Free The South African Private Energy Market
A partnership between South Africa and innovative private market companies such as Powerledger can save the South African economy
I recently read a couple of articles mentioning that Eskom, the state owned South African electricity provider, was planning to charge electricity users who used solar energy (but were still connected to the national grid) a higher tariff of about R900 a month. One article tried to go into a little more detail, explaining that the tariff charge consisted of a R218 fixed connection fee plus an additional R720 - taking the total charge to R938.
It seemed a bit arbitrary that a drive towards innovation and a stable and green electricity supply would cost South Africans so much. Time has shown that the monopolised South African energy market has crippled the ability for the South African economy to have stable electricity, as well as innovate in the domestic energy market.
Electricity production drives industry. You can’t farm, manufacture, or provide services without electricity, and in recent times, the decline in electricity production in South Africa (SA) has played a major role in the stalling domestic economy. The first chart compares South Africa’s electricity production vs GDP, and for context I’ve included similar comparisons with China and South Korea.
Energy stability (and independence) are extremely important for economic growth (and national security) and it’s vital that SA strategically and creatively directs an inordinate amount of resources towards energy stability, but with a focus towards a greener future. Measuring CO2 emissions for countries with similar sized populations, South Africa’s CO2 emissions are worse than those of Italy, France, and Brazil on a per capita basis, suggesting a lack of climate awareness, on top of a lack of will for innovation.
Unfortunately the resources required to modernise the South African energy sector need to mostly come from the private markets, and one of the most interesting companies focused on modern energy solutions is Powerledger.
Powerledger
Powerledger is an Australian born company that provides technology products which allow for the efficient distribution of renewable energy - enabling private energy markets to thrive.
Powerledger’s products focus mainly in energy trading and traceability, flexibility trading, and environmental commodities trading.
Energy Trading and Traceability
xGrid: allows energy consumers to trade solar energy, peer to peer (P2P), across a shared grid. The entire transaction is tracked and recorded on a blockchain.
How it works is that for example in a neighbourhood, all (or a few) houses will each have their own PV supply on their roofs, and be connected to one, exclusive, electricity grid. Therefore multiple suppliers on one grid. You as an energy consumer can buy some of your neighbour’s excess electricity (stored in a battery pack).
Another example is a cross store P2P transaction can take place where if one store has a PV connection, that store can provide solar energy to a neighbouring store, even if the neighbouring store doesn’t have its own PV connection.
Benefits of xGrid:
Access to cheaper renewable energy for consumers
Additional revenue stream for renewable energy generators
The load on the grid can be managed, preserving the grid and improving its resilience
Current use: The Uttar Pradesh government, one of India’s largest states, implemented a project to install solar energy on a grid shared by neighbouring buildings - tracked and traded using Powerledger’s xGrid. 27GW of total electricity capacity was installed, and Powerledger’s P2P solar energy trading system resulted in a 43% lower tariff for energy consumers, compared to the market price. This system has also been implemented in Australia and Spain.
In another example, Carlton and United Breweries (CUB), using xGrid, allows people to sell their excess solar energy to CUB in exchange for beer. For example A$30 worth of energy might get you A$66 worth of beer. This shows great brand leadership in creating climate awareness.
uGrid: for energy consumers connected on a smaller grid, perfect for shopping centres, apartment complexes, or office buildings. Again residents can trade solar energy with each other - monetising their roof space.
Benefits of uGrid:
Sustainable property
Potential revenue stream for building managers
For consumers - access to cheaper renewable electricity, and improved visibility over consumption
This could also be an opportunity to run a creative and extremely beneficial philanthropic project for businesses and property owners. They could allow neighbouring homes and schools to have access to the property’s excess solar energy for free, or at least at a much lower rate than the national grid rate for electricity, but supply would be more consistent.
Current use: A property development called East Village in Knutsford, England was created with a sustainable living agenda. Each home in the estate will have a solar PV connection and store excess energy in individual battery packs. The homes will also share one main grid, where energy can be sourced from the homes’ batteries or from the estate’s main feed. Residents can trade energy from home to home, or from the main grid to any home in desperate times - facilitated by Powerledger’s uGrid.
Flexibility Trading
MODE Flex: every so often in an electricity network there can be higher demand for energy than normal, resulting in congestion on the grid, which can cause outages. Other times, a part of the network can go offline if for example a tree falls onto some power lines and disturbs distribution. In more developed countries with higher functioning energy systems, distributed energy resources (DER) are used as a hedge for these events. Here, there are multiple energy sources (solar, wind, etc) feeding electricity into a network, and the energy source used to provide a certain region with electricity can be switched depending on the demand and supply conditions in the network.
Powerledger’s MODE Flex enables a local energy market (LEM) where DER suppliers work to stabilise the power grid during unforeseen circumstances by giving energy consumers access to affordable energy, quickly. The LEM is maintained by smart contracts, artificial intelligence, and machine learning to efficiently match and execute buy and sell orders.
Benefits of MODE Flex:
Energy users benefit from sophisticated forecasting and price matching
Seamless grid switching, especially in times of crisis
Blockchain based transactions for faster settlement, easier auditing, and improved transparency
Smart contract trading allowing for automated transactions and faster settlement
Environmental Commodities Trading
Once SA can streamline its existing energy distribution systems, the country can become larger contributors to world climate agreements, more so through carbon credits and other energy trading certificates.
TraceX: Powerledger offers a blockchain powered energy certificate trading platform called TraceX, that efficiently handles the trading of Renewable Energy Certificates, Guarantees of Origin and carbon credits.
Benefits of TraceX:
Real time price discovery
Verifiable audit trail
Standard terms for a fairer market place
Efficient trading market
Current use: The Midwest Renewable Energy Tracking System (M-RETS) partnered with Powerledger to leverage the company’s TraceX system to launch a renewable energy certificate market in the United States. M-RETS supplies close to 100 million RECs annually, and Powerledger was tapped to helped reduce costs and improve trading efficiency.
What This All Means
Implementing these projects can start on a small scale, for example connecting houses in a neighbourhood, estates, or apartment complexes to one exclusive power grid and educating residents on the benefits of xGrid and uGrid.
As the projects become successful in these smaller structures, they can be implemented at larger scales as a national agenda for the government - further stabilising energy supply by granting private markets even more access to the national energy network for distributed energy supply. All supported by MODE Flex.
Over time South Africa can find itself in a position where it has an energetic (excuse the pun) renewables market supported by a lucrative environmental commodities trading market powered by TraceX.
The truth is the cost of solar energy has has been rapidly decreasing across the world.
So its quite puzzling that the national energy provider in South Africa wants to charge consumers a higher tariff. A lot of people probably don’t want to hear this, but Eskom really is too big to fail. Probably why its been so easy to mismanage the company. But a strategic approach to improving the efficacy of the state owned company through partnership with the private markets is quite possible.
The democratisation of energy generation and distribution would drastically improve the South African energy market by giving energy consumers access to stable energy supply, at more affordable rates, and at the same time allowing for broader innovation in the local energy market.
Additionally, the reduced strain on the national grid would put Eskom in a place where Eskom can shut down larger parts of the national energy network to re-build and upscale. Those projects would require heavy investment into local and other tech companies and allow for a boom in innovation in South Africa - driven by the ability to experiment, and the need for unique solutions to the South African energy problem.
Once these networks are improved, the country could also find itself having excess capacity which the country could direct towards industrial production by charging electricity users in certain sectors a much lower tariff (or giving them free energy), and allowing a manufacturing boom in South Africa.
The solutions are there. South Africa just needs efficient capital allocators to implement them.