Amidst the backdrop of rapidly escalating electricity prices and the unexpected implementation of load shedding, a number of factors have converged to reframe discussions around the value proposition of commercial rooftop solar energy adoption.
“In the past, the decision was rooted in the environmental impact of this technology,” states Yoann Joyeux, managing director at Emergent Energy, the largest provider of installed solar photovoltaic (PV) commercial projects in South Africa.
“However, this driver of adoption was heavily influenced by the social contagion effect, which suggests that installations increase in relation to the penetration rate and visibility of installations in the surrounding area.”
The uptake of solar PV in the South African context has, to date, been low, accounting for just 0.5% of South Africa’s energy mix, says Joyeux. By comparison, countries with less ideal solar climates have seen far greater uptake, with Germany topping 6%, Italy’s solar contribution in overall energy consumption sits at 7.5%, and even the UK is utilising about 3.4%.
Now, however, the dominant driver of adoption, particularly in South Africa, has switched to cost mitigation. Due to the volatility in Eskom’s power production costs, explains Joyeux, solar has attracted the attention of CEOs and commercial property owners, whose primary concern is the bottom line – with environmental wins being largely incidental. “Offering electricity rates of between R0.30-R0.70/kwh, based on the size of the installation, PV solar generation already outperforms both coal and nuclear power generation.”
Businesses and property owners have also sought to mitigate the variability and uncertainty of Eskom’s power supply with small-scale rooftop PV solar installations. This removes much of their reliance on the grid, and also insulates them from the pending pass-through price shocks that relate to Eskom’s large-scale power generating developments, which are running over budget and well behind schedule.
“However, when considered against these benefits, many businesses may still be hesitant to incur the capital expenditure associated with rooftop installations,” says Joyeux. He believes that by reframing the discussion around solar adoption, business and property owners will realise that there exists a compelling business case for the implementation of this technology.
“Thanks to the introduction of innovative procurement models, commercial rooftop solar installations offer numerous viable business opportunities,” he continues. For starters, those that finance an installation using their own capital can immediately realise potential savings on electricity costs of up to 30%.
“This makes sense in the context of commercial properties, because energy generated during the day can be used immediately. That’s not the case of residential users,” elaborates Joyeux. Any surplus generating capacity can also be sold to other tenants or back to municipalities to create an additional revenue stream.
“The combination of these cost savings and the potential to generate income help to recoup the capital investment at an accelerated rate due to the efficiency of the model. Once that is achieved, PV solar begins to positively impact the balance sheet with significant returns on investment due to the negligible costs of continuing to run the asset.”
Opportunities also exist for businesses or property owners who feel that rooftop solar installations are not core to their operations. “By leasing previously unused roof space to solar providers, property owners create additional forms of non-gross leasable area (GLA) income,” explains Joyeux.
“And with a number of innovative solutions out there, such as Fedgroup’s direct ownership investment platform, this provides property owners with the option of a ‘clean’ roof rental, or a combined roof rental and asset rental agreement.”
According to Joyeux, Fedgroup’s lean model means investing in solar carries no more risk than buying a property. “More importantly, the performance yield of these assets can guarantee 97% of output. That means investing in renewable energy no longer requires a leap of faith, and there are no other asset classes in the market that offer that level of guaranteed performance.”
Based on the myriad benefits offered by commercial rooftop PV solar, Joyeux suggests that businesses shift their thinking around the role that solar installations play in their business model.
“It’s now an out-and-out investment decision, be it to increase the value of the property or as a viable means to diversify your business by creating a stable source of passive income. Continuing to justify renewable adoption based purely on cost mitigation, or the benefit offered to the environment not only short-sells the value proposition, but effectively shortchanges the business,” he concludes.