Renewable energy tariffs could cost businesses more at night
By Larry Claasen
BUSINESS leaders should be careful when it comes to agreeing to power contracts that lock them into a renewable tariff plan which does not take into account the need to be supplied at night, cautions Discovery Green.
Discovery Green, a division of the Discovery Group that offers electricity trading and energy consulting services, says the market is becoming increasingly dynamic when it comes to tariffs and power generation.
This, however, means businesses that need a 24/7 supply of electricity have to consider not only the electricity rate they have negotiated with solar energy providers during the day, but also the rates they will be charged by wind energy providers at night.
The introduction of independent solar providers into the energy market has enabled businesses to buy electricity at a cheaper rate than what they can get from a municipality or from power utility Eskom. But looking only at cheaper solar power without considering how much more expensive wind power can be could have far-reaching financial implications, said Discovery Green executive director and actuarial research and development head, Dan Ginsberg.
Assuming that all renewable power, regardless of how it is generated, will bring down electricity prices is a dangerous assumption. “The most important thing that business leaders have to take into account is that they should not make a financial decision based on the world as it looks today,” Ginsberg said.
He pointed out that, although wind can provide power throughout the night, it is expensive to install. At the same time, wind has to compete with solar during the day, which for its part is pushing energy prices down when the sun is up. This means that to get a return on investment, wind providers have to charge higher prices at night.
In the long term, looking to Eskom to provide supply at night is not the answer, as the power utility is planning to shut down several of its ageing coal-fired plants in the next decade. The government’s plan is to replace the coal plants with wind power, but this is dependent on Eskom’s commitment to roll out 14,000 km of transmission lines that will connect renewable projects to major economic centres.
“We can solve the generation problems, the private sector can do some great work… But we need all hands on deck in terms of solving transmission quickly.”
Turning to batteries also does not provide a complete answer, as they can provide a maximum of only four hours of power, which cannot cover a 12 to 14 hour night without massive, cost-prohibitive oversizing.
Ginsberg also advises companies to be careful when concluding solar power contracts, as they could find themselves locked into tariff deals in a market where prices are decreasing. He gave the example of how the increase in solar providers has had a marked impact on electricity markets in Europe and Australia.
“At times, the daytime price is not even zero, it’s negative, because there is so much energy being pushed onto the grid from solar that people are being paid to ramp up demand, because the grid can’t cope with all the energy being pushed onto it.”
For its part, Ginsberg said Discovery Green was finding a lot of interest from business when it comes to using its services. Business leaders understand that they don’t have all the answers when it comes to a changing electricity market, so they are happy to turn to them to find a solution that works.
