Addressing the Energy Crisis in South Africa: Episode 1

It is possible to overcome the energy crisis in South Africa and build a sustainable energy future. Solutions do exist and some are leading the way. In this episode we first look at how George is dealing with the energy crisis whereafter we take a broad look at the transformation of the Electricity Supply Industry in South Africa.

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Addressing the Energy Crisis in South Africa: Episode 1
Presented by Enpower Trading

South Africa is in the midst of a landmark power crisis which has resulted in devastating short-term and long-term effects on South Africa's economy and its people.

With increased loadshedding and the rising and crippling cost of electricity, municipalities play an integral role in helping to resolve the energy crisis by providing alternative, innovative solutions to allow the South African Electricity Supply Industry and the their economies to regain lost ground and hopefully, put the country on a path to accelerated economic growth.

Featured in this episode:

• Alderman Leon Van Wyk, Executive Mayor at George Municipality.
• Bongani Mandla, Director of Electrotechnical Services at George Municipality.
• James Beatty, Chief Executive Officer at Enpower Trading.

Listen or watch to understand and explore:

• What prompted George Municipality to look at alternative energy sources as a possible solution.
• The strategy to implement these alternatives.
• 'Frameworks' George Municipality has put in place to ensure the grid is open and accessible.
• If the municipality sees increased competition as a threat.
• How the municipality plans to retain revenue or increase revenue if competition is increasing.
• The benefits an open market will have to the customer and how this impact the broader community and drive local economic development.
• The technical challenges as well as policy, legal and regulatory reforms required to make wheeling possible.
• What success will look like over the next few years in dealing with energy crisis in George.
• The role Enpower Trading will play in the transformation of the Electricity Supply Industry.
• The value the trader brings in trying to accelerate new generation capacity onto the national and municipal grids.
• The concept of Grid-centric vs. Energy Centric and the misconceptions surrounding wheeling.
• How we can ensure that municipalities don't lose money.
• How municipalities should go about 'future-proofing' their services to allow for local economic development.

Episode Summary:

• 00:00:00 In this section, George municipality in South Africa discusses their approach to addressing the energy crisis by looking at alternative energy sources. They recognised that Eskom tariffs were increasing rapidly and renewable energy costs were becoming cheaper, prompting them to mitigate the risk of escalating tariffs by generating their own electricity using renewables. Their strategy included focusing on energy efficiency, such as replacing old CFL light bulbs with energy-efficient ones, as well as implementing their own solar PV plants. They have already made progress in this regard and plan to continue expanding their efforts.
• 00:05:00 In this section, George municipality discusses their efforts to address the energy crisis in South Africa. They mention several initiatives, including replacing lights with LEDs, commissioning a solar PV plant, and procuring energy from independent power producers. The municipality has also implemented projects to improve efficiency, such as installing UPS batteries at traffic light intersections and implementing solar PV plants at water and waste treatment facilities. They highlight the progress made and the plans to gradually move away from power outages by the end of 2025. Additionally, they mention the municipality's commitment to enabling grid access and encouraging other municipalities to create frameworks for open and accessible grids.
• 00:10:00 In this section, George municipality discusses the process of implementing a use of systems agreement and developing policies to guide private sector access to the electricity grid in George municipality. They mention that there is a policy in place and that the municipality is reviewing it to increase the cap and allow for bigger players to enter the industry. They also talk about the change in legislation that enables increased generation capacity and competition in the market. When asked about the municipality's view on increased competition, they see it as an opportunity rather than a threat, as it opens up the market for investment and development in the electricity infrastructure. They emphasise the importance of the municipality's network in facilitating the movement of electricity and the need to solve complex challenges in the changing environment. Overall, they express excitement about the opportunities and acknowledge the time and effort it will take to address the various issues.
• 00:15:00 In this section, the speaker discusses the potential for inventions and new ideas in the energy sector, particularly in the context of Wheeling, which they believe has led to pioneering work and the development of specialised software. They highlight the importance of growing and opening up new markets and opportunities for entrepreneurs. The speaker also emphasises the trend of energy market liberalisation globally and its significance for South Africa's economic growth and sustainable energy future. They discuss the benefits of an open market for customers and its impact on the broader community and local economic development. Additionally, the speaker addresses the need for reliable electricity supply at affordable costs, as many businesses and households currently rely on expensive generators and diesel. They suggest that coupling solar PV with battery storage can play a crucial role in powering networks and enabling the private sector to thrive. George municipality also mentions the concept of Wheeling agreements as a means of moving electricity and describes it as a toll fee for transferring power from private generators to consumers, highlighting the potential for new intermediation in the electricity market. Lastly, they mention the technical challenges faced in implementing the Wheeling project, including the lack of historical maps and templates, and the policy, legal, and regulatory reforms required to make Wheeling possible.
• 00:20:00 In this section, the speaker discusses the challenges faced by the team in implementing the use of systems agreement in the energy sector. These challenges included legal, financial, and technical aspects, such as manual meter readings and time-consuming data capturing processes. To address these issues, the team worked on automating systems and creating software-dependent processes. They also emphasised the need for standardisation across municipalities, collaborating with the Western Cape government on a template for use of system agreements. However, the speaker acknowledges the resource constraints faced by municipalities and highlights the team's efforts to navigate these limitations. The ultimate goal is to move George off stages one to four of the energy crisis by the end of 2024, requiring bold decisions, technical solutions, regulatory compliance, environmental approvals, and funding structures.
• 00:25:00 In this section, James Beatty discusses the role of Enpower Trading in transforming the electricity supply industry in South Africa. They highlight how the trading model facilitates a private marketplace where customers have more choices for cleaner and more affordable power. They mention that Enpower Trading works with private power plants to supply electricity to private customers, including big mines, smelters, and retailers, as well as customers within municipalities. James also emphasises that this model is positive for Eskom, as it facilitates the construction of new power plants and pays a fee for the use of Eskom's infrastructure. They compare this transformation to the liberalisation of the telecommunications industry in South Africa, which resulted in numerous benefits and success.
• 00:30:00 In this section, James Beatty discusses the value that traders bring in accelerating new generation capacity on the national and municipal grids in South Africa. Traditionally, the electricity supply model in South Africa relied on programs like the REIPPP Energy program, where government-backed procurement was used to off-take power from private generators. However, this model had limitations in terms of liquidity and the ability to construct new power plants. With the introduction of traders, a new pool of demand is created by aggregating smaller buyers, which provides more liquidity in the marketplace. The traders can then facilitate the construction of power plants by providing bankable guarantees. This results in more power supply, mitigates load shedding risk, and ultimately leads to more clean and affordable power in the market. The concept of grid-centric versus energy-centric is also discussed, highlighting the importance of focusing on customer needs and providing better energy solutions.
• 00:35:00 In this section, James Beatty discusses the importance of focusing on aspects like grid reinforcement and providing flexibility on those networks. They suggest that municipalities should view the networks as infrastructure assets and monetise them efficiently. By doing so, they can supply cleaner and more affordable energy to customers, creating opportunities for the grids to generate revenue. The speaker also emphasises the need for a paradigm shift from being energy-centric to being grid-centric and believes that this shift will help mitigate the loss of revenue from customers opting for off-grid solutions. They propose a tariff structure that ensures municipalities are revenue neutral, meaning they continue to collect the same revenues even when private companies are utilising their grid. This approach aims to preserve the municipalities' market position and revenue while facilitating the delivery of cleaner and more affordable power.
• 00:40:00 In this section, the importance of municipalities remaining relevant in the future is discussed. It is suggested that municipalities should focus on customer satisfaction and provide viable and competitive options to keep customers on the grid. By facilitating the opening up of Wheeling to the marketplace, municipalities can offer clean and affordable solutions, which would incentivise customers to stay. It is also emphasised that municipalities need to work with the private marketplace to open up networks and benefit from the changes happening in the energy sector. The example of other countries like Turkey, where municipal networks were auctioned off during market liberalisation, is given to highlight the need for positive change in order to avoid bigger picture changes being imposed by external forces. Overall, a more open market would help preserve and strengthen municipal networks in South Africa.

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