News24 | OPINION | Alternative energy may, ironically, save fuel stations

Installing renewable energy systems and upgrading a fuel station to offer alternative energy charging facilities and the supplementary services to go with them will undoubtedly future-proof a fuel retailer’s business, write Karen Keylock and Sashen Singh.

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The global economic slowdown, an unprecedented move towards working from home, and continued acceleration in migration to online shopping channels have reduced mobility, resulting in expectations of a 9.2% decline in global fuel retail values between 2019 and 2030.

While this may sound like bad news for the 6 000 fuel stations, major oil companies and independent dealers in South Africa, demand for electric vehicle (EV) charging is expected to increase by 36% from 2019 to 2030 – and fuel retailers are well-placed to take advantage of this opportunity.

South Africa is likely to see a slower transition away from combustion engines, but developments abroad – for example the European Union’s (EU’s) ban on new petrol and diesel vehicle sales from 2035 – will substantially impact the cars available to export from South Africa.

The EU is advancing climate action to mitigate carbon emissions on its continent as part of the Paris Agreement’s measures to limit global warming and minimise environmental impacts from all aspects of its economy.

In line with this, the Carbon Border Adjustment Mechanism (CBAM) environmental tariffs are being phased in from next year in the EU. Both developments are already compelling South African car manufacturers to upgrade their production lines to manufacture EVs for export. Manufacturing EVs locally will, in time, achieve the necessary economies of scale to make these cars competitively priced for the South African market.

READ | Carbon border taxes put South Africa exports at risk — study

‘Mobility’ stations set to replace fuel stations

EV charging facilities certainly offer great potential for fuel retailers. It’s a natural progression for them, as it uses their experience and already-expanding forecourt product offerings while providing the highest potential margin. And, with less than a hundred of the more than 5 000 fuel stations currently offering EV charging facilities in South Africa, the opportunity is wide open for fuel retailers to seize.

A recent study on the future of fuel stations in South Africa by commercial real estate company Cushman & Wakefield | Broll indicates that fuel stations will evolve into “mobility” stations within the next five to 15 years.

These will offer a wider range of energy sources (electricity, natural gas, petrol, diesel, biofuels, and green hydrogen) and, because many of these options require more time for “refuelling”, other services such as pharmacies, laundry services, gyms, and co-working spaces will become more common at these sites.

Operators will then become less reliant on income from fuel, as it will account for just 20% of the forecourt’s revenue, compared to the 90% it contributed historically.

The considerable investments being made by oil companies in EV charging and green hydrogen bode well for transitioning fuel retailers. Sasol, for example, is advancing several projects in green hydrogen – a sustainable fuel alternative to decarbonise South Africa’s heavy-duty transport sector. Green hydrogen boasts a high energy density, allowing vehicles to travel long distances on a single tank and refuel quickly, hence Sasol’s plans to supply green hydrogen, potentially in collaboration with existing fuel stations, to vehicles such as long-haul trucks, buses and mining fleets.

Unlike black, brown or grey hydrogen (produced using coal or gas), green hydrogen is produced solely from water, by using electrical currents derived from renewable energy sources such as wind or solar farms. South Africa is ideally located to use its resources for green hydrogen production, exports, and even the refuelling of hydrogen-powered ships.

READ | PIC leads a R660 million pledge for green hydrogen

Powering up with alternative energy builds business and climate resilience

Load shedding, which has made an unwelcome comeback, heavily impacts the fuel retail sector from both a climate and business resilience perspective.

According to the South African Petroleum Retailers’ Association (SAPRA), load shedding puts fuel retailers under pressure because diesel and generator-related costs are coming out of the bottom line of these operators. Fuel retailers are prepared to make the capital investment in a solar solution but are stuck between a rock and a hard place because of agreements with site owners.

Fuel stations are, in fact, ideally suited for solar PV installations because they have sizeable areas of roof space over their buildings and forecourts, which are generally located in full sun.

They also consume a great deal of electricity, with most sites operating 24/7, including 24-hour retail stores. In addition, their energy needs will continue to rise, particularly if you consider the potential energy consumption of the EV charging stations that will become more and more prevalent in South Africa.

Pivoting is a lifesaver, but it costs money

The outlook for fuel stations is more promising than one may expect. Installing renewable energy systems and upgrading a site to offer alternative energy charging facilities and the supplementary services to go with them will undoubtedly future-proof a fuel retailer’s business. But these things cost money, which ultimately affects the bottom line.

To support their clients in transitioning their businesses, some banks like Nedbank have developed alternative energy solutions that use the value of the infrastructure itself. This helps fuel retailers tailor repayments to their unique business cycle, making the purchase of the infrastructure more affordable.

Karen Keylock is national retail services manager at Nedbank Commercial Banking and Sashen Singh is senior manager of sustainability at Nedbank Commercial Banking.

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