By: Bronwyn Timm - SOLA Group Business Development Manager 

South Africa’s energy landscape has dominated headlines for many years. Even with the respite in load shedding, there are pressing concerns about the state of Eskom’s generation fleet and its distribution network. Diesel costs, to keep the lights on, are spiraling to eye-watering levels: Eskom spent almost R5-billion on diesel last year alone. The status quo is unsustainable – both economically and environmentally. As the pressure grows for the country’s energy transition to gain momentum, there’s a need for bold solutions. 

Enter virtual wheeling, which if we get right as a country, is poised to transform how electricity flows from renewable sources to energy consumers. That’s the point, right? Breaking coal’s stranglehold on our energy ecosystem. 

Before we dig a little deeper, it is useful defining what wheeling is. The practical application of wheeling involves a detailed reconciliation process on a buyer’s Eskom bill. The buyer continues to use the general mix of electrons flowing through the national grid, in our case Eskom’s. At the renewable energy generation site, a meter tracks how much electricity is generated and sent to the national grid. At the same time, a meter at the buyer's location records the electricity they pull from the grid. Every month, these two measurements are compared. The renewable energy produced during specific "time of use" periods is deducted from the Eskom electricity bill that the buyer consumed during those same periods. The buyer is credited for this power at a wholesale tariff which results in savings to the buyer as renewable energy is generally cheaper than Eskom power.

Virtual wheeling is an innovative way for South African businesses to tap into renewable energy, such as solar power, without the need for on-site installations.

Unlike traditional wheeling, virtual wheeling uses billing and metering systems to offset a buyer’s grid energy usage without the need to amend their Electricity Supply Agreements. Virtual wheeling uses a system of rebates to match the power a business uses from the national or municipal grid with the clean energy generated at a remote location, like a solar farm.

As a result, buyers continue paying their usual municipal or Eskom electricity bill, while Eskom processes a monthly cash refund in a separate Virtual Wheeling account, as opposed to a credit on a customer’s monthly bill. 

This model ensures buyers receive wheeled energy refunds from Eskom based on the amount of renewable energy purchased from Independent Power Producers (IPPs), like SOLA, that assume the risk and responsibility for designing, building, operating, and maintaining the project.

This is an exciting opportunity to reshape the energy market in South Africa, but it doesn’t come without challenges. 

First, SOLA, as a vertically-integrated renewable energy provider, has long-championed wheeling, powering private companies across the country. The business has designed, built and implemented the four largest currently operational wheeling facilities in South Africa, including delivering the country’s first virtual wheeling power purchase agreement (PPA) with Vodacom. Virtual wheeling marks an increase in energy generation choice for the market, shifting from a single-buyer, single-seller model to generation sold to multiple buyers. This opens a much larger section of the market, particularly low-voltage and municipal network users previously excluded from traditional wheeling. 

The virtual wheeling mechanism’s simplicity represents a paradigm shift. By removing the need to amend electricity supply agreements per site, virtual wheeling can shorten the sales cycle with buyers and remove a great deal of complexity from their plates. 

For each new renewable energy project, the diversification of buyers is important as it helps with the general risks one normally faces with these projects. If one buyer falters, power can shift elsewhere. In addition to this, virtual wheeling is also an innovation catalyst, opening new opportunities in data management, risk assessment and product design, potentially spawning new sub-sectors or even industries. 

Virtual wheeling often lends itself to shorter power purchase agreements, which is a double-edged sword. Only selling shorter-term contracts means generators absorb a high level of risk, which will drive up finance costs and threaten new project viability. Even in this space, long-term contracts remain vital. 

Funders need long-term certainty that the virtual wheeling mechanism will endure. Without it, committing to capacity expansion is daunting. Market confusion compounds this. The variety of options creates confusion, making it difficult for buyers to understand the timing, costs, contract terms and risks – all of which slows down adoption. Metering reliability, too, is crucial – poor data could derail credit rebates, a risk which must be very closely managed. Uncertainty over the role of traders in virtual wheeling, a concern even raised by Eskom, further muddies the waters.

However, none of these challenges are insurmountable. We must forge ahead to unlock green power flowing to consumers at scale. Looking ahead, the smart bet is on technology such as battery storage to deliver flexible, high-value energy. Furthermore, it is critical to push for longer-term power purchase agreements to secure financing. It is important to diversify buyers to mitigate risks, and collectively it is imperative to advocate for regulatory clarity. Beyond this, educating buyers to cut through market confusion is foundational, and innovating in data and risk management present compelling opportunities. 

Virtual wheeling could unlock South Africa’s renewable energy potential. It requires a blend of optimism and pragmatism. No one is under any illusion that it is a silver bullet, yet. The complexity and risks are real and deserve full attention – but the rewards are well worth pursuing. For virtual wheeling to succeed in this country, regulators must define trader roles, Eskom must ensure grid reliability, and the entire industry must commit to a stable, long-term energy framework. If we get this right, South Africa stands to take a considerable step forward towards a sustainable energy future, powered by choice, innovation, and resilience.