Addressing the Energy Crisis in South Africa: Episode 2

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 the City of Cape Town is dealing with the energy crisis whereafter we take a broader look at the Transformation of the Electricity Supply Industry in South Africa.

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Presented by Enpower Trading

The South African landscape and Electricity Supply Industry is changing rapidly, and as the market evolves, the incentive for municipalities to procure their own power becomes more evident.

Decarbonisation owing to climate change, is a key motivation to transition to green energy but as electricity costs accelerate and loadshedding increases, municipalities are forced to 'future-proof' their strategies in order to provide access to affordable, sustainable energy for all.

Episode Summary:

• 00:00:00 In this section, Kadri Nassiep, Executive Director for Energy at City of Cape Town shares the City of Cape Town's vision for achieving green, affordable, and sustainable energy for all is discussed. The city aims to migrate towards an energy-secure future that is dominated by private sector participants, believing that competition will be healthy for the energy market. Their plans include transitioning away from Eskom, the current unreliable and unaffordable energy supplier, and establishing an open and competitive marketplace. They also aim to become a net-zero carbon city by 2050 and promote the installation of solar arrays for consumers to contribute surplus power back to the city. The municipality's energy strategy includes stabilizing the network in response to the load shedding crisis and optimizing the utilization of resources to alleviate poverty and sustain economic growth. The ultimate goal is to transition to a more sustainable energy platform and achieve decarbonization.
• 00:05:00 In this section, Kadri Nassiep discusses the priorities and programs implemented to enable and drive change within the energy system in South Africa. He mention two different tenders, one for embedded generation and another for dispatch-able power, aimed at increasing the supply of solar installations and base load power respectively. The goal is to reduce the impact of load shedding by commissioning about 200 megawatts of village generation and 500 megawatts of dispatch-able energy projects by 2026. Kadri also mentions the focus on demand side management, specifically through a tender for load shifting, where an aggregator will be responsible for managing the reduction of load during peak periods. Additionally, the Kadri highlights the need to regulate contracts between different parties involved in the energy system, such as Eskom, third-party generators, the city, and customers. Lastly, he mentions the program to allow commercial customers to export excess power back to the grid.
• 00:10:00 In this section, Kadri Nassiep discusses the municipality's efforts to engage with and refund those who have applied for the electricity generation program. He highlights the importance of getting more generation online to ensure energy security and eliminate load shedding over time. The municipality is creating an enabling environment for the private sector through tenders and long-term contracts, such as the 20-year power purchase agreement for the embedded generation tender. He also mentions the possibility of opening up the market to the residential sector and reviewing trading platforms to facilitate engagement with the market. The decision to allow electricity wheeling is based on both regulatory specifications and the belief that consumers should have the choice to access clean and competitive power that aligns with their needs and brand. Overall, the municipality is actively working towards providing opportunities for the private sector to play a bigger role in addressing the energy crisis.
• 00:15:00 In this section, Kadri Nassiep expands on the challenges and obstacles faced in implementing clean power projects in Cape Town. One major challenge is the need for power available outside the city limits, and until the issue of "Wheeling" (transferring power from one area to another) is resolved, there is uncertainty about the availability of off-take agreements. Kadri emphasizes the importance of the role of the regulator in approving the Wheeling framework and tariffs but points out the challenges in obtaining their approval and the lack of clarity in their decisions. He also mentions the progress of the city's electricity Wheeling research pilot, which is testing the metering and billing systems and the legal and contractual frameworks. Despite challenges such as generator availability, the pilot is expected to be ready for market by the end of the year. These pilot learnings will help open up the Wheeling program to all participants and scale it beyond the pilot phase.
• 00:20:00 In this section, James Beatty, Chief Executive Officer at Enpower Trading explains how they will play a crucial role in transforming the electricity supply industry by implementing a private marketplace. Private traders will buy power from private suppliers such as IPPs or small embedded generators and sell it to private off-takers. This creates a more bankable solution for South Africa, as it allows for the construction of new power assets and helps address load shedding. Wheeling, or utilizing government infrastructure, ensures that municipalities and local businesses can access cleaner and more affordable electricity while remaining on the network. It also enables energy blending, where traders can combine solar and wind generation to deliver renewable penetration of up to 80 percent or more, benefiting customers and corporates looking to avoid carbon border adjustment mechanisms and achieve net-zero targets.
• 00:25:00 In this section, James discusses the importance of implementing solutions that meet the preferences and targets of customers in order to address the energy crisis in South Africa. He mentions that without these solutions in place, there is a risk of customers seeking alternative off-grid options and putting pressure on municipalities. The speaker emphasizes the need for municipalities to preserve their revenues and jobs by allowing these solutions to be integrated into their grids. He acknowledge that educating municipalities about these benefits has been a challenging process but highlight the progress made through partnerships and successful case studies. Finally, James explains the concept of "grid-centric" versus "energy-centric" approaches in managing municipal assets.
• 00:30:00 In this section, James discusses the distribution of power in South Africa and suggests that municipalities should adopt a framework where they lease out their networks to private operators. This model has been successful in other markets, as it allows for specialization and increased productivity. By focusing on physical infrastructure and grid strengthening, municipalities can provide a more efficient and reliable power supply. James Beatty also emphasizes that this approach would protect the municipalities' income, as they would continue to receive earnings from power supply regardless of whether a private trader operates in the network. This solution is seen as beneficial for customers and network owners alike, as it offers a competitive and cleaner energy solution.
• 00:35:00 In this section, James Beatty emphasizes the importance of municipalities in South Africa offering competitive and sustainable energy solutions to their customers. With recent regulatory changes allowing customers to explore alternative power options, it is crucial for municipalities to provide a solution that meets the customers' needs and keeps them connected to the grid. By doing so, municipalities can protect their business models, attract more industry and business, and ultimately increase their income and revenue. James believes that a focus on customer satisfaction and providing affordable and clean energy solutions is key for municipalities to thrive in the future.

About Enpower Trading
Enpower Trading is one of the first companies, to provide unique and innovative energy supply solutions for the future energy industry in South Africa.
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