Leverage your solar system to assist with cash flow

Businesses invested heavily in solar power systems during the worst of load shedding to keep operating despite electricity shortages.

These systems can still be of great value by delivering substantial savings on electricity cost, but many owners have neglected the maintenance and reconfiguration needed to maximise their value.

This is according to Matthew Cruise, energy analyst and senior business developer at Jaltech, a solar power financier that is now buying existing installations and selling the electricity they generate back to the original owners.

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Jaltech has already invested R2 billion in acquiring installed solar systems and aims to grow its portfolio to about R2.5 billion by the end of February next year.

Chris Yelland, managing director of EE Business Intelligence, says Jaltech’s approach reflects the maturation of South Africa’s solar market.

“Initially you had installers of solar systems. Some then expanded to offer an EPC [engineer, design, construct] solution. Thereafter developers entered the scene, taking care of permits, licences and so forth.

“The financing market developed, which is where Jaltech operated – and now you have them moving into owning and operating the assets.”

How it works

Jaltech inspects each system, upgrades or expands it where necessary, and maintains and insures it at its own expense.

The business that owns the system continues using the electricity generated on its premises, paying Jaltech an agreed tariff that is generally about half what it would otherwise pay Eskom or its municipality.

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Tariff increases are capped at 6% or two percentage points above inflation annually, whichever is higher, making electricity costs more predictable.

The solar system remains on the premises, and the electricity generated is supplied exclusively to that business.

“We are not an electricity trader, so we do not wheel electricity from one client’s premises to another client elsewhere,” says Cruise.

Any surplus electricity is fed into the grid at the available tariff, with Eskom or the municipality crediting the business’s electricity account accordingly.

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“We would come and buy the assets, and we would then make sure that it’s operating at its peak efficiency to try and get as many kilowatts out of it as possible because we only get paid when we are delivering the solar power to the business,” says Cruise.

“So that could look like upgrading the system a bit, adding batteries, doing a full system audit.”

Maintenance

Cruise says solar installers typically clean panels only once or twice a year, if cleaning is included in their agreements. Otherwise, clients must pay extra. Substantial mark-ups on after-sales services often discourage businesses from arranging regular cleaning.

Dust can reduce a system’s performance by as much as 15%, particularly in Gauteng, near mines and along the coast.

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Jaltech often cleans panels four times a year because it bears the cost when electricity production falls below optimal levels.

“Although a cable is designed to last 20 years, sitting in the harsh weather in Cape Town for 10 years can [create] an issue.” The same with interconnectors.

“So we come in and we do full system audits, make sure the plant is safe. We cover the insurance in the cost, and we do the full maintenance in the costs of our tariffs that we provide to customers,” Cruise explains.

Yelland points out that specialist operators can improve the performance of solar installations through effective cleaning, maintenance and programming.

By managing the assets efficiently, they can maximise electricity production, allowing them to make a profit while supplying renewable energy at a discount to Eskom and municipal tariffs.

Adapting when tariffs change

Jaltech also adapts systems to the electricity tariffs charged by Eskom or municipalities to maximise savings.

When Eskom changed its tariff structure, shortening the morning peak period and extending the evening peak by an hour, it also increased the highest peak tariff by considerably more than the average tariff increase.

This raised electricity costs for businesses by up to 38% during that period, Cruise says.

Using batteries to store solar-generated electricity for the entire evening peak allows businesses to avoid drawing expensive power from the grid during those hours.

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Another opportunity to reduce costs is managing Notified Maximum Demand (NMD). This is the maximum amount of electricity, measured in kilovolt-amperes (kVA), that a customer has agreed with Eskom or a municipality it may draw from the network at any given time.

Businesses pay a separate charge to ensure sufficient electricity capacity is available when needed. Demand can spike when large equipment is switched on and requires additional power to start.

Substantial penalties apply if the agreed limit is exceeded.

Intelligently managed solar power can reduce peak demand, lowering costs and limiting the risk of penalties.

Suitable systems

Jaltech acquires systems with a capacity of approximately 200kW or more, or a value of at least R1 million, throughout South Africa.

Contracts are negotiated individually and typically run for eight to 20 years.

Jaltech replaces any components that need replacing during the contract period as part of the deal.

Melanie Veness, CEO of the Pietermaritzburg and Midlands Chamber of Business, says the model is innovative and could appeal to businesses that were forced to invest in backup power and now want to recover some of their capital. She notes that its potential benefits depend on various factors.

Cruise adds that selling a solar installation can appeal to businesses that want to concentrate on their core operations rather than manage an asset requiring considerable technical expertise.

With the economy under pressure, recovering capital previously invested in backup power could also ease cash-flow constraints.

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