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Solar businesses: Save money, protect environment

Solar businesses: Save money, protect environment

Aug 11, 2014

By Gareth Warner, Managing Director of Solarcentury in Africa

South African electricity prices increased 78% between 2008 and 2011, and by more than 20% year-on-year from 2010 to 2013. Prices are predicted to rise by a further 8% year-on-year until 2018, taking the cost per kilowatt hour (kWh) to 89.13 cents in 2018, up from 65.51 cents in 2013 – and this is before we factor in the most recent price increase announced by the National Energy Regulator of South Africa (NERSA) in July 2014, which could be as much as 3% to 6% above the 8% increase already granted for 2015.

This is significant when you consider that in 2008, we were paying just 22.7 cents per kWh of electricity when the power crisis hit and Eskom’s investment history and pricing policies came back to haunt the power utility.

That means we’ll be paying more than 400% more for electricity in 2018 than we did ten years previous, with no end in sight for future increases.

The rising cost of energy in South Africa is particularly problematic for high energy users such as retail complexes and commercial properties who are increasingly looking to other energy sources to help reduce their energy bills.

More and more businesses are choosing to invest in large solar PV systems for their unused roof space as a way to help them cut their energy bills, and also reduce their reliance on fossil fuel energy and therefore lower their environmental impact. Getting their energy spend under control also means they don’t have to pass on the increasing cost of energy to their customers.

For some companies, a 20% cut in energy costs represents the same bottom line benefit as a 5% increase in sales, so reducing your fossil fuel bill by investing in solar can bring massive business benefits.

A solar photovoltaic (PV) system is becoming a more recognised way to make money from unused roof spaces. Savvy global manufacturers such as BMW and Jaguar Land Rover have chosen to install solar roof systems. They’re now enjoying lower energy bills and carbon emissions thanks to the clean solar electricity being generated by their solar PV systems.

Although solar PV is a relatively new technology in South Africa, deployment is rising and South Africa now features in the solar global top ten. With this growing interest in solar, I often hear the same questions from businesses looking to invest in solar for their unused roof spaces. Here is a selection of the most common queries:

Will I get value for money?
Cost will always be a big factor, but choosing the cheapest option can result in more expensive problems later on. Make sure you choose a partner who is established, has a sufficient credit rating and offers effective warranty cover of the system. Many South African companies lack experience in this regard, so it’s worth checking if they have experience of working with the commercial sector. You cannot put a price on value. The quality of system design and installation are arguably more important than the upfront cost. Choose a contractor who has completed projects similar in size, complexity and roof type as your installation.

What assurances are there that the system will work?
Ideally, you should not have to worry about the system working properly once it’s installed. The provider should offer a warranty for the system that covers timeframes and performance levels. It’s best to take out an operations and maintenance (O&M) contract so that, in the event that something goes wrong, the provider will fix the problem quickly.

Will the system damage the roof? Isn’t it too heavy?
Photovoltaic systems have successfully been constructed on warehouses, factory buildings and retail spaces, including some extremely lightweight membrane roof structures. Structural engineers are highly experienced at assessing the load-bearing requirements of PV roof installations, and solutions have been designed without any strengthening required. For new builds, it’s more efficient to consider the structural needs during the design phase as strengthening can be added at the time of construction if necessary.

What are my financing options?
Solar PV systems can either be paid for upfront or through a purpose-designed finance agreement. If capital is unattainable, you could enter into a lease agreement with a third party. These finance options are relatively new in South Africa and can be complex agreements, but the best providers will have experience of such deals and create a smooth process for you.

What form of contract should I use?
Once you’ve decided on a provider, you will need to agree on a contract and time frame. For larger rooftop installations, engineering, procurement and construction (EPC) contracts are typically used to cover construction, with a separate O&M agreement for maintenance. However, the Joint Buildings Contract Committee (JBCC) contract seems to be widely adopted in the industry. Ideally, the O&M contract should include monitoring by the provider so that diagnostic tests can be performed remotely and the provider can quickly see if the system goes offline.

Solar PV roof systems are a cost-efficient long-term investment and are ideal for roofs that are going to be in place for a minimum of 20 years, with the PV system likely to continue working for a further 10 years at least. Rooftop PV systems provide a return on investment after five to eight years. Thereafter, electricity is essentially free and the system functions as a savings model for the business.

Five years from now, businesses that installed solar on their roofs today could be smugly counting the millions they saved on their energy bills and reinvesting it in their businesses. And choosing solar isn’t just a plus for future business growth – it also demonstrates a commitment to the environment and the long-term health of the planet.

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