Allowing Companies To Produce Up To 100MW May Not Be SA’s Panacea

GOVERNMENT’S proposal to enable companies to produce up to 100 megawatts (MW) of electricity for their use and on-selling to the grid might not be a blue swan after all, as Eskom and energy experts confirmed the utility would still have to charge higher tariffs to keep its boilers going.
The utility would also have to make up for the revenue lost as South Africa’s intense energy users, the most diligent revenue generators, cut down on Eskom supplies as they utilise their own generation capacity.
“There needs to be a cost reflective, transparent tariff structure to address issues like Eskom being the supplier of last resort and wheeling across our networks. “This would be the same for similar situations on the municipal networks,” Eskom confirmed this week in response to questions from Business Report.
Early last month, President Cyril Ramaphosa announced that within 60 days, new regulations will be gazetted to exempt embedded generation projects up to 100MW from having to apply for licences from the National Energy Regulator of South Africa (Nersa).
These projects would be able to send surplus energy to the grid, subject to possible charges and connection agreements, with Eskom and municipalities to ensure regulatory compliance and system stability.
Eskom confirmed that it had well established processes to integrate new generation on the network, which involve application, network studies, if applicable construction of infrastructure, and related capital funding, grid code compliance, power purchase agreements and commissioning. “However, we do need a policy change and tariff unbundling to support the industry changes,” it said.
Energy expert Ted Blom said while the concept brought on a “warm feeling”, there were only 34 companies with the capacity to generate that much energy, and that also depended on factors such as the type of renewable resource used, the location of the generation plants as well as the tariff Eskom could not forego.
“Using renewables to generate that much power would be a waste of time: you only have three or four hours in a day to generate from solar.
“Eskom would still have to charge the companies anyway for the time it kept its boilers going while they used their own generated power,” he noted.
Eskom said it was engaging various stakeholders about changes to policy, regulation and future market requirements to enable the prospective connections.
Blom said the most feasible options for companies were still either gas, diesel or small nuclear capacity that would require about R750 million capital, because South Africa still lagged five to seven years behind industry leaders Russia in the technology.
“Philosophically, this is a good idea, but in reality it will be hard to set up solar farms in the industrial areas where most companies operate and that also brings in the question of security of the output. “Companies would be more comfortable generating within their own premises,” Blom said.
Eskom said depending on the specific location and size of the proposed plant, strengthening of infrastructure may be required and in turn the funding to support such.