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Measuring embedded generation opportunities for municipalities

In recent years, there has been an increasing interest in small-scale embedded generation (SSEG) technology in South Africa. This interest is due to the increasing price of grid-tied electricity as well as decreasing costs in SSEG systems.

As WINDABA concluded on 09 October, industry experts deliberated about the opportunities embedded generation present for municipalities in light of the new regulation declared by the Department of Energy in Q3 2019.

In May, former minister of energy Jeff Radebe gave the National Energy Regulator of South Africa (NERSA) leave to licence 500MW for SSEG projects, sized between 1MW and 10MW, without him needing to sign it off.

Responding to a question on whether municipalities are ready to be off-takers for Independent Power Producers (IPPs), Nhlanhla Ngidi, head of energy and electricity at the South African Local Government Association (SALGA), said metros and secondary cities are ready to be offtakers of IPPs.

He said the City of Cape Town is an example of a metro that has demonstrated this readiness.

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However, Ngidi noted that the issue would be around balancing the tariffs between baseload power and intermittent power supplied by IPPs.

Regulatory environment

The SALGA official also raised a regulation dilemma relating to political stability, which affects how municipalities are governed.

He said in most cases a certain municipality would be governed by one political party for a period of five years and for another five years a diffirent political party might take over.

This change in governance often has a direct impact on the Power Purchase Agreements that municipalities would be signing with IPPs.

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In terms of bankability, the moderator of the session asked about the likelihood of IPPs signing PPAs with municipalities.

Dr Kilian Hagemann, managing director of G7 Renewable Energies, said: “It is very challenging to have a bankable PPA with municipalities.

“The challenge starts from the regulatory environment. You find that the municipality has a hard time to commit to a 20-year term contract or even 10 years because of the municipal finance management act and also they need to follow processes to get Treasury approval.”

Another point Hagemann noted is the question of creditworthiness of municipalities.

In conclusion, an audience member questioned the panel on how the grid is going to be balanced when the injection of embedded generation increases power supply.

A representative from Nersa responded to the question by pointing out that embedded generation would assist the national power utility, Eskom, to avoid loadshedding stage 1.

Stage 1 rotational loadshedding requires 1,000MW to be loadshed nation-wide.

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Babalwa Bungane
Babalwa Bungane is the content producer for ESI Africa - Clarion Events Africa. Babalwa has been writing for the publication for over five years. She also contributes to sister publications; Smart Energy International and Power Engineering International. Babalwa is a social media enthusiast.