A mass supply of electricity from rooftop-mounted solar photovoltaic (PV) solutions in residential households is one of the most effective immediate solutions to supplement and bring relief to the strained national power grid, which is currently facing undercapacity issues, says management consulting firm The Boston Consulting Group (BCG).
BCG partner Urs Reinhard tells Engineering News that now would be an opportune time for South Africa to open up to the idea of a nett feed-in tariff to encourage residential homeowners to install solar PV solutions on their rooftops, thereby supplementing their own use and feeding excess electricity back into the national grid. “A nett feed-in tariff would allow homeowners to pursue solar PV as a bankable home investment, as there would be a guaranteed income generated from the feed-in tariff,” he says.
As one of a handful of renewable energies, solar PV currently has several benefits compared with other renewable energies, including the current low price of components, especially when compared with the price of components only a few years ago. Also, South Africa has a significantly high solar yield peak, which allows the country to exploit the sun’s full energy potential.
However, there is one significant exception. “The business case does not work yet as political buy-in to push a nett feed-in tariff is limited,” says Reinhard, adding that government’s acceptance of the idea that homeowners could feed electricity into the grid will have a large impact on the “new balance of power” will be.
Reinhard uses this term to describe how the structure of the South African power market will evolve, specifically from a base-load driven central power generation model to a decentralised renewables-driven model, and the necessary structural changes to the key market players and regulatory environment.
“Government is currently resisting residential power feed-in – also known as decentralised power production. However, at this point in time, it is the right thing to do to alleviate the power crisis,” he says.
Nevertheless, Reinhard notes that there is an obvious non-availability of power from solar PV solutions at night, which means that solar PV’s periods of yield, being the strongest towards midday and fading again into the afternoon, are problematic as households consume the most electricity in the mornings and the evenings. Alternatively, storage solutions, in the form of batteries, can only be economically implemented on a small scale that will not fully cover all the households electricity needs.
“Therefore, a typical household would be using less than 50% of a PV system’s potential output during the day, while the rest of the produced power is going to waste or being inefficiently used at night through a battery storage system. This is why a feed-in agreement makes so much sense, because the unused electricity can be fed into the grid during the day, which would take a lot of pressure from Eskom's constrained power system,” says Reinhard.
A nett feed-in tariff would, however, require certain upgrades to electricity meters, so that they can read the power flow in and out of the meter, which is required to determine electricity consumption by the consumer from the grid and electricity supply by the consumer back into the grid, so that the tariff can be calculated.
However, Reinhard points out that, South African municipalities are disallowing any type of electricity feed-in by residential clients into the national grid. “Municipalities believe that by paying some clients for electricity they will end up bankrupt, as a large portion of municipalities’ income is generated through the sale of electricity from Eskom to homes at a marked up price,” says Reinhard.
Reinhard further states that, for the nett feed-in tariff to be financially viable for municipalities, they would need to be compensated for their lost gross margins of the electricity sale.
To implement and manage the subsidy, a new institution called a central off-taker would need to be implemented. “The central off-taker will be tasked with monitoring household consumption and household feed-in, as well as municipalities’ lost-profit margins,” says Reinhard, adding that the Council for Scientific and Industrial Research has already developed the financial scheme of such a profit-neutral nett feed-in tariff that ensures a positive incentive for all market participants.
This begs the question, however, about which government department the central off-taker should report to, Reinhard points out that it could be the Department of Energy (DoE) directly or the National Energy Regulator of South Africa, but he says that he believes it should be neither but rather a completely new unit that reports to the DoE.
No Risk for Homeowners
Reinhard tells Engineering News that there would be no risk to home owners – in terms of losing money in the long term when investing in rooftop solar PV solutions – if feed-in tariffs are applied that are fixed over the investment period, which is common practise in other parts of the world.
“With a guaranteed feed-in tariff, a solar PV system becomes bankable. This enables residential homeowners to apply for additional finance on their home loans to afford to buy these systems and pay them off over a couple of years,” he says.
The mass uptake of residential rooftop solar PV systems, if initiated immediately, could add up to 2 GW to the national grid in about two years, concludes Reinhard.