.5 and 6.5kWh/m2 per day, which is roughly 40% more than Central Europe.
Solar energy provides a long-term saving to commercial and industrial (C&I) players. Most solar plants amortize themselves within 5 – 7 years and produce power for 20 – 25 years if built and managed properly.
The sheer growth of the solar industry and broad adoption across so many different sectors is testimony to the fact that the numbers work. However, there are certain companies that seek the benefits of solar without wanting to invest the capital that is required to build a plant. While solar provides a long-term saving, the Covid-19 pandemic placed many industries under strain and it is understandable that many organizations may prefer to invest in operational growth at this point.
This has given rise to the Power Purchasing Agreement (PPA) model in which the development of the solar plant is financed / owned / operated and managed by a third party. This approach enables companies to provide the space to build a plant (on a roof or land) and commit to purchasing the resulting power output, while the plant itself belongs to the PPA counter-party. In this way, companies can access higher volumes of solar power without the capital investment.
An additional benefit is that the operations and maintenance of the plant also rests with the investor. Various versions of this model are anticipated to enter the market as financing solar is fast becoming a trend. New Southern Energy provides this option to C & I clients, subject to a feasibility study achieving certain requirements.
Join me at the upcoming African Energy Investment Summit at the CTICC in Cape Town on Wednesday 28 September at 15h45 where I will be speaking about power purchasing agreements and why we believe these will play a key role in Africa’s solar-revolution moving forward. Our team will also be available for questions after the session.
Or for more information about New Southern Energy’s solutions, go to www.newsouthernenergy.com
Lee Smith is the Chief Operations Officer of New Southern Energy. He hold a BSc(Eng) in Aeronautical Engineering from Wits and a MSc(Eng) in Sustainable Energy Engineering from UCT. Over the past 12 years he has worked in Technical Asset Management, Owner’s Engineering, Lender’s Technical Advisory and Independent Consultancy in the solar and wind industries.