The recent announcement by the City of Cape Town that it will soon be able to pay for own-generated solar power to be fed back into the local grid is good news for the city’s property market, says Brent Townes, commercial property chief operating officer for Lew Geffen Sotheby’s in Cape Town.
According to Townes, the move should see a jump in property values – specifically for the city’s commercial, industrial and retail property sectors, which have the space to become big energy providers.
On 24 January, the mayor of Cape Town, Geordin Hill-Lewis, said that the city was now exempt from the competitive bidding process needed for energy procurement. Without the exemption, the city could only procure its power from Eskom.
This resulted in an impossible administrative burden not suited to the decentralisation of buying and selling electricity. Under the exemption, however, businesses – and in time, residents – will be able to receive cash for selling their excess power into the city’s grid system. The city said it should be able to start buying power from June 2023, with residential feed-in coming in 2024.
Townes said that many property owners in the city may benefit significantly from this move as they have the budget and the roof space available to be net energy contributors to the grid.
“With the ongoing industrial expansion along the N7 corridor and up the West Coast as far as Saldanha, many new developments are substantial structures like warehousing, which perfectly lend themselves to solar power generation,” said Townes.
By taking advantage of the changes, businesses stand to benefit from their investment in their own generation while aiding other companies through a stable electricity supply.
Townes added that the capitalisation rates in Cape Town usually run lower than the national average in the property sector, and this widening of value is also likely to increase with investors who own suitable properties seeing a healthy capital appreciation.
“Property valuations should, therefore, also increase as a property with the potential for self-generated energy as well as an additional income stream will surely impact its value, and this would need to be factored into the valuation process in much the same way signage and cell phone tower income has been,” said Townes.
Townes said that the scheme is a win-win for all, not just commercial property owners but also because:
- The city benefits as it will buy in at one rate and sell at another;
- Weekend load shedding should decrease as businesses that are closed will be able to contribute substantially over that period;
- This, in turn, should also reduce the burden during the week (storage-depending).
According to Cape Town Mayor Geordin Hill-Lewis, payments to commercial customers will be possible before June 2023 and within the year for any resident with the necessary city-approved generation capacity.
As the city will also pay these customers an incentive over and above the Nersa-approved tariff, it is an attractive proposition for anyone with the capacity to join the scheme, said Townes. A caveat is that an owner with an asbestos roof would not qualify in terms of the scheme.
The progress being made in Cape Town is also likely to follow through to the rest of the country over time, with president Cyril Ramaphosa indicating that feed-in tariffs and regulations around feeding power back to the national grid will be presented in the coming weeks. businesstech