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By Taryn Bornman
- In Asset Finance Business Finance Renewable Energy Solar
While power outages extend beyond the borders of South Africa, the country’s energy crisis has escalated to a critical point with indefinite load shedding.
It goes without saying that the continued success of businesses in South Africa relies heavily on embracing renewable energy sources, such as solar power. Nevertheless, the solar sector is often regarded as enigmatic and intricate.
To shed light on the subject (no pun intended), Centrafin, a principal asset financier, conducted interviews with key individuals from Centrafin, as well as AREP (Association for Renewable Energy Practitioners), a quality assurance organization which specializes in solar technology.
Tips: Financing Solar For Your Business
1. Lengthy funding process: A primary concern among clients seeking funding for their solar solutions is the time it takes to secure the funding. Often, the process can stretch over weeks, especially for larger installations that involve substantial capital outlay.
Solution: While the funder acts as the catalyst for its own turnaround times, you, as the client, can play a crucial role in hastening the process by cooperating with the funder and submitting the correct documents and information during the application stage:
The application stage includes the following:
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- You as the business owner complete and sign an equipment application (usually a one-page document). This application also serves as permission for the funder to continue with the vetting process – so it is important that the information you provide on this application is accurate and that you sign and date the form.
- FICA documents will also be requested during the application process as it is a regulatory requirement – these documents hold significant importance, particularly from a fraud prevention standpoint and verifies your identity.
- To assess the client’s affordability, the funder will require updated financial information.
- In the case of solar applications, the funder will conduct thorough due diligence and request the supplier of the equipment to provide specific documents that demonstrate their credibility as a reliable solar supplier.
2. Rigidity and lack of flexibility: Funders may have have rigid criteria, and understanding their client’s unique business model may not be a common practice. Flexibility in structuring the client’s facility is another worry, as some tier-one funders may not be accommodating in this aspect. Every business is unique, and a one-size-fits-all approach simply won’t do.
Solution: Centrafin recommends engaging in open dialogue with the funder and clearly stating your non-negotiables from the beginning. In most cases, both parties may need to make some accommodations to find a mutually agreeable solution.
3. Complex upfront payments: Additionally, the requirement for advanced payments, which is often necessary to secure the solar equipment, can indeed prompt clients to seek additional loans. This, in turn, creates further challenges for businesses as they navigate the financial implications and potential complexities involved in securing the necessary funding for their solar projects. Upfront payments can be a daunting challenge, complicating deal structures and causing unnecessary stress.
Want to finance a solar solution for your business? Click here to apply for finance through Centrafin, and receive feedback within 24 hours.
Tips: Solar Equipment
There are a few things you need to keep in mind to ensure your safety and the efficiency of your installation; alternative power generation units can be dangerous if not designed and installed correctly. Start with these five things:
1. Only work with registered and certified Solar PV installers and contractors. Practitioners can belong to one of two Solar PV industry bodies: AREP and/or SAPVIA. Additionally, the practitioner should have Solar PV certification in the form of a P4 certificate from AREP, or a PV Green Card from SAPVIA (the only certifications currently accepted by the industry at large). Feel free to ask your practitioner for proof of registration and certification. You can find a directory of registered, certified practitioners on the AREP website.
2. Consider your power quality requirements: Users with sensitive electrical equipment will need to take additional precautions to safeguard against future damage, e.g., radio amateurs, data centres, medical centres, etcetera.
3. Ensure that the existing structure to which you want to add Solar PV, is professionally assessed to confirm whether the structure can carry the additional load. Ask your registered, certified practitioner for recommendations or consult a structural engineer.
4. Ensure you install equipment that is easily available to you as an end-user. You don’t want to be bound to a single practitioner simply because they are the sole supplier of replacement parts for your Solar PV system.
5. Finally, ensure you receive all documentation for the installed system from your registered, certified practitioner. This includes a COC, single line diagrams for the AC and DC sides of the installation, the data sheets for all the equipment installed, and a clear list of what to do in case of alarms
What about calculating the actual costs and savings tied to the solar system?
AREP advised the following:
When calculating the hard costs of installing Solar PV for your business (whether commercial or industrial), you’ll need to consider the cost of energy for:
- the Solar PV system you’re installing over its lifespan, which could be as low as R0.40c per kWh,
- the battery bank, at ± R2.00 per kWh, and
- where supplemented with a diesel generator – the operating costs for the diesel genset, which varies between R8/kWh and about R14/kWh.
Those costs combined should be compared with what you’re currently paying, the municipal tariff, future increases, tax incentives, and any possible improvements in productivity that could affect operational costs.
With a clear understanding of the available funding options and following appropriate guidelines for selecting the right solar solution and supplier, you can empower yourself to craft judicious choices in embracing renewable technology as a compelling substitute.