South Africa has benefited for decades from an abundant and cost effective energy supply primarily sourced from coal-fired plants. Electricity generation in South Africa has been dominated by the state-owned enterprise Eskom, who owns and operates the national electricity grid. Eskom currently holds the monopoly in the energy market as it supplies about ninety five percent of South Africa’s electricity.
The current electricity shortages and load-shedding has peaked everyone’s interest in the possibility of renewable energy. South Africa has the perfect climate for solar energy to dominate the markets and relieve some of the much needed pressure on the current power grids.
If South Africa has the perfect climate and a clear need for solar electricity, why are households and businesses not jumping to install and benefit from solar electricity?
Germany has set the international standard as being in the forefront of producing solar electricity. One of the major attractions in Germany is the renewable energy feed-in tariffs (REFIT), which has been introduced through legislation. This legislation specifies that any surplus energy produced by a generator should be exported to the electricity grid and the utility is then obliged to offer a guaranteed tariff for energy exported to the grid. The REFIT law places a duty on the utility and the generator to enter into a power purchase agreement (PPA), which guarantees that the utility will purchase any excess energy produced by the generator for a fixed period of twenty years.
Energy generation from renewable energy sources in Germany has increased from 6.3 per cent in 2000 to about 31 per cent in 2014. Peak generation from combined wind and solar reached an all-time high of 74 per cent in April 2014. Germany has also reduced its co2 emissions levels from 1990 to 2014 by 27 per cent, with energy sector’s reduction of 24 per cent.
There are obvious benefits for the environment, the national grid and the consumer, so why has South Africa not followed in the footsteps of Germany?
To answer this question, we need to look at the legal frameworks in South Africa and whether it allows for a REFIT system.
Renewable Energy Feed-in tariffs
The REFIT law was introduced in South Africa through Regulatory Guidelines that were published by the National Energy Regulator of South Africa (NERSA) in 2009. After the regulatory guidelines were published, the Department of Energy (DOE) announced that REFIT did not comply with legislation regarding procurement processes due to the absence of price competition. After the abandonment of REFIT, it was announced in August 2011, by the DOE that a competitive bidding process for renewable energy would be launched, known as the Renewable Energy Independent Power Procurement Program (REIPPP).
The PPPF Act provides that a preference point system must be followed, in respect of contracts that have a Rand value above a prescribed amount,’ a maximum of 10 points may be allocated for specific goals, provided that the lowest acceptable tender scores 90 points for price.’
Small-scale embedded generators
At present the City of Cape Town has formulated guidelines for small-scale embedded generators (SSEG), this is however not a legal framework but rather a guideline set for SSEG within the City of Cape Town’s power grid. SSEG refers to power generation under 1MVA, such as PV systems or small wind turbines which are located on residential, commercial or industrial sites where electricity is also consumed
There are many barriers in the existing guidelines and legislation that discourages consumers from investing in Solar PV systems. We will discuss these barriers briefly:
Firstly, the existing legislation requires that anyone generating electricity “not for own use” must obtain a generating license from the NERSA. Clarity is still required whether feeding surplus generation back onto the utility grid and then drawing the same amount of electricity off the grid at a later stage for consumption is regarded as being “generation for own use”. In the absence of this clarity, the City of Cape Town does not require SSEG’s smaller than 1 MVA to obtain a generating license provided that, over any consecutive 12-month period, they do not feed more electricity onto the City’s grid than they purchase from the City. Consumers residing in Cape Town, but located in Eskom’s area of supply, need to apply to Eskom for consent to connect SSEG to the electrical grid.
The second barrier is that all embedded generation systems installed on the City of Cape Town grid must be signed off on commissioning by an ECSA registered professional engineer or technologist, this can be a very costly procedure for the average consumer.
The last and biggest barrier is in terms of the tariffs for SSEG within the City of Cape Town. The tariffs are determined annually by the City and are subject to approval by NERSA.
The applicable SSEG tariff is the Residential small-scale embedded generation tariff and comprises:
- A daily service charge
- An electricity consumption charge per kWh consumed
- A rate per kWh at which the City will purchase residential excess generation.
The daily service charge along with charges for consumption and credits for generated electricity fed onto the utility network will be billed monthly (as is done for other City services e.g. water and rates).
At present to feed back into the grid The City of Cape Town has a service charge of R13.03 per day, which totals up to R390.91 per month. The average generator will feedback less electricity than the monthly service charge especially during winter months when generators might not have any surplus electricity to feed back into the grid however, they will still be charged the daily service charge.
The tariffs offered to the SSEG needs to be standardised across the country, as many municipal areas are charged different tariffs for electricity purchased. One way to do this would be to pay a percentage of the tariff back to SSEG instead of paying a flat rate.
In conclusion, although we can acknowledge the numerous government interventions for promoting renewable energy in South Africa, it is apparent that challenges still exist around the guidelines and legislation for SSEG. With the current energy crisis and rolling blackouts in South Africa, more and more consumers are considering alternative options. Government has to either acknowledge the need for SSEG’s and introduce a reformed national framework or they leave embedded generators to follow the current ambiguous guidelines. This could result in SSEG’s illegally installing renewable energy systems and generating electricity for self-consumption. Thereby not feeding into the grid and alleviating current shortages in the energy industry.
It is evident that a national legislative framework will be vital to remove barriers for consumers who wish invest in renewable energy systems in South Africa. Hopefully South Africa can learn from the international benchmarks and implement legislation that can promote renewable energy production for SSEG.