Amazon to tap into Eskom’s grid in renewable energy project

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 11 Dec 2020
Jeff Bezos, founder and CEO of Amazon.
Jeff Bezos, founder and CEO of Amazon.

US tech giant Amazon has announced a renewable project in SA in partnership with local companies.

The SOLA Group will be responsible for developing the project and will build, own and operate the solar facility.

The project will begin construction in early 2021.

Globally, Amazon yesterday announced 26 new utility-scale wind and solar energy projects, including in SA, totalling 3.4 gigawatts (GW) of electricity production capacity, bringing its total investment in renewable energy in 2020 to 35 projects and more than 4GW of capacity.

According to the company, these new projects will make Amazon the largest, to date, corporate purchaser of renewable energy.

Amazon has now invested in 6.5GW of wind and solar projects that will enable the company to supply its operations with more than 18 million megawatt hours (MWh) of renewable energy annually.

“Amazon is helping fight climate change by moving quickly to power our businesses with renewable energy,” says Jeff Bezos, Amazon founder and CEO.

“With a total of 127 solar and wind projects, Amazon is now the biggest corporate buyer of renewable energy ever. We are on a path to running 100% of our business on renewable energy by 2025 – five years ahead of our original target of 2030. This is just one of the many steps we’re taking that will help us meet our Climate Pledge. I couldn’t be more proud of all the teams across Amazon that continue to work hard, smart and fast to get these projects up and running.”

The 26 new wind and solar projects announced are located in Australia, France, Germany, Italy, South Africa, Sweden, the UK and the US.

Earlier this year, Amazon’s subsidiary Amazon Web Services opened an African data centre region located in Cape Town.

Tapping into national grid

In SA, the SOLA Group notes the local project will see 28GWh of solar energy wheeled via Eskom’s utility grid from a solar farm in the Northern Cape to Amazon’s facilities each year.

It explains that energy wheeling holds tremendous value in that it enables the supply of energy to urban areas, which has been generated from energy projects in outlying areas, such as a solar farm located in an area where the sun is most powerful and consistent.

This is done through the transfer of electrical power via a utility’s transmission or distribution system between different grid or network service areas, the company adds.

Chris Haw, executive director at the SOLA Group, explains that although the concept of wheeling energy using Eskom’s existing infrastructure has been in place since 2008, certain administrative barriers have hindered the uptake of such services.

“This project, which comprises a 10MW solar PV farm, has also received a sought-after generation licence from NERSA [National Energy Regulator of SA], a milestone that other similar projects have struggled to achieve.”

Haw explains that the NERSA process requires a signed power purchase agreement and fully developed project in order to obtain approval.

“This creates contractual challenges because many inputs, such as the foreign exchange rate, are still fluctuating while the application process is under way. The high standard of development required for submission means that NERSA are not handing out licences to projects that won’t proceed, which is a very good thing.”

SOLA says the project aligns with the South African government’s intent to open the electricity grid, allowing independent generators of electricity and consumers to enter into bilateral agreements to optimise the cost and sustainability of energy, which has previously been difficult to achieve.

It points out that the generation licence received from NERSA is one of the first granted as part of the recent allocation made for distributed electricity generation in order to plug the short-term capacity gap.

Haw says SOLA will deliver the energy via the Transmission Network though a Wheeling Use-of-System agreement.

“This Wheeling Use of System Agreement is the first of its kind and the largest solar PV wheeling arrangement in South Africa to date.”

BEE partners

The project will be majority black South African-owned, as Mahlako a Phahla Investments, a black women-owned and -operated energy and infrastructure investment holding company, will own 45% of the project.

Mahlako’s executive team, consisting of Makole Mupita and Meta Mhlarhi, has led the company’s participation in South Africa’s renewable energy sector.

“We are proud to be partnering with Amazon on this milestone transaction to bring South Africa its very first solar energy wheeling project,” says Mupita.

“We are dedicated to the creation of a more prosperous, sustainable and inclusive world. It is for this reason that we are excited about partnering on a project like this, which values the economic empowerment of previously disadvantaged groups in South Africa,” she adds.

Mahlako’s vision is to see more projects, with similar participation from underrepresented population groups, brought to fruition in South Africa going forward.

“The active participation of women, specifically African women, in the energy sector is a goal that drives much of our work at Mahlako,” explains Mhlarhi.

Other investors into the project include African Infrastructure Investment Managers (AIIM), through the IDEAS Fund, one of South Africa's largest domestic infrastructure equity funds and one of the largest investors in the country’s renewable energy landscape, with a total of R10 billion invested into projects producing 2.5GW of power.

“This project is well aligned to IDEAS’s investment mandate of targeting infrastructure investments that have tangible social and environmental impacts, as well as the potential to deliver strong long-term returns. We’re looking forward to working closely with the SOLA Group and Mahlako teams to help improve accessibility and affordability of clean renewable energy here in South Africa,” says Vuyo Ntoi, AIIM’s joint-MD and IDEAS portfolio manager.