Guest column: What options for the wine industry in the face of loadshedding?

South Africa’s last loadshedding-free day was back in October last year. This grim statistic points to the steady, and seemingly unstoppable, decline of Eskom and the national grid. The impact has been to kneecap an already limping economy but what to do about it?

Believe it or not, there are scenarios where reliable electricity supply is restored, possibly within 12 months but likely much longer. What is reliably certain is that electricity tariffs will continue to rise at above inflation, with an above-18% increase approved by regulator NERSA for the next year.

It is this trend, arguably more than loadshedding, that seals the case for distributed power.

More specifically, there is an especially strong case for embedded or “behind-the-meter” systems, which means generating electricity at the user’s site for their own consumption. Typically, this entails generating electricity from solar photovoltaic (PV) modules, with battery storage or standby generator to provide power when the sun is not shining. It is not a solution for everyone – space constraints and electrical load requirements might make it impractical – but for winemakers, the technology, environmental and commercial case is already compelling, and is fast becoming irresistible. Furthermore, embedded systems largely bypass regulatory uncertainty.

For generation, solar PV has largely pipped other technologies – for simplicity, reliability and cost. The main features of solar are a high upfront cost and minimal running costs.

Without loadshedding, an embedded solar system would offset your consumption from the grid – be it supplied directly from Eskom or the local municipality. The financial returns are based on the savings resulting from buying less grid-supplied electricity, factoring in an assumed escalation in grid tariffs each year. The “pay-back” period – the amount of time it takes before savings exceed the cost of the solar system – can be as short as 5-8 years. Considering the useful life of the solar PV system, with maintenance, can be 15-20 years, the return on investment will be substantial.

With loadshedding, the equation is more complicated. A solar-only system does not provide electricity when the sun is not shining, and so additional battery storage or a standby generator is required.

Battery storage is a significant additional upfront capital cost, but modern lithium ion batteries are falling in cost and improving in reliability, with high voltage systems further enhancing cost-effectiveness. The return on investment is based on how efficiently the system is charged and discharged, known as “cycling”. If cycled regularly, today’s lithium ion batteries charged from a solar PV system will comfortably beat a diesel generator on cost at today’s diesel prices over its lifetime.

However, going fully off-grid with solar and battery storage rarely makes sense. Oversizing the solar and battery system is needed to provide a buffer to meet your electrical load under all conditions, arising because of lower-than-expected solar PV production or a spike in your load. But if the oversized capacity is unutilized, this is inefficient capital investment. This can be mitigated with the use of a standby generator, which has a lower upfront cost but higher operating costs. When not needed, no fuel is burned and it is simpler to operate efficiently – but comes with higher environmental impact and fuel price uncertainty. To the extent available, grid-supplied electricity is always the cheapest marginal cost of electricity.

There is no rule-of-thumb to say what a system should cost, or what the pay-back period or return on investment will be. In all cases, it depends on what the user is trying to solve for, be it “knowable” variables like size of load or maximum demand, or the “unknowable” variables like future tariff path or future stages of loadshedding. The first objective is always energy efficiency (i.e. reduce overall energy consumption); the next is to shift discretionary loads – for instance, irrigation or pumping – to match sunlight hours, and cheapest-cost solar power.

Unfortunately, while the technology is maturing, an embedded power system – with solar, battery and possibly standby generator – remains a substantial outlay, putting outright ownership out of reach for many. One silver lining to loadshedding has been the growth of third-party ownership arrangements, whereby the electricity consumer leases the equipment or enters into power purchase agreement with a third party who owns the system. This has the advantage of avoiding the upfront cost, and the onus to ensure the reliability and maintenance of the system rests with the third-party owner. The downside, if it is that, is that the third-party owner extracts some of the value to themselves. The user should take care to ensure the legal contract is fair and reasonable.

To be frank, there is no embedded solution that fully substitutes reliable grid supply at today’s grid tariffs. But grid tariffs are rising sharply, and the outlook for grid reliability remains patchy. An embedded system is a means to locking in certainty over both cost and reliability.

• James Eedes is a clean energy founder and investor working towards the transformation of the South African power sector. He has interests in Kaelo Energy, a Black-owned renewable energy independent power producer and Solar MD, manufacturer of advanced lithium ion battery storage products. He is the younger brother of Winemag.co.za editor, Christian.