KEEP UP TO DATE WITH ALL THE IMPORTANT COVID-19 INFORMATIONCOVID-19 RESOURCE PORTAL

FANews
FANews
RELATED CATEGORIES

Standard Bank welcomes president’s call for private sector energy generation

01 August 2022 Standard Bank

Innovative platform enables any enterprise to sell energy

The South African president’s recent removal of the licensing threshold on embedded private generation, the announcement of feed-in electricity tariffs for the outright purchase of privately generated electricity, tax incentives for the construction of commercial generation installations, and a virtual - albeit temporary - scrapping of private power generation application red tape, marks a watershed in South Africa’s 14-year struggle against the socially and economically crippling onslaught of loadshedding and persistent energy insecurity.

While the country breathes a collective sigh of relief that a comprehensive and broadly inclusive plan is finally on the table, “the effectiveness of these bold initiatives depends on how quickly they can be implemented, and how successfully the expertise available in South Africa’s private sector can mobilise and gear capital in the development of an environmentally and financially sustainable public-private energy future,” says Berrie de Jager, Head of Natural Resources at Standard Bank’s Business and Commercial Clients division.

Kick-starting stalled construction on bid window five independent power producer projects by addressing impractical local procurement requirements, doubling the size of bid window six projects from 2 600MW to 5 200MW, issuing requests for proposals for battery storage, as well as the review and speeding up of Integrated Resource Plan allocations, are significant developments that the country’s existing energy sector should leverage - and take to scale – with alacrity. “The funding mechanisms and capital structures enabling these projects have long been in place. They are proven and are working well in the formal, relatively restricted, public-private renewable generation sector,” observes de Jager.

What is most exciting about the president’s recent announcement, however, is the new opportunity that these pronouncements present in the decentralised energy generation space, that is “the niche and entirely untapped energy market that sits behind the Eskom or municipal meter,” says de Jager.

Making this space available for general investment for the first time means that almost any business in any sector can now potentially generate – and sell – any amount of energy to the grid. In short, once the required regulatory adjustments are made, energy production, sale and trading will no longer be the preserve of the state and its exclusive and very limited circle of approved energy partners.

Instead, if South Africa urgently implements the reforms promised on Monday night, “investment in the country’s energy market will expand exponentially, allowing all manner of innovative combinations of energy generation, sale and supply,” predicts de Jager. From malls to mines, hotels to hospitals, and farms to factories – every business or even small enterprise might soon be participating in the generation and sale of electricity.

While Eskom will retain control through a soon-to-be spun off transmission entity regulating and controlling the trading and transmission of energy across the grid, “the key challenge for South African businesses wishing to participate in the country’s new energy market is managing the financing, construction delays and cost overruns that typically plague private generation projects,” reports de Jager. Poor quality energy generation technology investments are another common pitfall preventing businesses with no knowledge of energy generation from reaching cash-neutrality as quickly as possible.

To help businesses manage the operational and reputational challenges associated with independent energy generation, Standard Bank has developed a digital platform to support clients in procuring high quality and financially sound Solar Photo Voltaic solutions.

Even before the president’s recent announcement, “we designed PowerPulse as a digital platform to empower ordinary businesses to produce, deliver, consume and trade energy,” says de Jager. Whether you are a financial executive looking to manage energy costs, feel overwhelmed by the jargon and complexity of technical solutions, or are simply unsure of which providers to use, PowerPulse provides the answer. “PowerPulse even assists with financial modelling, delivering a report which can be used to justify renewable energy investments to boards or investors,” adds de Jager.

In Standard Bank’s experience, a key need for any business thinking of building an independent energy generating and trading capability includes accessing and shortlisting accredited engineering, procurement and construction partners. Introductions to specialist concierge teams to guide the process is also critical for businesses whose core capability is not energy. As such, PowerPulse is also linked to solar photo voltaic and other technical knowledge bases across the energy value chain, “connecting client enterprises with the specialist energy experts, advice and resources that they may require,” reports de Jager.

Supported by this kind of energy procurement and build capability ecosystem, “any businesses can confidently add an energy income stream to their existing operations or infrastructure,” says de Jager.

Moreover, knowing that clients are being guided by PowerPulse provides Standard Bank with the confidence to provide funding support to as many clients as possible, “heeding the president’s call to contribute to South Africa’s future energy security in a profitable and sustainable manner,” concludes de Jager.

Quick Polls

QUESTION

Each year ordinary consumers and their financial and wealth advisers flock to dozens of asset manager ‘outlook’ presentations to find out about economic and investment trends, and the next ‘hot’ company. What do you want asset managers to share during these events?

ANSWER

Asset allocation strategies
Big picture investment themes and how to position portfolios for them
Investment methodologies and historic fund yields
Share tips by the score
fanews magazine
FAnews June 2022 Get the latest issue of FAnews

This month's headlines

A free smoothie does not make a loyal customer
Consequential loss policy court cases
Everything you need to know about death, disability and severe illness cover post-emigration
Are advisers doing all they can for clients’ portfolios?
Financial advisers need help - navigating the complex ESG fund environment
Subscribe now