Vodacom hopes a new agreement with power utility Eskom will help to increase electricity on the national grid while at the same pushing its goal to source its energy from renewable sources.
Ultimately, SA’s largest mobile operator is looking to put in place measures that will help to reduce incidents of load-shedding and power uncertainty for its operations, which have bled billions of rand due to the energy crisis.
This week, Vodacom signed a virtual wheeling agreement with Eskom that it says “will help accelerate efforts to solve the country’s energy crisis”.
According to Eskom, wheeling “is the delivery of energy from a generator to an end-user located in another area through the use of existing distribution or transmission networks”. This may also be across multiple different distribution networks, such as through Eskom to a municipality.
A simple example of wheeling is a solar farm based in the Northern Cape selling its energy to a company in Gauteng. The electricity is delivered using Eskom’s transmission network and the municipal distribution network.
“The challenge for us that we needed to solve together with Eskom was that we would need to generate energy in one place and somehow ensure it gets to 15,000 places across the country, which is our base station sites,” Sitho Mdlalose, CEO of Vodacom SA, told Business Day.
In the case of Vodacom, it means the group can have power generated in one part of the country, the Karoo for example, and fed into the national grid, and receive credits for that generation from Eskom. Using these credits, Eskom can then deliver an equivalent amount of power to Vodacom sites in other parts of the country.
Mobile operators — burdened by heavy costs to keep their network running during power outages — have been struggling as Eskom’s extended power cuts sometimes deplete the batteries of their cellphone towers, leading to customers losing their signal.
With persistent load-shedding and a rise in vandalism and theft aggravating SA’s fragile economic recovery and affecting service delivery, operators have had to take on extra costs, creeping into the billions to reduce the impact of load-shedding.
“Ultimately what we’ve worked on with Eskom, together with one of our subsidiaries Mezzanine, has been to develop a platform for this,” Mdlalose said.
“We’ve worked on and constructed this with Eskom over time to get the right construct and framework that can be used by everyone. This is not a Vodacom thing. This opens it up for all the businesses across SA.
“So that enables us now to go and sign up independent power producers and get into long-term agreements with them. They build the solar plants wind plants, they generate the power, they wheel it back into Eskom and through that process we then get credits.”
In addition to adding capacity to the power grid, Vodacom says the new deal will play a significant role in moving it closer to its goal of sourcing 100% of its electricity demand from renewable energy by 2025.
In the financial year to March 2023, the Vodafone subsidiary spent R16.5bn in capital expenditure, building more than 40,000 network sites across its operations. Of that, R11.2bn was spent in SA. Part of this cost is now being taken up by backup power systems to cope with the effects of load-shedding. Since 2020, the operator has spent R4bn addressing what it terms “energy resilience”.
As the wheeling and other efforts around renewable energy get built up, Mdlalose says the mobile operator will continue to plough money in to keep its network sites functioning during power outages.
In addition to power, the group continues to put money into its network, the primary use for its capital.
Earlier in the week, Vodacom’s Western Cape unit said it plans to invest R570m in this financial year in the region’s network. Of this, R470m is earmarked “to improve the quality, capacity and reach of the broadband network infrastructure in urban and rural areas”, well as expansion of 5G.
The remaining R100m will be spent on energy projects for uninterrupted connectivity during power outages.
For the current financial year, the group has committed to investing 13% to 14.5% of revenue on capital expenditure.
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