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Why solar isn’t soaring

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Given the current power challenges South Africans face, it makes sense for many to make use of rooftop solar panels. However, the uptake has been really slow due to the installation price, ROI and problems linking the panels into the current electricity grid, writes KEVIN NORRIS and DAVE SMITH of the Jasco Group.

Given the current power challenges in South Africa, as well as a growing trend toward solutions for sustainable electricity, solar technology as a source of energy supply has become a hot topic, particularly for organisations wishing to reduce their reliance on utility power sources. Rooftop solar photovoltaic (PV) plants can help organisations generate their own power, and using grid tie inverter systems enables them to feed excess generated power back to the utility for use elsewhere. However, despite the benefits of such systems, there are two common challenges that have emerged. Firstly, PV plants are a costly investment, and the Return On Investment (ROI) has in the past taken many years to realise, although this is changing as the cost of installation reduces and electricity tariffs continue to increase. This makes obtaining funding for such systems difficult. Secondly, there remain several issues with the connection of solar plants to the main grid, which has slowed the uptake of these solutions. Addressing these challenges is key to harnessing the power of the sun as an alternate, sustainable energy source.

Grid tie solar systems are the simplest and most cost effective method for utilising solar energy as a replacement for day-to-day power requirements. On a very basic level, the grid tie invertor converts the direct current (DC) power generated by solar panels, into the alternating current (AC), and injects this AC current into the existing load. Any excess energy is then fed into the power distribution network. The inverter is also able to ensure that energy requirements are drawn from available solar power first, and only utilise utility supply should there be a solar shortfall. This system does not necessarily require a battery for energy storage, although this will extend functionality, so the installation is very simple and efficient, and maintenance is low. However, while the cost of manufacturing solar PV panels and grid tie inverters has reduced over the past few years, as a result of increased demand, greater economies of scale and technological advancements, solar remains a costly solution to implement. The high cost of raw materials and the high-tech conditions required for the manufacture of components keep these solutions out of reach of the average homeowner or business.

Justifying this investment is often one of the biggest challenges to the implementation of solar power solutions, and obtaining loans and funding is typically a difficult sell. ROI takes a few years to realise, and the investment will only typically pay for itself within six to 10 years. The rate of return is dependent on a number of factors, including the type of installation and the existing tariff with the utility. However, what needs to be kept in mind is that solar PV systems have a predictable performance curve of 25 years and a usable life of 35 years. In addition, using a grid tie inverter system, homeowners and businesses will one day be able to feed excess power back to the grid, either offsetting this against utilisation costs or selling this power to the utility provider. PV systems therefore should not be seen as a depreciating asset. They are in fact an asset that not only reduces current costs, but in the long run could be a significant income generator for the owner.

To quantify this value is a relatively simple mathematical exercise with the assistance of financial models. In 2015 the average cost of electricity per kilowatt-hour (kWh) is similar to the Lifecycle Levelised Cost of Energy (LLCE) of a typical grid tie system at around R1.00 per kWh. This means that, calculated over the complete guaranteed performance lifespan of the panels (approximately 25 years), the cost per kWh from a solar PV system will be similar to the municipal cost in 2015. Going forward the cost of electricity from the utility is very likely to increase significantly year on year, while the cost of the installed PV system will remain at its installed price plus the minimal cost of maintenance. If you look at this over the next 10 years, your cost of solar generation would be around R1.00 per kWh, while the utility cost is forecast to be as high as R3.50 per kWh.

This same trend is likely to continue over the lifespan of the solar PV system. If you project these increases over the 25-year period, the cost difference between now and then would be significant. Effectively, within this period, the solar PV solution could still be generating electricity at R1.00 per kWh, whereas by that stage the cost of utility power will doubtless have increased many times. It is these future differences in the cost of energy between the utility costs and the fixed solar PV cost that should be recognised as part of the long-term sustainability of owning such an asset. Additionally, in most cases the asset is attached to a building and would result in improved valuation of the building. Not only does this have a positive financial implication, it also has an environmental implication, especially when one considers the Carbon Tax that will be levied as of 2016. The only way to negate the carbon tax is to either recycle or produce “Green kWh” from a renewable source like solar PV.

In order to drive adoption of solar PV solutions, it is necessary for financial institutions to recognise their value and assist businesses and homeowners with funding these systems. Forward-thinking financial institutions should look to leverage the security of a loan for solar PV power against the asset itself, as it will pay for itself many times over in years to come. The asset could also be recognised as part of the building itself and be financed utilising an extension of the building bond. In addition, government needs to come on board by assisting financial institutions with tax rebates for their efforts in financing Solar PV systems. This is sound strategy, as by funding these systems, financial institutions are contributing to the overall reduction in carbon output and, more importantly, helping to resolving the country’s current energy shortages.

In addition to funding, connecting to the utility remains a challenge. One of the most pressing issues is the nature of pure solar solutions (without energy storage capability), in that they are only able to produce energy during daylight hours, and the energy must be used or dumped. For the majority of residential applications where nobody is at home during the day, this generated power will be wasted if a solution to feed this power back into the grid cannot be resolved. Connection codes therefore need to be finalised, and metering for two-way energy flow needs to be implemented. It is also important to find a solution to the problem of optimising the use of all renewable energy generated to the advantage of both the end-user and the utility providers.

The concept of net metering, whereby users sell their excess renewable energy back to the utility for credit and utilise these credits when the renewable source experiences shortfall (such as at night when there is no sun to power solar PV systems) is one that has great potential to benefit all parties concerned. For most residential applications, this form of energy trading works well. Some utilities may limit the amount of energy you can sell back for credits to the amount of utility energy used (i.e. if you use 2,000 kWh per month, than you may only sell back a maximum of 2,000 kWh per month). Another system would be to annualise this amount, enabling owners to make better use of the credits throughout the year, such as in winter where generation may not match overall consumption.

Theoretically, users could manage consumption and generation of energy to a zero balance and not have to spend a cent on energy from the utility for the year. This idea in principle is appealing, particularly for consumers and business, however for utilities this could cause problems. If renewable energy customers are not paying what they used to pay for electricity, but rather supplementing their own power generation with utility power, how does the utility find revenue to pay for the maintenance of the generation, transmission and distribution network the entire system uses? Feed in tariffs have been suggested as one solution to this problem, whereby the utility purchases the excess energy from providers, while users still purchase utility power, and there is no obligation to consume at the same rate as you sell energy.

Regardless of the challenges involved, solar PV remains the most viable and cost effective alternate energy source for South Africa, a country that experiences significant hours of sunshine for much of the year in the majority of its regions. If these problems can be satisfactorily resolved and solar becomes a mainstream power generation source, not just for the utility but for business and homeowners too, the currently bleak power prospects of South Africa may have a brighter future after all.

* Kevin Norris, Consulting Solutions Architect, Renewable Energy, and Dave Smith, Managing Director, Renewable Energy, The Jasco Group

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Online retail gets real

After decades of experience in selling online, retailers still seek out the secret of reaching the digital consumer, writes ARTHUR GOLDSTUCK.

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It’s been 23 years since the first pizza and the first bunch of flowers was sold online. One would think, after all this time, that retailers would know exactly what works, and exactly how the digital consumer thinks.

Yet, in shopping-mad South Africa, only 4% of adults regularly shop online. One could blame high data costs, low levels of tech-savviness, or lack of trust. However, that doesn’t explain why a population where more than a quarter of people have a debit or credit card and almost 40% of people use the Internet is staying away.

The new Online Retail in South Africa 2019 study, conducted by World Wide Worx with the support of Visa and Platinum Seed, reveals that growth is in fact healthy, but is still coming off a low base. This year, the total sale of retail products online is expected to pass the R14-billion mark, making up 1.4% of total retail.

This figure represents 25% growth over 2017, and comes after the same rate of growth was seen in 2017. At this rate, it is clear that online retail is going mainstream, driven by aggressive marketing, and new shopping channels like mobile shopping. 

But it is equally clear that not all retailers are getting it right. According to the study, the unwillingness of business to reinvest revenue in developing their online presence is one of the main barriers to long-term success. Only one in five companies surveyed invested more than 20% of their online turnover back into their online store. Over half invested less than 10% back.

On the surface, the industry looks healthy, as a surprisingly high 71% of online retailers surveyed say they are profitable. But this brings to mind the early days of Amazon.com, in 1996, when founder Jeff Bezos was asked when it would become profitable.

He declared that it would not be profitable for at least another five years. And if it did, he said, it would be in big trouble. He meant that it was so important for long-term sustainability that Amazon reinvest all its revenues in customer systems, that it could not afford to look for short-term profits.

According to the South African study, the single most critical factor in the success of online retail activities is customer service. A vast majority, 98% of respondents, regarded it as important. This positions customer service as the very heart of online retail. For Amazon, investment back into systems that would streamline customer service became the key to the world’s digital wallets.

In South Africa online still make up a small proportion of overall retail, but for the first time we see the promise of a broader range of businesses in terms of category, size, turnover and employee numbers. This is a sign that our local market is beginning to mature. 

Clothing and apparel is the fastest growing sector, but is also the sector with the highest turnover of businesses. It illustrates the dangers of a low barrier to entry: the survival rate of online stores in this sector is probably directly opposite to the ease of setting up an online apparel store.

A fast-growing category that was fairly low on the agenda in the past, alcohol, tobacco and vaping, has benefited from the increased online supply of vapes, juices and accessories. It also suggests that smoking bans, and the change in the legal status of marijuana during the survey, may have boosted demand. 

In the coming weeks, we can expect online retail to fall under the spotlight as never before. Black Friday, a shopping tradition imported “wholesale” from the United States, is expected to become the biggest online shopping day of the year in South Africa, as it is in the USA.

Initially, it was just a gimmick in South Africa, attempting to cash in on what was a purely American tradition of insane sales on the Friday after Thanksgiving Day, which occurs on the third Thursday of November every year. It is followed by Cyber Monday, making the entire weekend one of major promotions and great bargains.

It has grown every year in South Africa since its first introduction about six years ago, and last year it broke into the mainstream, with numerous high profile retailers embracing it, and many consumers experiencing it for the first time. 

It is now positioned as the prime bargain day of the year for consumers, and many wait in anticipation for it, as they do in the USA. Along with Cyber Monday, it provides an excuse for retailers to go all out in their marketing, and for consumers to storm the display shelves or web pages. South African shoppers, clearly, are easily enticed by bargains.

Word of mouth around Black Friday has also grown massively in the past two years, driven by both media and shoppers who have found ridiculous bargains. As news spreads that the most ridiculous of the bargains are to be had online, even those who were reticent of digital shopping will be tempted to convert.

The Online Retail in SA 2019 report has shown over the years that, as people become more experienced in using the Internet, their propensity to shop online increases. This is part of the World Wide Worx model known as the Digital Participation Curve. The key missing factor in the Curve is that most retailers do not know how to convert that propensity into actual online shopping behaviour. Black Friday will be one of the keys to conversion.

Carry on reading to find out about the online retailers of the year.

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Reliable satellite Internet?

MzansiSat, a satellite-Internet business, aims to beam Internet connections to places in South Africa which don’t have access to cabled and mobile network infrastructure, writes BRYAN TURNER.

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Stellenbosch-based MzansiSat promises to provide cheap wholesale Internet to Internet Service Providers for as little as R25 per Gigabyte. Providers who offer more expensive Internet services could benefit greatly from partnering with MzansiSat, says the company. 

“Using MzansiSat, we hope that we can carry over cost-savings benefits to the consumer,” says Victor Stephanopoli, MzansiSat chief operating officer.

The company, which has been spun off from StellSat, has been looking to increase its investor portfolio while it waits for spectrum approval. The additional investment will allow MzansiSat’s satellite to operate in more regions across Africa.

The MzansiSat satellite is being built by Thales Alenia Space, a French company which is also acting as technical partner to MzansiSat. In addition to building the satellite, Thales Alenia Space will also be assisting MzansiSat in coordinating the launch. The company intends to launch the satellite into the 56°E orbital slot in a geostationary orbit, which enables communication almost anywhere in Africa. The launch is expected to happen in 2022. 

The satellite will have 76 transponders, 48 of which will be Ku-band and 28 C-band. Ku-band is all about high-speed performance, while C-band deals with weather-resistance. The design intention is for customers of MzansiSat to choose between very cheap, reliable data and very fast, power-efficient data. 

C-band is an older technology, which makes bandwidth cheaper and almost never affected by rain but requires bigger dishes and slower bandwidth compared to Ku-band connections. On the other hand, Ku-band is faster, experiences less microwave interference, and requires less power to run – but is less reliable with bad weather conditions.

MzansiSat’s potential military applications are significant, due to the nature of the military being mobile and possibly in remote areas without connectivity.  Connectivity everywhere would be potentially be life-saving.

Consumers in remote areas will benefit, even though satellite is higher in latency than fibre and LTE connections. While this level of latency is high (a fifth of a second in theory), satellite connections are still adequate for browsing the Internet and watching online content. 

The Internet of Things (IoT) may see the benefits of satellite Internet before consumers do. The applications of IoT in agriculture are vast, from hydration sensors to soil nutrient testers, and can be realised with an Internet connection which is available in a remote area.

Stephanopoli says that e-learning in remote areas can also benefit from MzansiSat’s presence, as many school resources are becoming readily available online. 

“Through our network, the learning experience can be beamed into classrooms across the country to substitute or complement local resources within the South African schooling system.”

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