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Energy Storage

Is It Time For Battery Storage To Replace Diesel Backup Generators In The C&I Sector In Africa?

Most of the public utilities on the continent that play a key role in financing the power sector are facing severe liquidity challenges. Low cost recovery models and practices resulting in non-cost reflective electricity tariffs for various reasons (mostly political) are part of main reasons some of these utility companies are  strapped for cash. A lot of these public utilities also have legacy issues related to under-investment in critical infrastructure and operations. This has hampered efforts to maintain their existing assets and invest in new ones, therefore slowing down addition of new generation capacity as well as the extension of electricity transmission and distribution networks.

This precarious situation means that lot of African countries struggle to attract capital in the energy sector. For example, according to the IEA’s Africa Energy Outlook 2022, African countries received less than 3% of global clean energy investment from 2010 to 2020. The under-investment in generation, transmission, and distribution infrastructure coupled with growing populations and economies in these countries has resulted in quite a few of these power utility companies failing to meet demand, leading to electricity rationing. Residents and businesses in a number of countries on the continent experiencing frequent power outages. South Africa is one of these countries where outages are having a devastating impact on the economy. South Africa recently experienced Stage 6 load-shedding. Stage 6 load-shedding is said to cost South Africa up to R4.6 billion (US$270 million) per day. To mitigate the impact of these frequent power outages, homes and businesses have been relying on expensive and heavily polluting petrol and diesel back-up generators.

Backup diesel generators have been a “permanent” feature in the C&I sector in a lot of African countries. The IEA’s Africa Energy Outlook 2022 report summarizes the scale of backup generator usage on the continent by saying, “In sub‐Saharan Africa alone, such capacity (of back-up generators) amounted to 45 GW in 2021, more than all the renewables‐based generating capacity in the region. Of this, 13 GW is in Nigeria, where 25 terawatt‐hours (TWh) or 40% of the total electricity is auto‐generated by industrial and commercial firms and households using oil products. Improvements in grid reliability would enable utilities to earn more from sales to industrial and commercial clients, which are crucial to their revenue basis, by discouraging auto‐generation and reducing the need for backup generation during blackouts.”

Recent advances in battery storage and the rise of the more affordable and safer cobalt-free LFP battery solutions could finally present a viable opportunity for large scale stationary storage to displace some of these diesel generators in the commercial and industrial sector. Historically, battery storage, mostly in the form of large banks of lead acid batteries, has been employed in the C&I sector on the continent for very short duration UPS applications (around 15 minutes or so) by businesses with critical loads. Diesel generators are the default technology for longer duration applications. Banks, data centers, the manufacturing sector, mines, office parks, and shopping centers are some of the main users of diesel backup generators.

Could battery storage for longer duration applications for use during power outages in the C&I sector make sense now given recent advances in LFP tech and cost reductions over the past decade? A lot of companies in the C&I sector have also been installing large solar plants at their sites. These could also be combined with long term duration battery storage to increase their share of self-consumption. The first real use case for long duration battery storage in most of these markets would be to increase energy security and up-time during the frequent power outages. Other applications such as peak shaving, energy arbitrage opportunities from charging when tariffs are low, and using that energy during more expressive peak times could also be attractive in places where there is a significant difference between the peak and off-peak tariffs. It’s probably worthwhile now for players in the C&I battery storage space to do a deep dive into the business case of C&I storage in quite a few African countries. Is it time for battery storage to start replacing backup diesel generators? Is the business case looking compelling now or how far off are we now?

 
 
 
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Remeredzai Joseph Kuhudzai has been fascinated with batteries since he was in primary school. As part of his High School Physics class he had to choose an elective course. He picked the renewable energy course and he has been hooked ever since. At university he continued to explore materials with applications in the energy space and ending up doing a PhD involving the study of radiation damage in High Temperature Gas Cooled Nuclear Reactors. He has since transitioned to work in the Solar and Storage industry and his love for batteries has driven him to obsess about electric vehicles.

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