By Ann Baker-Keulemans

What is it costing local retailers in South Africa to keep the lights on and the fridges and ovens running? The cost, it is turning out, is astronomical. Shoprite Holdings’ operational update for the 6 months ended 1 January 2023 reports that, “The Group’s additional spend on diesel to operate generators across our Supermarkets RSA store base in order to trade uninterrupted during loadshedding stages five and six amounted to R560 million for the period.”

Meanwhile Reuters reported on 14 March 2023 that property developer Attacq is planning to reduce its reliance on diesel generators used to power its shopping malls (https://www.reuters.com/world/africa/south-africas-attacq-posts-273-rise-distributable-income-2023-03-14/)  while Business Tech notes that due to load shedding over the six months to January 2023, diesel costs across pharmacy and healthcare retailer Dis-Chem stores had increased by 54% to R36 million.

In an eye-opening article by Nick Wilson for News24 Business, South African retail giant Woolworths announced that load shedding was costing the business R15 million per month. Admittedly the country has seen very high levels of load shedding over the last few months, and this number does reflect the impact of stage 5 and 6 (or higher) load shedding, but that is still a significant outlay. The retailer also noted that it expected an even more challenging landscape as higher inflation and interest rates continue to affect consumers, and that “an imminent resolution to the debilitating power crisis…appears remote.”

The latest national budget speech from the South African Minister of Finance brought some relief and certain concessions from government, which acknowledged the impact of load shedding on food prices across the country. However, there was a notable omission as the diesel-related price relief measures were aimed solely at manufacturers, even as food retailers have been spending huge sums of money on diesel to fuel freight vehicles and generators to keep shelves stocked, their stores operating, and  consumers happy. As reported by Business Tech, the CEOs of South Africa’s three largest food and grocery retailers shared their disappointment that the South African government chose not to extend the diesel fuel levy refund to food retailers. The article (CEOs from South Africa’s biggest retailers slam government’s ‘half-job’ load shedding relief (businesstech.co.za) shares comments from Pick n Pay’s Pieter Boone, Spar’s Mike Bosman, and Shoprite Checkers Pieter Engelbrecht. The article says, “The government has accepted the logic that the food industry should not be penalised for the energy crisis but has only done half the job. Our supermarkets are on the front line in keeping the lights on, and the shelves and chillers stacked, for customers during load shedding.” All three CEOS maintained that although they have absorbed as much of the cost of keeping the lights and fridges on as possible, they would not be able to continue indefinitely, and these costs will have to be passed on to the public eventually.

On 8 February 2023, retail group Pick n Pay announced that load shedding has been having a profound impact on its business practices – racking up a bill of R60 million a month to run diesel generators. The group said that the current energy crisis is a new permanent reality for the retail sector, and immediate interventions are being planned, including solar installation and reducing energy consumption. Over the 2022 period, the group said it had spent an additional R346 million year-on-year to run diesel generators for the first 10 months.

An unpredictable electricity supply continues to impact business

Nick Wilson’s News24 Business article says that Woolworths was responding to the erratic electricity supply by “focusing on developing a longer-term business solution to mitigate both upstream and downstream impacts to this challenge”. Woolworths added, “This includes the impacts on our suppliers, and particularly those where the costs required to manage the breakdown in infrastructure have become prohibitive.” Despite the fuel levy relief, food manufacturers are facing an ever-growing challenge. For many, an erratic power supply is severely impacting their processes. The human toll is also real as many businesses are having to consider changing their operating hours to accommodate load shedding. The same is true for smaller retailers who simply cannot afford to run generators or invest in renewable energy. Two to four or more hours of downtime every day is hardly a model for economic success.

Lena Le Roux, MD of locally based Staycold International, is fully aware of the impact of load shedding, as well as other supply chain challenges, that are currently putting pressure on the South African retail market. Staycold is committed to reach net zero (reaching zero greenhouse gas emissions) and, says Le Roux, the business is passionate about creating a product that is as energy efficient as possible, as sustainably as possible. Their efforts have been successful as they were recently recognised internationally as being in the top 3% of the supply base ‘for energy efficiency by a global brand’.

Le Roux explains that their manufacturing plant is based in a rural area with an intensely loyal employee base who are willing to work odd hours around load shedding. Despite operating on solar as far as they are able, load shedding is still incredibly disruptive and, despite their flexible workforce, Le Roux says they can see the toll load shedding is taking on the human side of things.

Managing the impact of load shedding

For larger retailers and supermarket groups, investing in alternative energy supplies is the only way forward. With the South African government pledging to reach net zero by 2050 and the current legal and moral demands around sustainability and cutting carbon emissions, renewable energy certainly makes the most sense – for those who can afford it. Woolworths reports that its "significant past investments in its energy supply capabilities have proven beneficial, with 99% of its stores and all its distribution centres already equipped with generator capacity.”

In an article for Business Tech, Luke Fraser writes, “Attacq, the owners of Mall of Africa and Glenfair Boulevard, is the latest prominent retail space owner to invest heavily in solar in an attempt to escape Eskom.” He adds, “According to Attacq, during stage 2 load shedding, the company spends R170,526 daily to keep the lights on in its retail space. When rolling blackouts go to stage 6, these costs rise to over R511,500 – and this is before even counting the costs of lost business and sales as a result.” Attacq has signed a Power Purchase agreement (PPA) for a 15MWp power supply in 2023 and has started construction on four new rooftop solar power projects. “R17 million worth of retrofit projects are also underway in the country, with plans to invest further. Resilience principles will also be introduced, such as rooftop solar installations that are being grid-tied to their generator capacity. Other measures, like lighting retrofits that reduce energy use from common area lights, and generators with data panels that switch off during load-shedding hours, are also part of these resilience principles” (Business Tech, 29 December 2022).

Other mall owners are also investing heavily in solar projects. The Redefine Group, which owns amongst others the South Coast Mall, East Rand Mall, Centurion Mall, Kenilworth Shopping Centre, Maponye Mall, and the Golden Walk Shopping Centre, is investing R194 million in solar photovoltaic projects, smart metering, and water and energy efficiency across its portfolio (https://www.engineeringnews.co.za/article/redefine-well-positioned-for-growth-with-new-simplified-asset-platform-2022-11-07/rep_id:4136).

Shoprite has also increased its solar photovoltaic system capacity by “82% to 26,606kWp from the previous year –achieved via 20 soccer fields worth of solar panels.” The group has focused on solutions to improve energy efficiency, reduce its carbon footprint, and reduce electricity consumption overall. By installing LED lights at its sites, the group has saved “399 million kWh to date”, says Fraser.

Energy efficiency, energy conservation, and alternative energy sources

Tygue Theron, Head of Business Development at Energy Partners Intelligence – a division of Energy Partners and part of the PSG group of companies – believes that a comprehensive energy strategy is crucial for cutting energy spend and carbon emissions. For Theron, energy efficiency encompasses not only solutions that help you use less electricity, but also those that help “manage costs, secure the best sources of energy supply, and address any risks that may leave the business without power at crucial times.”

Theron says that effective data collection is the only way to ensure a solution that is effective and fit for use across multiple store locations and to cover all their needs. Integral to this is the ability to “accurately measure and assess current energy usage and monitor progress in real time.” Theron argues that you would need a minimum of 12 months’ worth of data for an accurate assessment. The next step is managing that energy strategy. For Energy Partners, removing the human element and using technology, including IOT-enabled devices, automated controllers, and AI to control energy usage makes the most sense. Theron emphasises that accurate reporting is an absolute necessity. For this to work, you need the right resources and skills. This is why Theron advises using a dedicated outsourced service provider to structure the most effective solution for your needs.

Daniel De Beer, Regional Manager for Sub Saharan Africa at Emerson Commercial & Residential Solutions, is no stranger to the quest for ultimate energy efficiency, as Emerson has been manufacturing and installing energy-efficient technology for several years now, utilising highly effective compressors and condensing units. “On average, retailers are using 70% of their energy consumption for refrigeration alone, and roughly 50% of that usage can be attributed to compressors,” he says.

Although there is some significant capital outlay, by Emerson’s calculations, a saving of 20% on electricity consumption is very achievable. Pay-back, in fact, was measured at 3 weeks to 6 months, depending on the size of the installation.

For Emerson, to be energy efficient is to also consider the responsible and effective use of electricity, as well as reducing consumption.

De Beer does, however, caution against throwing money at the problem without investing in the skills, knowledge, and expertise needed for success. As he points out, retailers are often working with a range of equipment that has different operating requirements and different voltages. “Your solutions are only ever as good as the other tech in the system, and it needs to work together in harmony and seamlessly. If you are going invest in electronic controllers and smart tech – and it does come at a premium price – it must be installed and managed by professionals who understand both the end-user needs and requirements, as well as the specifics of the technology being implemented.”

Staycold’s Le Roux says energy efficiency and surge protection are essential when it comes to coolers and refrigerated units. “Surge protection has become a standard necessity in the face of an unpredictable power supply and the electrical surges that occur with load shedding. Le Roux points out that even their standard protection has limits, however, withstanding about 80% of the surges currently being seen, as the company reports massive spikes are becoming a far more common occurrence. The same digital controller that provides surge protection also comes with an eco-mode that is triggered if the cooler doors haven’t been opened for a certain amount of time. Once this sleep mode is triggered, the lights and fans are turned off automatically and the temperature is maintained statically until the door opens again. As Le Roux says, “We have been using this design for the last eight or nine years, and this level of energy efficiency does come at a cost - for which the retailer receives a high level of longevity, protection, and energy savings.”

The sentiment amongst the experts is clear – while capex may be your priority, high-quality tech that is energy efficient, effective, and sustainable is not cheap. By running the numbers, asking the hard questions, and doing your research, retailers are investing in  solutions that are looking increasingly necessary for their survival.

Solar outpaces coal as a cheaper alternative

In an article titled How solar power became cheaper than coal (www.mybroadband.co.za ), writer Miles Illidge states, “Fossil fuels dominate the world’s energy generation, but research shows that solar energy is now cheaper than coal.” He goes on to say, “The study found that electricity from solar generation is approximately 63% cheaper per megawatt-hour (MWh) than fossil fuels, and according to the World Energy Outlook for 2021, solar photovoltaic and wind power are the cheapest sources of new electricity generation. The cost of electricity from coal dropped $2 (R31) per MWh between 2009 and 2019, while prices associated with the generation of solar power decreased by 89% over the same period. In 2009, electricity generated from solar sources cost $359 (R5,503) per MWh. By 2019, costs had dropped to $40 (R613) per MWh.”

This has occurred for several reasons. Most notably, demand has increased, allowing solar technology and hardware manufacturers to achieve economies of scale. In addition, the technology driving solar power production has improved due to increased interest in sustainable and renewable energy sources. Most importantly, solar power requires no fuel and has markedly fewer running costs than those associated with coal or nuclear power plants.

This is good news for those who have invested in or are in the process of investing in solar as a renewable power source. Demand is on the rise globally. As such, despite challenges related to raw materials and certain technologies due to the Covid-19 lockdown and the war in Ukraine, the cost of solar-produced electricity is notably lower than that of traditional power producers. The bad news is that South Africa is in the middle of a crisis of government, and political interference versus political support is, as yet undecided. Despite South Africa pledging to reach Net Zero by 2050 and the recent introduction of a Minister for Electricity, political interference and stonewalling when it comes to fully embracing and deploying renewable energy sources is concerning.

Is solar all it’s cracked up to be?

Emerson’s De Beer firmly believes that solar as a renewable energy source is a viable option for South Africa. The company has spent considerable time investigating renewable energy sources such as solar. While it is not necessarily about the payback, De Beer does believe that the positive impact it has in mitigating the impact of load shedding cannot be overstated. And, he adds, if the government approves Eskom’s NERSA application to allow solar producers to push electricity back into the grid for significant incentives (which include the possibility of payment for selling excess electricity back into the grid), the demand will see the country achieve economies of scale that will continue to drive down the cost of solar installations.

For Le Roux, solar has its pros and its cons. She believes that generic solar is currently too expensive to be a viable solution for anyone but the biggest chains and franchises. She says, “We need the European supply chain to come up with affordable, practical solutions that will then work their way into our market.” While she does believe the use of solar will become the norm, and costs will therefore stabilise, she also says that we need clever tech solutions to be able to offer solar as an alternative for many franchise retailers and smaller stores. That innovation, she believes, is still coming.

Le Roux believes that slotting commodities into an existing solar stream is far more feasible, although it needs to be done by an expert. “It is an extremely complex process as each of the commodities must be considered in isolation, the applications are all different, and this needs to be accommodated in the design phase. There is no perfect solution. There can’t be, the challenges are too great and the practicalities too complex. What we can focus on is energy consumption and our carbon footprint. We can work to reduce both of those, and also work with renewable or sustainable energy where possible.”

The worst thing you can do is do nothing.

Responsibility and education

For Staycold MD Lena Le Roux, retailers need to take responsibility during load shedding. This requires both education and management. It’s all very well telling people how to reduce the effects of load shedding, but this needs to be managed at a floor level as well. “It is essential that we don’t put strain on a strained situation, for example, restocking cold cabinets during loadshedding, as this adds pressure to an already pressurised grid, and not opening cooler doors for longer than necessary.”

For some sage advice on what to do during a power outage, visit https://www.srpnet.com/assets/srpnet/pdf/customer-service/safety/business-outage-planning-checklist.pdf