Addressing the Energy Crisis in South Africa: Episode 4

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 Msunduzi Municipality 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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Overview:

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.

Show guests:

• Cyncol Sibiya, Msunduzi Municipality
• James Beatty, Chief Executive Officer at Enpower Trading

Episode Summary:

• 00:00:00 In this section the focus is on how municipalities in South Africa are dealing with the energy crisis and developing policies for electricity wheeling. Msunduzi Municipality is represented by Cyncol Sibiya, and Enpower Trading's James Beatty is back for a 4th time.
  Cyncol kicks off and discusses the current lack of policy in place for electricity wheeling in their municipality and the factors influencing its development. These factors include tariffs, conditions for willing transmission, passing of credits, and alignment to changing energy trends and customer needs. The municipality is working with various stakeholders, such as SALGA, Sustainable Energy Africa, Nersa, George Municipality, and Eskom, to develop the framework and policy for electricity wheeling. The municipality's vision is to achieve green, affordable, and secure energy, with a goal of eventually being supplied by a significant portion of renewable energy.
• 00:05:00 In this section Cyncol discusses the benefits of renewable energy and wheeling for both the municipality and its customers. The municipality identifies benefits such as no reduction in sales volume, creation of jobs, and potential revenue reduction through energy consumption. For customers, there is a demand for green energy to comply with market demands and remain competitive. The municipality plans to communicate its intentions to customers through a workshop and is open to exploring wheeling despite challenges, particularly the issue of large deposits required to distribute energy through the Eskom Network.
• 00:10:00 In this section Msunduzi Municipality discusses the challenges faced by municipalities in collaborating with Eskom and other entities to facilitate electricity wheeling and future-proof their energy models. The issues include the requirement of deposits from municipalities, lack of clear guidelines from Eskom, and uncertainty around long-term contracts. To address these challenges, municipalities are collaborating with stakeholders such as SALGA, National Treasury, and Sustainable Energy Africa. They are also working together with neighboring municipalities, third parties, and government departments to optimize the benefits of electricity wheeling while ensuring grid reliability and equitable distribution of resources. Cyncol emphasizes the importance of municipalities future-proofing their energy models and how empower trading can assist in this process by providing access to cleaner and more affordable energy solutions for customers.
• 00:15:00 In this section James Beatty discusses the increasing pressure on municipalities in South Africa to decarbonize and provide cleaner, more affordable energy solutions to their customers. He highlights the role of the Wheeling product in future-proofing municipalities and keeping customers connected to the grid. To fast-track this future-proofing, James identifies the challenges of understanding the benefits of Wheeling for local markets, technological capacitation, and the need for regulatory frameworks and policies. He emphasizes that progress is being made, but the next hurdle is technological capacitation of municipalities to rapidly roll out and scale up Wheeling once the regulatory framework has caught up.
• 00:20:00 In this section Mr Beatty discusses the considerations for private sector businesses when engaging with municipalities for electricity trading in South Africa. He emphasizes the importance of political stability and bankability of municipalities, as well as their technological capacitation. James explains that these elements are crucial for the successful delivery of the Wheeling product, which aggregates and blends cleaner, greener energy from various sources and delivers it to different parts of the country. The benefits of electricity trading include the aggregation and blending of energy, hedging services for producers and consumers, and balancing services to maintain grid stability as the market evolves.
• 00:25:00 In this section James discusses the benefits of trading solutions for customers and Enpower Trading's differentiators. Traders offer short-term pricing contracts, allowing customers to buy power more tailored to their needs while managing risks internally. Enpower Trading, born from a large IPP company in South Africa, has natural access to clean, affordable generation and decades of commodities trading experience, making it a strong competitor. Wheeling and trading enable municipalities to leverage their grids and increase revenue by allowing customers to access cleaner, more affordable electricity and stay on the network, preserving jobs and generating additional revenue from power-related services. This service is important as electricity revenues can account for over 25% of municipalities' receivables. By increasing electricity supply on the network, municipalities can potentially see an incremental uplift in revenue.
• 00:30:00 In this section James discusses the benefits of allowing private sector involvement in municipal grids. According to his perspective, increased revenues for municipalities would lead to job creation and grid reinforcement. The private sector, specializing in their field, could operate on the grid while municipalities redirect funds towards traditional infrastructure services. This arrangement, he believes, presents a win-win solution for all stakeholders, facilitating economic development in these networks. Despite ongoing debates in the market, he views this as a natural private-public partnership opportunity.

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