A recent report on the transition to renewable energy warns businesses that although it is a good idea, it might be costly and risky in the long term.
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Discovery Green’s white paper, ‘Renewable Energy Strategies For Businesses In South Africa: A Technical Review,’ compares five ways businesses can procure renewable energy and what each option costs.
The report’s key findings include:
Caution against over-investment in solar
Businesses should be cautious about investing too much in solar power because their energy use doesn’t align perfectly with solar energy production. This mismatch might force them to rely on regular power sources, significantly raising energy costs in the long run.
Traditional vs renewable energy costs
- Traditional coal generation: Users pay for actual usage.
- Renewable energy: Users pay for generated energy, regardless of actual consumption.
- Andre Nepgen, head of Discovery Green, emphasises the importance of optimising the mix of renewable energy to match business consumption patterns up front.
Analysis of renewable strategies
- Reviewed strategies include rooftop solar, wheeled wind generation and trading.
- The review covers seven industries: financial services, food retailers, fitness, hospitality and entertainment, shopping centres, mining and agriculture.
- Tested scenarios include oversupply in solar generation and high carbon taxes.
Cost implications
- Using solar for 45% of energy needs can lead to a 77% increase in costs to cover the remaining 55% with other renewable sources.
- Many businesses end up with low renewable energy coverage, making them vulnerable to future price hikes for regular electricity.
- Rooftop solar, for example, provides limited coverage and leads to price increases because it doesn’t balance out energy use over the month.
Optimal coverage levels
- The best savings happen when about 30% of energy needs are met with renewables.
- Businesses using most of their energy during off-peak hours reach this savings point with less coverage, while those with high energy use need more coverage.
Variability in renewable output
- Solar power can vary by over 14% month-to-month, and wind power by up to 33%.
- Within a single billing period, the fluctuation can be as high as 72%, affecting cost savings.
Importance of diversification
- Using a mix of different energy sources and methods helps create a more stable energy supply that can handle changes in energy production better.
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Key quotes:
- Andre Nepgen: ‘With renewables, you pay for what was generated, regardless of whether your business uses the energy or not. This is the fundamental difference between the procurement of renewable energy and utility-supplied electricity – the point of payment.’
- White paper findings: ‘Our analysis shows that output from a single solar facility can fluctuate by more than 14% between consecutive months, and by up to 33% for wind plants, and that’s if the sun was to shine and the wind was to blow as expected.’
- Research insights: ‘The report suggests that diversification is essential when procuring renewable energy. This applies to how energy is produced and used, as diversification could help build a more stable ‘energy portfolio’ that could better withstand changes in energy generation.’
Discovery Green’s report underscores the complexities of renewable energy procurement and highlights the need for strategic planning to optimise financial and operational benefits.
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