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Load shedding hits commercial property hard

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Load shedding is affecting productivity and profits and putting tenants in tight corners

Load shedding has severely affected commercial and industrial tenants struggling to meet rising costs and tight production schedules, says a leading South African businessman.

“Production and efficiencies have dropped significantly whenever there has been load shedding,” said Jeremy Wiley, managing director at De Goede Hoop Development Company in the Western Cape.

With wasted costs, Wiley – who spoke to the Independent on Saturday at the Cape Chamber of Commerce and Industry’s Electricity Summit in Cape Town, attended by business owners, property developers, city officials and energy industry experts – said affected tenants “struggled to make their businesses profitable, which again affected their ability to pay rents”.

He stressed: “The entire debate about being more energy efficient, reducing operating costs and providing a greater degree of energy security for our tenants is vital.”

But prospects are grim and Eskom has little to offer the business and property sectors. Under Multi Year Price Determination 4, Eskom has applied to Nersa for a further 15% tariff increase from 2019/20 to 2021/22 and is projecting 10% for each of the following two years.

Historical data from both Eskom (2018) and StatsSA (2018), show while inflation has almost doubled since 2009, Eskom prices have tripled over the same period, as reviewed by the 2019 GreenCape Energy Services Market Intelligence Report.

Meanwhile, the global average price for solar PV dropped 72% in seven years from R4.91/kWh in 2010 to R1.36/kWh in 2017 (Irena 2018). Bruce Raw, GreenCape Energy programme manager, said: “The biggest driver of energy efficiency is increasing tariffs. You don’t really need a policy to make people more efficient if tariffs continually rise.”

But load shedding has one positive unexpected offshoot – it is pushing business people to invest in renewable energy. Davin Chown, chairperson of the SA Photovoltaic Industry Association, says it could be in property developers’ interest to stay ahead as electricity tariffs go up and PV prices fall.

“Businesses have to do it for themselves and regulations will catch up. Also the investment carries over to property value with people prepared to pay more for built-in energy security.”

Grahame Cruickshanks, Green Building Council South Africa managing executive of market engagement, says: “They are essentially future-proofing assets.” He sees commercial property owners exceeding basic green property requirements. But while the price of going green might be dropping, it still takes a large initial capital investment.

“From the outset tenants will enjoy the benefits and, over time, pay a share of that additional capital infrastructure,” says Wiley. A 1MW installation, the limit from the outdated Integrated Resource Plan, would take an investment of between R8million and R12m, says Raw.

Wiley says the impact on rent could be minimised with greater adoption of energysaving measures, “and if by-laws require every new commercial and industrial property to have a solar PV rooftop installation, the cost will come down”.

Mayors commit to target

Solar panels are environment-friendly because they use the power of the sun to generate energy. Picture: Supplied

The country’s post-2015 National Energy Efficiency Strategy aims for South Africa to have energy-efficient buildings by 2030. The plan requires a 50% reduction in energy consumption for public buildings, and a 37% reduction for the commercial sector from 2015 to 2030.

In addition, it is going to take commitment from local government level, says Grahame Cruickshanks, Green Building Council South Africa managing executive of market engagement.

He said the mayors of eThekwini, Cape Town, Tshwane and Joburg have committed to the Net Zero Carbon Buildings Declaration to ensure new buildings will operate at net zero carbon by 2030 and pledged all buildings will operate at net zero carbon by 2050. This was an “extremely ambitious” target. 

Companies that comply will have energy-efficient buildings with all remaining energy from on-site and/or off-site renewable sources. Cruickshanks confirmed that a draft version of a revised SANS 10400 XA standard is being processed.

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