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Green Energy and Big Business Plans

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With the increased focus on Green Energies within this country and globally I have been going over a business idea that I've had for the past year.

Not without going into to much detail in the open domain and having some other genius come along and plop the idea out from under my nose I need to turn to a much wiser and well good educated audience.

My Topic is Green Energy

There is definite potential for huge growth within the South African market for Green Energy products and even green or carbon neutral power generation. What are the major barriers to entry?

Funding / Investment
Technical savy

I've been investigating the different options and have come across one power generation option which may have more potential spin-offs other than the carbon neutral power generation that could be gained.

However to entice investors and venture capitalists I cannot approach possible funders with a golden outlook and provide figures that will be pleasing, I have to be real about this! What are the potential pit falls and implications in pursuing a project like this.

So I turn to my friends with their wealth of knowledge and experience in the worldly world.

Starting off is the key but were does one need to take the first step.

I hope to make this a series of questions and answers and update blogs on my progress.


  1. TygerBS's Avatar
    I have similar idea.
    Form what I have found out legislation is also another issue in this country.
  2. Paul's Avatar
    The biggest thing to keep in mind about green/alternate energy is that there is no silver bullet. There (IMO) won't be one thing that will replace fossil fuels (Coal and oil)

    So for example Hydrogen Cells might become viable to power and drive motor vehicles but won't neccessarily work on powering a home. A home might be powered by Solar panels and thus be off the grid or it could be powered by a Solar Panel farm or Windfarm that replaces a power station.

    To sell your idea, you need to identify the specific area that it will be used for. Whether later it is used for something else that is irrelevant.
    Updated 06-06-2012 at 01:56 PM by Paul
  3. Hubris's Avatar
    I work for Eskom's commercial department, make of that what you like. Basically you need to come to a decision about what your market is. Green Energy is a big concept. Do you want to be an IPP or do you want to ride the industrial or consumer product/service bubble? The only way we can give you meaningful feedback is if you're a little more specific. I know you're hesitant to lose your IP but some generic jargon should be sufficient for our purposes and insufficient for the purposes of IP theft. Am I reading your post right?
  4. Hubris's Avatar
    Ignore my previous comment, got a chance to read this properly. I did supplier risk profiles on all the REFIT Round 1 bids (SA's first Renewable Energy projects) since the P&SCM is to be handled by Eskom; so I know the complexities of what is required to be considered a suitable IPP bidder. Remember, SA's energy grid has not been deregulated - the regulations have only been loosened to allow for licensed IPPs in the framework of the REFIT programme. So if you have a generation idea, it may well be some years before the Energy landscape is deregulated enough to allow for more widespread involvement of IPPs, if that happens at all.
  5. Hubris's Avatar
    If you are of the opinion that complete deregulation will happen, like in AUS where households contribute to the grid, then its probably a good time to start thinking about how you'd get an IPP business off the ground. The first issue to consider is technology, the second is technical skills, the third is BBB-EE (we live in South Africa, there is no getting past this) and the final issue is cost. Cost is the driving factor and margins are slim - they are after all, subject to NERSA tarrifs. Energy not profitable? That may sound counter-intuitive to people; but Energy and especially RE require specific technology and skills that are scarce, it also involves massive sunk and operational costs. Any energy facility that outputs more that 10MW (which is basically entry level) will run well upwards of R1bn, so the scale is truly mega. It's not an easy to enter a market like that. The barriers to entry are pragmatically neigh insurmountable due to the risk investors would have to take backing a start-up. Do a Porters Five Forces analysis and you should start to see what I mean. Of course I could be totally wrong depending on exactly what your idea is and what "other" benefits it provides other than carbon neutral generation.
  6. Hubris's Avatar
    Sorry I know I'm abusing this now but I can't get the edit function to work.

    For example, of the 24 or so REFIT bidders selected, only about 5 were "South African". Of course, this means they were "start-ups" too. If you look into their history and who they are comprised of, my argument becomes more clear. Bobby Godsell (ex-Eskom CEO) is running one, others are driven by Electrical Engineers. All of these facilities/companies are JVs, supported in the main by massive diversified trading companies and investment consortia. So really, the only South African part of the operation is technical skill, SA market knowledge and of course, BBB-EE. The "business" and "investment" part is driven/handled by the multinational corporates. Also, all of the equipment, control & instrumentation and technology is foreign. Again, all of these facilities are developed by turnkey project developers (like Schneider Electric, Siemens etc.) and are operated by specialist O&M contractors with experience in the RE space. Hope that puts the RE hype in perspective a bit... Don't mean to poop on your parade dude, but that's why most SA companies are going for the products/services related to RE energy for industrial and consumer markets.
  7. Hubris's Avatar
    There are also other options, Eskom runs an Integrated Demand Management programme which basically will refund companies for energy savings they create. For example, it could be as simple as surveying a residential estate's lightbulbs and replacing them with more efficient ones. If you save more than 1MW of energy, Eskom will pay you around a million bucks for that one MW. The concept scales to pretty much anything including refurbs of aluminium smelters etc. So if your idea fits that space, its MUCH easier to get off the ground. There's no guarantee, however, that Eskom will accept your proposal or that it's IDM programme will continue indefinitely. Trust me, we're not going to have blackouts again. Some intense long-term planning has been done - the REFIT bid is not so much about creating more MW for the grid, but more about creating alternative energy sources. When Medupi and Kusile go first fire, we'll have over 1000MW from each all day every day - which pretty much eliminates the capacity gap we've been filling with bi-lateral agreements and IDM for say another 10 or so years. Believe you me, Eskom's build programme is no where near finished. It finally has the public visibility and money it needs to do these things.
  8. Paul's Avatar
    What Hubris said
  9. Stu's Avatar
    Hubris, WOW I'm so glad I asked this question and thank you for your input and information. Amazing that you helped with these sort of programs etc. I'll add another blog with slightly more information for you so I can get a good evaluation.

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