Vodacom, Eskom sign 'virtual wheeling' power deal in SA

Telecom operator Vodacom has signed a "virtual wheeling agreement" with South African state-owned power utility Eskom, which aims to help accelerate efforts to solve the country's energy crisis.

"Wheeling" is a process of moving privately generated power to customers across national government-owned power grids and is gaining traction in South Africa as a way to bridge energy shortfalls.

Scheduled daily power cuts by Eskom – known as load shedding – have become increasingly regular in South Africa as Eskom's electricity supply struggles to meet the country's power demands. The energy crisis has wide-ranging impacts on all businesses across the country and telecom operators have been forced to look to alternative power solutions to keep towers and other connectivity infrastructure powered during blackouts.

Vodacom South Africa spent more than R4 billion (US$214 million) since 2020 on backup power solutions and R300 million (US$16 million) in the past financial year alone on operational costs such as diesel for generators.

"Not only is this a massive financial burden, it also poses a significant challenge for the company to achieve its broader environmental ambitions," the operator said.

In addition to adding capacity to the nation's power grid, the virtual wheeling agreement – a Vodacom innovation which has been co-developed with Eskom – will also play a significant role in moving Vodacom closer to its goal of sourcing 100% of its electricity demand from renewable energy sources by 2025.

The agreement – which Vodacom called a first of its kind in South Africa – will also enable Vodacom to secure Independent Power Producers (IPPs) under the same terms and conditions that underpin its agreement with Eskom.

"Vodacom's partnership with Eskom is transformational in that our virtual wheeling solution will enable South Africa's private sector to participate in resolving the energy crisis, which continues to impact the country's economy," said Vodacom Group CEO Shameel Joosub about the deal.

"It also provides a blueprint for other South African corporates to adopt, as we pool our collective resources with the common objective of bringing an end to load shedding. The virtual wheeling solution has the potential to be fast-tracked, depending on the available licensed capacity of IPPs," he added.

Wheeling power into the grid

Traditional wheeling typically involves a one-to-one relationship between an IPP and a buyer using the national grid to convey their energy.

While the concept of traditional wheeling is fairly common practice across the world, it has certain limitations for companies with complex operating environments like Vodacom South Africa, which has over 15,000 distributed low-voltage sites across the country that are linked to 168 municipalities. Up until this point, this complexity has prevented Vodacom from accessing large scale renewable energy from IPPs but the virtual wheeling solution addresses these challenges, the telco said.

"Converting our existing fossil-fuel based electricity supplies directly with on-site renewables is limited by technical constraints that are difficult to scale. We explored a traditional wheeling option, but this had numerous limitations, which we believed could be overcome by reimagining the problem and using technology to solve the issue," explained Joosub.

The Group CEO said Vodacom had four objectives when it approached Eskom with this solution: to remove complexity; to use technology to solve legacy limitations; to access renewable energy with a sound business case; and to encourage private participation to help solve the energy crisis. After a successful pilot phase, which concluded last year, and following "rigorous testing," the newly co-developed solution is now accessible to the public and private sector on a larger scale.

(L to R) Eskom Interim Group CEO Cassim Calib, Vodacom Group CEO Shameel Joosub, and Vodacom South Africa CEO Sitho Mdlalose at the virtual wheeling agreement signing. (Source: Vodacom)

With the agreement now signed, Vodacom will be able to add more capacity to the grid without impacting Eskom's balance sheet while helping to reduce its greenhouse gas emissions.

Furthermore, it provides a roadmap for others in the private sector who want to benefit from cost saving in the process of stabilizing South Africa's grid and reducing overall emissions.

"Think of it like purchasing renewable energy certificates. It also has the added benefit of positively impacting the supply deficit currently being experienced and nurturing the growth of renewable energy production in South Africa," said Sitho Mdlalose, CEO of Vodacom South Africa.

"We estimate that this initial phase will move approximately 30% of Vodacom SA's power demand onto renewable sources, a significant step towards our 2025 renewable energy ambitions. To make up the difference, we are working hard at exploring and developing additional solutions," added Mdlalose.

Vodacom said there are already a number of parties from across industries showing commercial interest in the virtual wheeling solution enabled by Vodacom subsidiary Mezzanine.

Vodacom Group has around 185.8 million customers across South Africa, the Democratic Republic of Congo (DRC), Lesotho, Mozambique, Tanzania and Egypt, as well as Safaricom's users in Kenya and Ethiopia.

Vodacom owns a 35% shareholding in Safaricom, and Vodacom is in turn 65.1% owned by UK-based Vodafone.

*Top image source: Image by evening_tao on Freepik.

— Paula Gilbert, Editor, Connecting Africa