Changing the rules of power

Dialogue is playing a central role in the development of renewable energy solutions for the KwaDukuza Local Municipality.

Several developments in the local and national regulatory environment are rapidly changing the rules around how electricity will be generated and distributed in the KwaDukuza Local Municipality in the future.

This emerged at the second Synergy for Energy seminar held by the Vuthela iLembe LED Support Programme to consider ways of securing a reliable electricity supply for the KwaDukuza Local Municipality.

Locally, the municipality has recently adopted an Energy Policy and regulations are being drafted to manage the implementation of alternative energy sources to supplement the failing Eskom supply.

Nationally, the Electricity Regulation Amendment Bill 2023, which seeks to create a competitive multi-market electricity industry, has been formally introduced into parliament. The Bill is expected to diversify ways of buying and selling electricity by introducing competition and decreasing electricity costs. 

Meanwhile, the process of receiving public comments on the South African Renewable Energy Masterplan (SAREM) has been completed. The plan is expected to be finalised by November this year and implementation will begin immediately.

Engagement and collaboration

These major regulatory developments will require public and private stakeholders to continue engaging and collaborating on plans to produce alternative energy supplies.

The KwaDukuza Local Municipality Energy Office, which falls under the Office of the Municipal Manager’s Special Projects Directorate, developed the Energy Policy which has now been approved by the Council, confirmed Chimene Pereira, Director: Special Projects, who managed the process.

“The policy was adopted with the understanding that it may be amended from time to time,” said Pereira.

The municipality is now developing a bylaw for embedded generators and considering whether tariffs should be applied. The next step will be to conduct a feasibility study around the best approach for KwaDukuza related to the cost of supply and its current infrastructure. 

The policy will have several implications for the private sector and consumers of electricity in the municipality, including safety precautions for installations.

“The cost-related implications are not fully understood,” said Chimene. “There is a potential for revenue losses and tariffs must still be determined. We are not entirely sure what the financial implication for local government will be under the new policy.”

The policy will allow the municipality to explore an energy mix for its own generation capacity, and will change the role of Eskom in the energy value chain if demand is reduced.

The new policy will change the way that electricity is generated and procured, with the Council playing a greater facilitation role in the process. 

Generation strategies

Generation strategies will include embedded power systems like installing rooftop solar PV systems on municipal buildings with or without feeding into the municipal grid. This could be financed through the municipality’s balance sheet, debt or grants.

It may also include building stand-alone power plants like large wind farms or solar parks on municipal land with the possibility of selling surplus power to Eskom. This could be financed through debt or grants, public-private partnerships, operational agreements or special purpose vehicles with other municipalities and partners.

The policy will also pave the way for municipalities to procure energy from embedded generators based on feed-in tariffs, net metering and net billing principles.

Municipalities will play a facilitation role by buying electricity from local producers and selling it to willing customers. They may also store excess electricity and sell it when the demand is high, and provide electricity services like installations and maintenance for a fee.

Commenting on aspects of the policy, Sustainable Energy Africa Senior Project Coordinator Sinawo Sigalelana said it was progressive and promoted the uptake of embedded generation for KwaDukuza. The policy clearly articulated the requirements for connecting Small-Scale Embedded Generators (SSEGs) and states that customers can be compensated for feeding back to the grid once a NERSA approved SSEG tariff is in place.

However, the policy lacked guidance on embedded generation that was not small scale and standards were not explicit.

Sigalelana noted that all embedded generation must adhere to the South African Grid Code, which specifies standards and connection specifications.

The status of existing systems with non-compliant inverters and meters and the process for electricity wheeling (buying and selling) was not clear.

Municipal power procurement

On the national front, the Department of Mineral Resources and Energy’s (DMRE) Amended Regulations on New Generation Capacity paves the way for municipalities to procure their own power. 

The DMRE has clarified the requirements for municipalities to develop or buy power from IPPs. Municipalities will be required to apply to the Minister and applications must be supported by a feasibility study approved by municipal council, with evidence of alignment with the IDP and proof of compliance with the Municipal Finances Management Act (MFMA).

In another major national development, the Electricity Regulation Amendment (ERA) Bill has now been formally introduced into parliament. This Bill seeks to transform the electricity market by creating a competitive multi-market electricity supply industry managed by a transmission system operator. 

The ERA Amendment Bill will allow market participants to trade with each other, registered generators to enter into private power purchase agreements (PPAs) with direct customers, and generators to form PPAs with transmission system operators.

Transmission system operators will purchase electricity from Eskom and independent power producers.

Establishing an independent transmission company is part of the process of unbundling Eskom into separate generation, distribution and transmission entities.

This plan was first announced by President Cyril Ramaphosa in 2019. 

The poor performance of Eskom’s generation unit is the cause of national loadshedding. It is expected that unbundling Eskom will lead to more competitive generation and allow dedicated transmission and distribution companies to expand their operations.

SA Renewable Energy Masterplan

Meanwhile, it has been announced that the process of receiving public comments on the SAREM has been completed.

The master plan was developed by the Department of Mineral Resources and Energy (DMRE) in collaboration with industry experts and other government departments.

SAREM aims to support market demand for renewable energy, drive industrial development, foster inclusive development and build local capabilities in the renewable energy sector. The intention is to capitalise on the growing renewable energy and battery storage market, and to use the opportunity for inclusive industrial development.

The 18-month long process of developing involved labour unions, industry players, and community representatives who came together to create a social compact that supports national objectives and promotes the development of renewable energy value chains.

With the expected approval of national legislation around renewable energy, the completion of SAREM, and new local municipal regulations about to be promulgated, the scene is set for an imminent surge in energy developments within the Kwadukuza area.

Pic: Richard Clacey, Programme Manager of Vuthela, and Gerhard Pretorius, Deputy Head of SECO, South Africa