NRG Renew Africa signs PPA with Smollan
2015-11-30 | by Smollan
Johannesburg – November 30, 2015 – NRG Renew Africa, a provider of distributed and renewable energy solutions, has completed a power purchase agreement (PPA) with international retail solutions company Smollan.
The PPA will enable solar power solutions to be installed at two Smollan locations by the end of this year, contributing 25% renewable energy to the total energy consumption. It further demonstrates NRG Renew Africa’s technical, operational and financial skills to develop and commercialise the Independent Power Producer (IPP) PPA market in South Africa.
According to David Smollan, CEO of Smollan, the reasons for aligning the PPA with NRG Renew Africa relate to the business case together with its technical, operational and financial skills. “From a business perspective, this makes sense on various levels – there is no upfront capital required as we pay only for the power produced by the renewable energy system, it gives us full control of our energy future by providing Smollan with customised embedded generation sources designed to meet our specific needs, we have no performance or technology risk and as the owners of the system, NRG Renew Africa take care of all engineering, maintenance, construction repairs and monitoring.”
“Smollan has always been focused on people, job creation and improving lives”, says Smollan. “In the process of formalising our approach to delivering growth while having a profound social impact, we recently launched our Social and Environmental Impact Plan. It was this plan that initiated our desire to shift towards renewable energy.”
Although Smollan was originally investigating an outright purchase of solar photovoltaic (PV) power solutions, the opportunity to enter into a PPA over 20 years made the lifetime cost savings of the project substantial and the shift to renewable energy more viable. Through financing vehicles, NRG Renew Africa offers competitive PPA rates by accessing capital markets to bring low cost capital to energy projects.
“We have modelled our PPA tariff & escalation rates to beat municipal rates in the short, medium and long term. This agreement will see substantial savings and removes the element of unpredictable energy supply. We expect that in the first year Smollan’s power costs will be lower than current charges and annual costs beyond the first year should still be lower than the predicted current escalation rates,” says Adhila Mayet, Project Manager at NRG Renew Africa.
Further to this, NRG Renew Africa offers a PPA on a commercial scale and its international footprint and proven track record meant this PPA is a significant enabler to Smollan’s energy needs.
According to Dr Dino Petrarolo, VP Commercial & Industrial at NRG Renew Africa, municipality prices are higher than Eskom tariffs by a variable mark-up. “This makes the case for PPA contracting even more compelling as a hedge, and we believe that like Smollan, businesses in South Africa will increasingly look to renewable solutions to both enhance reliability and save money,” he says.