By Tiaan Hendriks, National Sales Engineer at SEM Solutions
If we want to stabilise South Africa’s economy we need fast, sustainable solutions for large power users. The department of mineral resources and energy recently announced that they are moving forward with President Cyril Ramaphosa’s directives which he set out in his SONA address earlier this month.
These include the easing of requirements for generation for own use, the procurement of emergency energy supply, and allowing municipalities to procure power directly. This has been a water shed month in the industry and these developments will definitely go a long way towards stabilising our private sector.
But is it enough?
Power crises are not unique to South Africa. However, in 2020 South Africa’s energy monopoly is uncommon by international standards. Other countries have been successfully moving away from large power monopolies for years. In fact, the unbundling of electricity sectors has been international best practice for three decades.
The good news is allowing large power users to generate power for their own use, and down the line potentially selling excess power back to the grid, is an early stage solution in the bigger picture of the unbundling of Eskom.
The unbundling of Eskom will mean a separation of generation, transmission and distribution into three distinct business units. This will allow for the separation of competitive markets (generation) from natural monopolies (transmission). The outcome being to open the market to multiple power generators, making the process cleaner, cost effective and more efficient. It also alleviates the pressure on Eskom’s generation fleet, while the transmission and distribution units can further service their mandate, allowing for better governance and opening the door for greater investment.
Wheeling as a realistic energy solution for industry. The government has to some degree brought power wheeling to the fore as a realistic, scalable solution. It’s already used successfully in a few local projects (like the Darling wind farm) and there are wheeling frameworks already in place for various municipalities across the country.
The existence of wheeling frameworks at a municiple level coupled with the potential for energy trading has radically improved the possibility of utility-scale renewable energy projects for private and municipal use.
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What is power wheeling?
Wheeling is the action of transporting energy from a generator to a remotely located end user through the use of an existing distribution or transmission system. A simple example of wheeling could be an IPP solar farm based in the Northern Cape, selling its energy to a mine in the North West Province that is delivered using Eskom’s transmission network.
Wheeling does not necessarily mean that the electrons entering the transmission network at point A will be used at point B, it’s rather the act of balancing the energy from the generator with the end user consumption while also overcoming system losses. In South Africa, wheeling can use any form of power available in our energy mix.
The National Energy Regulator (NERSA) introduced regulations around wheeling in 2011. As local municipalities have relied heavily on energy sales to produce a large portion of their income, government has had to ensure the process is highly regulated.
According to government’s Transmission Grid Code and Distribution Network Code, non-Eskom generators are entitled to equal treatment as Eskom generators. All generators (private and public) must be licensed to generate and supply the network with electricity. However the issueing of generation licences to IPPs has been a very slow and tedious process.
Fast forward nine years, to Eskom’s desperately unstable energy supply and an ailing economy, and the government is now open to deregulation.
What would South African industry need to make wheeling with renewable energy a stable, sustainable and affordable option?
To answer this question we need to explore the main requirements of a wheeling agreement. They are:
- The entities involved must be licensed by NERSA to generate and trade
- A bilateral agreement is required between the generator and consumer for the supply of energy
- A contract between the generator and the network owner is required for network services
- A supplementary contract is required between the consumer and the network owner for the adjusted electricity bill which takes the wheeled energy into account.
Wheeling enables IPPs to generate renewable energy where the resources are located (i.e. in Darling in the Western Cape) and supply end users in other locations allowing them direct access to clean, low-cost energy. It’s a highly effective decentralisation of power supply. The CSIR have simulated studies that show that the larger the footprint of your power supply (imagine multiple PV plants distributed over many square kilometres), the smoother the supply is. In other words, end users are not putting all their eggs in one basket.
Wheeling frameworks have not been a simple solution, which is why they are not yet a common solution. However, the unbundling of Eskom is highly likely to simplify things and we are now able to imagine scalable wheeling arrangements where a renewable energy IPP is delivering power directly to a large scale end user. Or even a large scale power user wheeling excess renewable energy back onto the grid for small-scale or municipality use.
Depending on what changes the government makes in terms of legislation and deregulation, all of this could be a reality which is most certainly a winning solution for both the government, big business, South Africa’s consumers and the environment.