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When an IPP, electricity trader and 20 business owners join forces …
Ambitious project in the Eastern Cape is shovel-ready but hobbled by lack of wheeling tariffs.
Investors in renewables will not be able to sell that capacity when there is no certainty regarding wheeling tariffs and the overall cost of electricity to consumers. Picture – iStock
About 20 large power users from Gqeberha have joined forces with an independent power producer (IPP) and an electricity trader in an ambitious multi-billion-rand project to protect their operations against load shedding.
National Energy Regulator of South Africa (Nersa) has however not yet approved municipal wheeling tariffs – and until there is clarity about the cost of using the distribution system to wheel the electricity from the generation plant to the end users, funding for the project cannot be finalised.
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Rural Maintenance
The developers also want certainty about the dispute between Eskom and Rural Maintenance about using energy bought from a local solar farm to supplement the Eskom supply and mitigate load shedding.
Moneyweb previously reported that Rural Maintenance, appointed by the Mafube municipality to distribute electricity in the municipal area on its behalf, was sparing residents of Frankfort in the Free State from the rotational blackouts when the amount of energy from the solar farm exceeds the load Eskom requires it to shed during load shedding.
Eskom put a stop to that, however, insisting that load shedding may only be skipped if Rural Maintenance can supply the total load or deploys additional alternative energy during load shedding.
Rural Maintenance CEO Chris Bosch tells Moneyweb the dispute is now with Nersa, which says it will deal with it within six months.
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Obstacles
David Mertens, who is coordinating the mitigation project on behalf of the Nelson Mandela Bay Business Chamber, says Eskom will have to accommodate IPPs and ensure an environment in which they can invest.
Without the assurance that they can benefit from their investment in mitigating load shedding, they won’t invest, he says.
According to Mertens none of the 20 businesses is in a position to develop an IPP project of 100-150MW on their own. Jointly, their demand however justifies it.
They have been exempted from load shedding up to Stage 4, but recently the rolling blackouts have intensified to Stage 6, with Stage 8 looming during the rest of the winter.
“We went to the market last year,” Mertens says, adding that the companies providing the key pieces of the puzzle have been appointed, but will only be named at a later stage.
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Wind and solar
The project will consist of a wind farm “with a bit of solar” in the Western Cape. The energy generated there will be wheeled through the Eskom transmission network and the Nelson Mandela Bay distribution network.
End users will have power purchase agreements (PPAs) with the trader, which will also be permitted to sell excess energy to other users.
According to Mertens the project is extremely complex because the demand profile must be matched with the supply profile, but every business has its own consumption pattern depending on their operations.
The project is shovel-ready, with all the necessary approvals and grid access, but the absence of wheeling tariffs at municipal level is a stumbling block.
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Tariff submission
It remains to be seen whether Nersa has taken to heart a submission by the Association of South African Chambers (Asac) about municipal electricity tariffs for the new financial year starting on 1 July and approved wheeling tariffs.
Following Nersa’s publication of a discussion paper about municipal tariffs for the new year, in which it was silent about wheeling, Asac told the regulator:
“Given that wheeling is becoming more and more relevant and a necessity in the electricity supply industry, it comes as a great surprise to Asac that wheeling charges have not been mentioned in the consultations document.”
A determination for rational and competitive wheeling charges is required for trading to develop in the municipal space. Investors in generation capacity will not be able to sell such capacity when there is no certainty regarding wheeling tariffs and the consequent overall cost of electricity to consumers.
Nersa has not yet published the finalised guideline and benchmark tariffs that will form the basis for the approval of municipal electricity tariffs for the next financial year.
This article originally appeared on Moneyweb and was republished with permission.
Read the original article here.
