Estimated reading time: 7 minutes
- The steep cost of grain storage remains a major challenge for most operators due to the dwindling supply of affordable electricity.
- Storage complexes making use of municipal electricity have registered between 50 to 100 electricity interruptions in the first month of the current marketing year.
- Grain storage operators need to become self-sufficient in terms of energy sources and consider some key factors before going off the national grid.
- The local market is moving in the direction of energy wheeling.
- Absa offers financing solutions and urges producers to find credible solutions.
South African grain storage operators play an imperative role in storing the national harvest safely, but in order to do so they depend on a reliable and stable electricity network. In addition, the steep cost of storage remains a major challenge for most operators, especially in rural regions, due to the dwindling supply of affordable electricity.
A recent article titled “Load shedding – What is the impact on silo operations?” by Wessel Lemmer, general manager of Agbiz Grain, Theo Boshoff, CEO of Agbiz, and Tiaan Mocke, group executive of Engineering and Property Assets at Senwes, pointed out that storage complexes making use of municipal electricity have registered between 50 to 100 electricity interruptions in the first month of the current marketing year. This article focusses on load shedding and its impact on silo operations.
Micro-grid renewable energy solutions
According to the article, grain storage operators need to become self-sufficient in terms of energy supply. They are considering alternative energy sources in the form of micro-grid solutions to supply power without interruption to mill or feed manufacturers. This local energy grid generally operates while connected to the grid, but can operate on its own. It can be powered by distributed generators, batteries, and/or renewable resources such as solar panels.
Alternative energy sources are, however, not necessarily the cheapest option and each facility needs to determine the levelised cost of energy (LCOE). The starting point is improving the efficient use of electricity to ensure that the facility is using as little power as possible. Once this is done, the total cost and benefits of a solar installation can be calculated.
The payback period on solar installations is approximately four to six years and on battery installations between eight and 12 years, depending on the characteristics of the facility and installed system. Embedding new generation capacity at silos comes at a significant capital cost and it may not be economical to generate the full energy demand from solar installations only. The costs may vary significantly from site to site.
Going off the grid
Dr Wikus Kruger, senior lecturer at the Power Futures Lab based at the University of Cape Town’s Graduate School of Business, says storage operators need to take some key factors into consideration before contemplating going off the national grid.
The availability of roof space is a key factor to take into account when installing large solar panel systems. Most silo complexes lack available space for this purpose, and therefore need to consider installing solar panels on land adjacent to the facility. Kruger is of the opinion that going completely off the grid is generally a sub-optimal solution, since it requires the installation of massive battery storage or generator facilities. In addition, facilities lose the benefits of the grid connection.
While the use of batteries as back-up for one or two hours during power outages is feasible, taking an entire facility off the grid requires a substantial investment which, at this point, is not economically viable for most operators.
Kruger says for most businesses installation of solar power systems is aimed at reducing the cost of electricity. Combining such an installation with a battery solution to maintain supply during power interruptions is currently being widely adopted in South Africa.
The threshold for companies producing their own electricity without a generation licence, was increased from 1 to 100MW and paves the way for private investment in the electricity sector. Previously, a power generating facility generating 1MW or more had to obtain a generation licence from the National Energy Regulator of South Africa (Nersa).
It was a difficult and protracted process, but after the Electricity Regulation Act, 2006 (Act 4 of 2006) was amended last year, any facility (generating up to 100MW) can now proceed without a generation licence. This is applicable for off-grid and wheeling across the grid.
All that is needed from a regulatory point of view is the registration of the facility with Nersa which, according to him, should be an easy process in principle. Compliance with the grid code in order to connect with the grid, as well as other requirements from funders or technical service providers, would in this case also be applicable.
According to Kruger, the local market is moving in the direction of energy wheeling as a solution to the country’s electricity woes. In the past months, Nersa has seen a large number of new registrations to generate electricity using wheeling.
Wheeling is the production of electricity in one region connected to a grid that is sold to an end user in another region. Transporting electricity across the grid requires wheeling agreements with the grid owners (such as Eskom, a local municipality or both) and agreements need to be in place with all the related entities. It also entails wheeling costs.
Facilities such as grain storage operators and mines that experience land constraints usually follow the wheeling option. At this stage, he says, there are no clear wheeling frameworks in South Africa yet, especially when it comes to local municipalities.
Banking industry commitment
Vishay Rabbipal, head of renewable energy at Absa Retail and Business Banking, confirms their commitment and determination to support solutions that contribute towards a sustainable future. This is achieved through creating innovative finance solutions that enable the roll-out of more renewable energy projects. Absa continues to promote the installation of renewable energy technologies by their clients aiming to reduce their energy costs, increase resilience and improve their own competitive advantage.
Absa therefore offers its clients throughout the value chain, including grain storage operators, a range of bespoke financing options tailored to fit their needs, while a project’s cash flow and financial requirements is taken into consideration. “We don’t only look at funding of renewables, but to support our clients in rolling out their own innovative practices to remain competitive.” This includes funding the adoption of automation, energy efficiency and power generation.
Different financing options for renewable energy
According to Rabbipal, their clients mostly consider solar power systems from an investment standpoint, taking into consideration aspects such as the time it will take for a system to start paying for itself, return on investment, and whether the cost of self-produced electricity is cheaper than purchased electricity.
Once a viable investment opportunity is identified, the client then turns to Absa for funding. This funding can be structured in a way that ensures the client pays less for the loan than what would have been paid for the electricity supplied (while aiming not to tie up their existing collateral).
“Absa’s Green Asset Finance product allows for the investment into solar – funding of up to 100% of the cost of the project can be obtained over a term of five to seven years. This structuring often positively impacts our clients’ cash flow over time. It is important to note that we lend against the assets and its cashflow without requiring additional security.”
Rabbipal says agricultural clients do at times require funding for a period longer than seven years, in which case Absa can supply funding through its Renewable Energy Term Loan for a period of up to ten years.
The criteria to be met
Rabbipal emphasises the importance of finding a credible solar supplier, as this decision will have an impact on the quality of an installation and the standards that must be met. He suggests taking the following into account when deciding on a supplier:
- The supplier must have a proven track record and experience in solar photovoltaic (PV) installation.
- The supplier must employ or subcontract qualified electricians. The electrician needs to provide proof of registration (a wireman’s licence).
- The installer should be able to produce a simulation or feasibility study of the electricity production estimate for the system for a year, taking into account average weather, based on a physical site visit. The installer should also advise the buyer on the size of the components (solar panels, inverter, batteries) needed to meet consumption requirements.
- The supplier must demonstrate its technical capabilities and know-how on how to install a solution that meets the electricity requirement.
- The supplier must have thorough knowledge of Eskom’s regulations, municipal bylaws and Nersa registration processes.
- After-sales service or maintenance contracts must be offered.
- The necessary warranties and guarantees for the installation and the various equipment/components of the system (solar panels, inverter, battery, structure of the system) must be provided.
- After completion, a certificate of compliance (COC), signed off by a qualified electrician and certified by a professional engineer (PrEng) must be provided. – Christal-Lize Muller, Agbiz Grain Quarterly
For more information, send an email to Wessel Lemmer at email@example.com, Wikus Kruger at firstname.lastname@example.org or Vishay Rabbipal at email@example.com.