Vodacom, Eskom sign first virtual wheeling agreement
07-09-2023 11:50:00 | by: Bob Koigi | hits: 3088 | Tags:

In a first of its kind in South Africa, Vodacom has signed a Virtual Wheeling agreement with Eskom earlier that will help accelerate efforts to solve the country’s energy crisis.

In addition to adding capacity to the nation’s power grid, this agreement - a Vodacom innovation which has been co-developed with Eskom - will also play a significant role in moving Vodacom closer to its goal of sourcing 100% of its electricity demand from renewable energy sources by 2025. This agreement will now enable Vodacom to execute the next phase of this innovative solution - securing Independent Power Producers (IPPs) under the same terms and conditions which underpin its agreement with Eskom.

Vodacom Group CEO, Shameel Joosub said, “Vodacom’s partnership with Eskom is transformational in that our virtual wheeling solution will enable South Africa’s private sector to participate in resolving the energy crisis which continues to impact the country’s economy. It also provides a blueprint for other South African corporates to adopt, as we pool our collective resources with the common objective of bringing an end to load shedding. The virtual wheeling solution has the potential to be fast-tracked, depending on the available licensed capacity of IPPs.”

The energy crisis in South Africa has been devastating for many businesses. Vodacom South Africa spent more than R4 billion on backup power solutions and R300 million in the past financial year alone on operational costs such as diesel for generators. Not only is this a massive financial burden, it also poses a significant challenge for the company to achieve its broader environmental ambitions.

Traditional wheeling typically involves a one-to-one relationship between an IPP and a buyer using the national grid to convey their energy. While the concept of traditional wheeling is fairly common practice globally, it has certain limitations for companies with complex operating environments. For example, Vodacom South Africa’s operating situation is unique due to the complexities associated with having over 15 000 distributed low-voltage sites across the country that are linked to 168 municipalities. Up until this point, this complexity has prevented Vodacom from accessing large scale renewable energy from IPPs. The virtual wheeling solution addresses these challenges.

“Converting our existing fossil-fuel based electricity supplies directly with on-site renewables is limited by technical constraints that are difficult to scale. We explored a traditional wheeling option, but this had numerous limitations, which we believed could be overcome by reimagining the problem and using technology to solve the issue,” said Joosub.

“Vodacom had four objectives when we approached Eskom with this solution: one to remove complexity, two to use technology to solve legacy limitations, three to access renewable energy with a sound business case and lastly, encouraging private participation to help solve the energy crisis,” added Joosub.

After a successful pilot phase, which concluded last year, and following rigorous testing, the newly co-developed solution is now accessible to the public and private sector on a larger scale. With the agreement now signed, Vodacom will be able to add more capacity to the grid without impacting Eskom’s balance sheet while helping to reduce its greenhouse gas emissions. Furthermore, the blueprint provides an easy-to-follow roadmap for others in the private sector, effectively involving those who want to benefit from cost saving in the process of stabilising South Africa’s grid and reducing our overall emissions.

“Think of it like purchasing renewable energy certificates,” says Sitho Mdlalose, CEO of Vodacom South Africa. “But most importantly, it also has the added benefit of positively impacting the supply deficit currently being experienced and nurturing the growth of renewable energy production in South Africa. We estimate that this initial phase will move approximately 30% of Vodacom SA’s power demand onto renewable sources, a significant step towards our 2025 renewable energy ambitions. To make up the difference, we are working hard at exploring and developing additional solutions, adds Mdlalose”

The future of virtual wheeling is looking bright, with a number of parties from across industries already showing commercial interest in the solution enabled by Vodacom subsidiary, Mezzanine.

To realise this, the Enzi Ijayo insists that the government must set up  an enabling policy environment that promotes renewable energy, investment, and infrastructure development.

“These should include clear targets, financial incentives, and streamlined regulations. Additionally, fostering innovation and supporting research in renewable technologies is crucial,” Wanguhu said.

It adds that Africa can transform its energy utility companies into successful entities by creating separate entities for household, commercial, and industrial power, increasing investments in infrastructure, accessibility, enhancing grid reliability, reducing transmission losses, and investing in smart grid technologies.

According to the report, utilizing public-private partnerships and green bonds or blended finance can increase global funds for renewable energy development in Sub-Saharan Africa, unlocking the region’s potential for sustainable energy production and promoting socio-economic advancements.

These measures are likely to see Africa scratch a sizable share of its vast renewable energy potential that is 39 per more than any other continent.

Statistics show that Africa has an almost unlimited potential of solar capacity (10 TW), abundant hydro (350 GW), wind (110 GW), and geothermal energy sources (15 GW).

The International Renewable Energy Agency (IRENA) estimates that renewable energy capacity in Africa could reach 310 GW by 2030; which would put the continent at the forefront of renewable energy generation globally.

Some countries like Kenya are already ahead of the pack in harnessing renewable energy potential, with 86 percent of its power mix being green.

At the same time, the African Green Minerals Strategy is out for public consultation, validation and input.