With ongoing electricity supply constraints resulting in many businesses not being able to operate, having alternative power supply is no longer a nice-to-have for landlords.
Landlords have installed generators and solar panels to power their buildings so their tenants can keep operating, and small and medium enterprises (SMEs) are most affected by extended load-shedding periods.
“The electricity crisis will not be resolved quickly and as landlords it is our responsibility to provide uninterrupted power supply to ensure our tenants can continue their operations,” Rael Levitt, CEO of Inospace, told Business Day.
Inospace is SA’s largest logistics provider of smaller spaces to SMEs and new costs such as paying towards alternative energy supply have a negative effect on tenant base.
Levitt said their lease agreements do not guarantee power supply. Inospace passes the direct cost of diesel to mid-sized and larger tenants but not the capital cost of the generators themselves. Larger businesses are happy to pay the rising diesel costs, but smaller businesses are finding the additional cost burdensome.
“Our micro-units have all-inclusive rentals, and we cannot charge for additional utilities,” he said.
PC Potgieter, sustainability manager for Fortress Reit, said if tenants cannot trade during load-shedding, this affects their turnovers resulting in overall increased occupancy costs.
We’ve significantly increased our investments into renewable forms of energy, mainly solar photovoltaic (PV) plants on roof space in our warehouses helping us reduce reliance on the national grid
— Irshaad Wadvalla, ESG officer at Equites Property Fund
“In future, tenants may push back on rentals where there is no emergency power, as it will affect their ability to achieve their budgeted turnovers and profitability, which determines their rent affordability,” said Potgieter.
Potgieter said load-shedding also negatively affects their carbon footprint. In 2021, the company’s overall carbon footprint decreased 14% from 2020. Increased blackouts resulting in more reliance on diesel has pushed up carbon emissions by 29%.
Fortress is a JSE-listed real estate investment trust (Reit) specialising in the logistics and retail property sectors.
Irshaad Wadvalla, ESG officer at Equites Property Fund, said the company is focused on ensuring its properties are equipped with guaranteed power supply.
“We’ve significantly increased our investments into renewable forms of energy, mainly solar photovoltaic (PV) plants on roof space in our warehouses helping us reduce reliance on the national grid and contributing to a lower carbon footprint,” said Wadvalla.
He said Equites has installed generators as a backup option, and continues to explore lower emission alternatives such as battery technology to replace diesel-powered generators in future. A litre of diesel generates 2.701kg carbon dioxide equivalent, higher than the carbon emitted from 1kWh of electricity generated by Eskom.
Equites specialises in providing prime industrial space in SA and the UK to multinationals that are prepared to sign leases for up to 20 years.
Globally, as a result of the transition to a greener economy and the increased awareness of sustainable buildings, tenants are willing to pay a premium for energy and water efficient buildings. These buildings contribute to lower utility costs for tenants and a reduction in carbon emissions.
Wadvalla said the inclusion of solar photovoltaic (PV) panels as an alternative energy supply is incorporated into the baseline design specification on new buildings and tenants benefit at no additional cost.
Potgieter said for the period ending June 2021, Fortress Reit has spent R71m on its solar programme with a further estimated expenditure of R87m committed to buildings.
Fortress has installed eight new solar PV plants, with a further 10 at various stages of procurement or feasibility assessment. The company generated 3,063 megawatt hours from its existing solar PV plants during the second half of the 2021 financial year, compared with 1,887MWh for the corresponding period in 2020.
Installed plant capacity across the portfolio was 4,735 megawatt peak as at June 30 2021, up from 2,808MWp as at June 30 2020.
Costs to install and operate generators, as well as solar is high, but luckily for Inospace, whose tenants are mostly small, logistics are not huge electricity consumers. However, its manufacturing and small food delivery type tenants need backup power.
Capital costs
“In our mixed-use logistics parks where we cater for types of tenants, we have installed large costly generators to cope with energy demand, but, the unexpected capital costs will slow down Inospace’s ambitious growth plans,” said Levitt.
Wadvalla said Equites gets 100% of the energy for the Johannesburg office from renewable energy generated at the Sere Wind Farm through the Eskom pilot programme, and will continue to partake in similar projects to achieve sustainability goals.
Equites and Inospace are participants in the City of Cape Town electricity wheeling pilot project which will enable the wheeling of electricity to 11kV (medium voltage) customers wanting to buy energy from third-party suppliers that source the electricity from generators connected to Eskom or city electricity grids.
Wheeling is the transportation of electricity from a generator to a remotely located user through existing distribution systems or multiple networks such as through Eskom to a municipality. The pilot project takes place over a period of 12 months ending with the full implementation of the wheeling facility.
Wadvalla said the wheeling pilot programmes by the municipalities and Eskom signals an opportunity for independent power producers to alleviate the capacity constraints that the national grid is experiencing.
“It also provides a pathway for constructive public private partnerships to support economic growth, sustain job creation, and contribute to SA meeting its nationally determined contribution to mitigate against climate change,” said Wadvalla.
Levitt said Inospace will be wheeling electricity from its solar panels to the city’s [Cape Town] electricity grids and onto tenants in other Inospace parks.
“With over 500,000m2 of roof space across our portfolio, we accommodate large scale solar panels, enabling Inospace to pass solar-driven electricity discounts to tenants,” said Levitt.
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