For trustees of South African residential complexes and estates, grappling with alternative electricity solutions is no longer an option – it’s a necessity. After seventeen years of energy insecurity, coupled with repeated tariff hikes exceeding inflation, community leaders are under pressure to find effective solutions, while residents continue to voice concerns.
The challenge is multifaceted. Resident owners, investor landlords, and tenants each have different perspectives and financial stakes in the variety of potential energy solutions available, which complicates decision-making. Even though load shedding has decreased, many South Africans now face load reduction or unplanned outages as municipalities struggle to keep their grids operational. As a result, cost-effective energy security remains a top priority.
Responses to the energy crisis vary widely, from doing nothing to entering into power purchase agreements (PPAs) with independent power producers. These agreements often involve installing a combination of solar PV systems, batteries, and generators. In some cases, individual unit owners have taken it upon themselves to install decentralised solutions such as standalone solar panels, batteries, inverters, or even diesel or gas generators.
This decentralised approach, however, has led to complications when trustees allow ad hoc solutions without considering tariff structures and billing mechanisms. In estates where homeowners are permitted to install their own solar systems, but the cost of electricity is distributed equitably among residents, problems can arise – especially in complexes with a single bulk account on a time-of-use (TOU) tariff.
TOU tariffs vary depending on the time of day, with lower rates during off-peak hours and higher rates during peak periods. Many complexes that buy bulk electricity on a TOU tariff distribute that power at an averaged or blended rate to residents. When some residents use their own lower-cost solar energy during the day to offset the complex’s blended average rate, it shifts their consumption profile to higher-cost nighttime hours. This increases the complex’s overall average electricity cost per kilowatt hour, leading to a situation where residents without solar end up effectively subsidising those with solar panels since they must now pay the higher tariff.
This imbalance forces trustees to adjust the tariff structure, often leading to discontent from residents who have already invested in solar systems. Trustees typically choose one of three solutions:
1. Higher fixed access charges: Imposing a fixed availability or access charge that applies to all residents, regardless of consumption.
2. Smart meter installations: Implementing smart meters for each unit, funded through a special capital levy from all unit owners. These meters can ensure fair billing by tracking real-time usage and passing through TOU tariffs directly to residents.
3. Electricity resellers: Partnering with an electricity reseller to install smart meters in exchange for monthly service fees, regulated by NERSA.
Smart meters and more precise billing mechanisms can prevent the so-called “utility death spiral,” where inconsistent tariff structures threaten the financial stability of the estate.
What’s happening at the complex level mirrors the situation in many municipalities and on a national scale. South Africa’s utility tariff structures were designed for a simpler time. As the country’s energy generation becomes increasingly deregulated and diversified, these tariff structures must evolve.
Paying a TOU tariff at the bulk meter and then allocating the total electricity cost based on average consumption is no longer adequate. Trustees must embrace the inevitability of implementing smart infrastructure. In countries further along the renewable energy transition, the gap between daytime solar tariffs and peak tariffs is widening, and South Africa will likely follow suit.
Smart meters streamline billing, eliminate errors, and prepare complexes for future tariff changes. Independent power producers, like Decentral Energy, can finance the installation of smart meters, either as a standalone solution or alongside batteries for backup power and tariff arbitrage.
Batteries are becoming a financially viable option for many complexes. As their cost continues to fall and the gap between off-peak and peak tariffs grows, battery storage solutions will become even more attractive.
Smart meters also enable innovative solutions, such as offering feed-in tariffs to residents with surplus solar power. By allowing residents to sell excess energy back to the estate, complexes can create a more equitable and efficient energy system.
Trustees must be mindful of the potential opposition that can arise from residents, particularly when introducing new billing systems or infrastructure. Smart metering offers solutions that benefit both those who have invested in solar systems and those who have not. This balance is crucial when seeking approval at an Extraordinary General Meeting of unit holders.
Imagine a scenario where 40% of residents in an estate have installed solar systems. In such cases, surplus solar power can be redistributed to residents without solar, or it can be stored in batteries for use during peak hours. This creates a win-win situation, where the entire community benefits from more efficient and sustainable energy use.
South Africa’s energy crisis has forced residential complexes and estates to rethink their electricity supply strategies. While the transition to greener energy sources presents challenges, the benefits in terms of cost savings, energy security, and reduced environmental impact make it a necessary and worthwhile endeavour.
By carefully considering available options, investing in smart infrastructure, and collaborating with independent power producers, trustees can navigate the complexities of the energy landscape and secure a sustainable, reliable power supply for their communities.
