Good news about Johann Rupert-backed electricity exchange by Jan Vermeulen

The Energy Exchange of Southern Africa (EXSA) has been actively trading since June 2023, Remgro has told MyBroadband.

Rand Merchant Bank (RMB) announced last year that it had acquired a 25% stake in Ubiquity Energy from Johann Rupert’s Remgro for an undisclosed sum.

Ubiquity Energy is the holding company for EXSA and holds a 51% stake in Enerweb.

At the time, RMB infrastructure transactor Sindisiwe Mosoeu said their main interest was EXSA.

Mosoeu also said it would start selling electricity in June 2023. Remgro has now confirmed that this has happened.

A Remgro spokesperson told MyBroadband that the South African energy trading industry has evolved into a hotbed of activity since the RMB acquisition.

“Not only has the industry seen the entrance of new players, it has also seen significant progress and development within the regulatory space, enabling a plethora of trading activity,” it said.

The company said EXSA has been wheeling renewable energy to several customers within Remgro’s portfolio.

“Through the initial focus on customers within the Remgro Group of companies, EXSA was able to limit its credit risk,” it explained.

“It also enabled these companies to reach net zero targets on an expedited basis.”

Since then, the focus has shifted to third-party customers outside of the Remgro Group. A significant number of Power Purchase Agreements have been signed, further bolstering the company’s customer pipeline.

Last year, Mosoeu said the exchange had a pipeline of over 100MW of electricity, which would be delivered over the next year or two.

Probed about the extent of its generation pipeline and list of customers, EXSA declined to comment.

EXSA said it would rather surprise the market to the upside at a suitable time.

“Lack of supply, particularly wind, is currently the biggest inhibitor to our business, but not unique to the industry,” it said.

“While the industry is still within its nascent stages, EXSA has been able to successfully execute on trades via its trading platform,” Remgro stated.

“Albeit smaller quantities, it has provided invaluable insights into operational requirements of trading within the South African context.”

Remgro explained that the risk profile of the trader or aggregator, through holding a diversified portfolio of both generators and customers, is different to a one-to-one or one-to-many trade, where customers take the risk of exposure to a single Independent Power Producer.

“We believe that in time, IPPs and their funders will acknowledge the favourable risk profile of a trader, and that funding requirements and guarantees should become less onerous,” said Remgro.

“We are starting to see this develop within the trading industry.”

Remgro said the primary constraints currently being experienced by the industry include the lack of immediately accessible renewable supply, municipal customer access, extensive regulatory approval processes, and funding requirements.

Regulatory uncertainty is also stunting larger investment into projects, with the expectation of future tariff structure changes and curtailment weighing on the industry.

Lack of skills, industry knowledge, and experience is another challenge that must be solved to drive growth within the trading industry.

Remgro said the next frontier for EXSA is the inclusion of battery storage solutions.

When asked about competition in the industry, Remgro welcomed it.

“Having many players is good for the trading industry as a whole, and a monopoly by a few large players would be to the detriment of all,” it said.

Remgro’s entrance into the energy market started many years ago when the company realised that energy security poses a threat to its investee companies.

It invested in companies specialising in photovoltaic technologies and installations to provide onsite backup power to companies like Mediclinic, Distell and RCL Foods.

As Remgro started to solve its energy security problems, another problem emerged — large and unpredictable Eskom price increases.

Companies were struggling to cope with the lack of electricity pricing security, and Remgro’s next task was to create pricing certainty.

It also realised that there was strong demand from companies outside the Remgro stable who struggle with energy pricing and supply security.

It started working on an energy trading platform to bring together green energy producers and electricity consumers.

Through the exchange, energy consumers get access to a diverse supply of reliable, cost-effective renewable energy. They can also benefit from green energy initiatives.

The great demand from its own investee companies has given EXSA a large client base from the start.

Mediclinic, for example, announced in September 2021 that it has entered into a £110 million agreement with EXSA to procure renewable electricity.

Earth & Wire, in turn, signed a 12-year power purchase agreement with the energy exchange to provide 5MW of solar energy to Mediclinic and another large customer.

source:Good news about Johann Rupert-backed electricity exchange (mybroadband.co.za)