South Africa: Mediclinic to cut Eskom dependence with renewable-energy accord

The first electricity to be supplied under an accord with the Energy Exchange of Southern Africa will be used around the end of 2022. Reliance on Eskom, from where Mediclinic currently gets about 90% of its power, will gradually fall to near zero in eight years, Jonck says in Stellenbosch. Mediclinic, which trades on the stock market in London and Johannesburg, aims to be carbon neutral by 2030.

South Africa’s President Cyril Ramaphosa in June announced that private companies will be able to generate their own power up to 100 MW without a licence. Mediclinic is in the process of installing solar panels to generate energy. But land constraints and the cost of battery storage mean that solar, while able to meet baseload demand, won’t be enough to cover peak consumption, Jonck says.

That’s the logic behind the agreement with Energy Exchange, based in Cape Town and currently the only platform which can connect businesses with independent power producers in South Africa. Led by CEO Garth Greubel, the exchange allows independent generators to sell their surplus power and will provide power from multiple sources, including wind, hydro and solar.

• The agreement, worth up to R2.1bn ($152m) , is subject to scrutiny by South Africa’s Financial Conduct Authority, because Remgro, the investment company controlled by Johann Rupert, is a shareholder in Mediclinic, as well as being a founding partner of Energy Exchange.

Municipality buy-in

Mediclinic also operates in Namibia, Switzerland and the United Arab Emirates. The company’s South Africa plans will require “significant” investment, Jonck says, declining to give figures. He expects that each item of capital expenditure for renewable energy will pay for itself through greater efficiency within about 10 years.

• Air-conditioning and fluorescent lights represent about 60% of energy consumption in a hospital and are “low-hanging fruit” which can be replaced by renewable energy, Jonck says.
• The company will remain legally obliged to retain diesel generators as a back-up, Jonck adds.
• Solar panels will be installed at all the company’s hospitals within eight years, and major facilities will have panels in three years, says Petrus Swanepoel, Mediclinic’s sustainability manager.
• Some previously fitted solar panels are also being replaced with up-to-date ones, Swanepoel adds.

Buy-in from South Africa’s municipalities is key to achieving carbon neutrality, Jonck says. The municipalities buy power from Eskom, and in turn sell it to users such as Mediclinic. As such, they have to approve the concept of energy “wheeling”, or the delivery of electricity generated by a private operator.

• South African Independent Power Producers Association (SAIPPA) consultant Andrew Carr said in July that while wheeling has long been possible in South Africa, the concept is yet to take off, with the lack of risk mitigation for new project developers remaining a constraint.
• Carr is waiting for the fine print on Ramaphosa’s plans to liberalise generation.
• So far only Stellenbosch municipality has approved Mediclinic’s wheeling plans. Jonck is confident that others will quickly follow. “We need them to buy in.”

Bottom line

Municipal-level decisions will be key to how fast Mediclinic’s renewable-energy targets can be rolled out.