South Africa’s electricity rationing program, known as load-shedding, is going from bad to worse with no end in sight. Some analysts say that load shedding may be with us for the next 10 years. The impact of load-shedding on homes and businesses has been so brutal and the South African Reserve Bank says that during high phases of load-shedding, where consumers can experience up to 12 hours of load-shedding per day, South Africa can charge up to R900 Loses million ($50 million) per day.
Eskom’s load-shedding program is structured in phases, where Eskom sheds a certain amount of load from the grid to stabilize the grid. Therefore, depending on the severity of the crisis, load-shedding is implemented in stages from Stage 1 to Stage 8, where Stage 1 sheds 1,000 MW of load from the grid and in the Stage 8 scenario, Eskom sheds 8,000 MW of load from the grid. removes. Grid. Load shedding is implemented alternately in blocks of 2 hours or 4 hours depending on the severity of the crisis.
Since late last year, there have been more than 100 days of continuous load-shedding in South Africa, the longest continuous stretch of load-shedding in the country’s history. The power crisis has now become so bad that in his address to the nation last night, South African President Cyril Ramaphosa announced that the National Disaster Management Center has classified the effects of load-shedding as a national disaster. To get an idea of how bad it is operating in this environment, we take a look at some of the recent announcements from some of South Africa’s biggest retailers, who have thousands of sites across the country.
Pick n Pay Group has over 1,900 locations in South Africa. In a business update this week, the group said emergency, localized, power supplies are a serious cost for the group. The group spent an additional R346 million ($19 million) year-on-year to run generators at stores in the first 10 months of the year, with costs concentrated in the latter months, and is currently at a run rate of around R60 million ($3.35 million). million) per month, depending on the phase of load-shedding experienced.
In addition to the above, the group is facing increased repair and maintenance costs of generators and some additional food waste costs. This is due to the fact that with increased load-shedding, the running time of diesel generators increases significantly. The group adds that all Pick N Pay and Boxer stores have backup power and are operational during load-shedding. However, severe load-shedding poses significant challenges. Consumer demand has decreased due to disruption, inconvenience and concern that home power outages could lead to food spoilage. Production of food and other goods is disrupted, creating a stock challenge. Diesel generators are not designed to run continuously for many hours and fail.
The Shoprite Group, which employs over 145,000 people, has a network of over 2,900 stores and distribution centers across Africa. In South Africa, Shoprite says that in just 6 months – from July to December of last year – Shoprite Group spent an extra R560 million ($31.21 million) on diesel for generators to ensure its stores could meet the load- Trade without significant interruptions during shedding phases. , These reports from two of the biggest retail chains can give an idea of how bad the situation really is.
Most of these retailers are installing solar PV onsite on sites where they are feasible, and where they can make some suitable arrangements with landlords. Given the huge amount being spent on diesel and the fact that load-shedding may be upon us in the near future, it may be time to seriously consider adding on-site battery storage. The C&I solar sector is well developed in South Africa and is seeing unprecedented demand. Running a diesel generator for 4 hours or more every day is a costly exercise. In this scenario, the unit economics of C&I battery storage can be very attractive.
Looking at most of the African continent, back-up diesel generators have been a “permanent” feature in the C&I sector in many African countries. The IEA’s Africa Energy Outlook 2022 report summarizes the scale of backup generator use on the continent by saying, “In sub-Saharan Africa alone, such capacity (of back-up generators) was 45 GW in 2021, all renewable There is more than energy-based generation capacity in the region. Of this, 13 GW is in Nigeria, where 25 terawatt-hours (TWh) or 40% of total electricity is self-generated by industrial and commercial firms and households using oil products. Improving grid reliability will enable utilities to earn more from sales to industrial and commercial customers, which are critical to their revenue base, by discouraging auto-generation and reducing the need for backup generation during blackouts.
Recent advances in battery storage and the emergence of more economical and safer cobalt-free LFP battery solutions may provide a viable opportunity for large-scale stationary storage to displace some of these diesel generators in the commercial and industrial sector. There is also a growing fleet of large batteries made using second life batteries reused from old electric cars and buses. These types of batteries will reduce the cost of stationary storage products, further improving the value proposition allowing them to better compete in places with frequent power outages, such as South Africa.
Other applications such as peak shaving, the opportunity for energy arbitrage by charging when tariffs are low and using that energy during more expressive peak times, may also be attractive in places where there is a difference between peak and off-peak tariffs. There is an important difference. It is probably worthwhile for players in the C&I battery storage space to take a deeper dive into the business case for C&I storage in some African countries. Is it time to start switching back-up diesel generators for battery storage? Does the business case look compelling now, or how far along are we? There are several firms in South Africa that are already assembling battery packs for C&I applications. Prolonged load-shedding may present an opportunity for these firms to support installations in the C&I sector.
Image from The Shoprite Group