Cape Town is spearheading efforts to combat the nation’s energy shortages through electricity wheeling, with Mayor Geordin Hill-Lewis announcing that 15 commercial electricity suppliers will soon begin wheeling through the City’s grid.
This development will follow the City Council’s approval, which is expected later this month. The mayoral committee recently authorised third parties to enter the electricity market and use Cape Town’s robust grid infrastructure.
‘Wheeling allows people to buy electricity from each other using existing grid infrastructure. The future is now, as Cape Town gears up for the first electron to be wheeled between our pilot project participants this July,’ explained Mayor Hill-Lewis.
‘Cape Town’s electricity landscape is rapidly liberalising off the back of our end load-shedding plans, with 700 MW of independent power under procurement, innovative Cash for Power and Power Heroes programmes, and now the sale of electricity wheeled between market participants,’ he said.
The City invited applications to participate in the wheeling pilot last year, and fifteen participants (representing 25 generators and 40 customers) have now been confirmed and are about to begin wheeling.
‘The City is getting on top of the complexity of wheeling, which requires new skills, regulatory and policy changes, billing development and bilateral agreements. Our programme will allow electricity to be wheeled over both the municipal and Eskom distribution networks in Cape Town,’ said Councillor Beverley van Reenen, mayoral committee member for energy.
Councillor van Reenen explained that sales will be governed by bilateral power purchase agreements in a market environment rather than a regulated environment because the price of the energy is set between the parties rather than by the city, Eskom or the National Energy Regulator of South Africa (NERSA).
Cape Town also has the necessary legal framework in place for wheeling, with the City’s Electricity Supply By-Law allowing for retail electricity wheeling through the network. Wheeling will take place at voltages of 11 kV and higher.
Cape Town is to source electricity from independent producers, the first South African city to do so and a sign of increased frustration with the government''s inability to reform the blackout-prone state-owned Eskom monopoly.
Geordin Hill-Lewis, the mayor of South Africa''s second-largest city, told the Financial Times that his administration wanted to set an "aggressive" pace as it procures at least 300 megawatts of renewable energy from independent producers in the next 40 months. This is a fraction of the 2,000MW used in the peak winter period.
"We have set quite a hard timeline because these are brand new deals for South Africa," Hill-Lewis said. "The way to do it is not to tiptoe through it for the next 10 years — it is to be really aggressive. And there is a whole lot of grey areas that will be resolved in being aggressive."
Rolling blackouts, known as load-shedding, have crippled South Africa''s economy in recent years. Eskom, whose ageing coal plants generates nearly all of South Africa''s power, has said it needs 4,000MW to 6,000MW of additional capacity to shore up supply. But even an "emergency" programme for the utility has faltered — the government is proceeding with only 800MW of an original 2000MW emergency procurement. Gwede Mantashe, the energy minister, opened the door to independent municipal generation in 2020, but many have been deterred by red tape.
Cape Town, which is under the control of the main opposition Democratic Alliance, is seeking to steal a march on the ruling African National Congress as frustration with the slow pace of reform builds. Hill-Lewis has called on President Cyril Ramaphosa to "back Cape Town as we procure our own power".
The Cape Town power projects would relieve pressure on the national grid but are unlikely to be enough to substantially improve supply. "This is the first important step but it is not yet the final crucial step towards reducing load-shedding in Cape Town, because you have to combine it with storage investment," Hill-Lewis said. "There will be a future procurement on storage as well."
Mantashe said this week that the government would not stand in Cape Town''s way, but analysts still believe that red tape could block municipal plans. Hill-Lewis has called for clarity from national government. Already, South Africa''s National Treasury has encouraged them to go ahead, Hill-Lewis said. "The language is quite literally, go for it — we need this to happen, we need an example of this working."
However, "some of these finance offers require government guarantees, which is obviously another way the national government could trip us up" if it refuses to issue them, Hill-Lewis said.
Some of the $8.5bn pledged at last year''s COP26 climate conference to help Africa''s biggest carbon emitter to end dependence on coal and speed up the construction of decentralised renewable projects could be directed towards funding independent power producers, analysts said.
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Eskom currently supplies less than two-thirds of its maximum available generation capacity to South Africa''s grid. The utility''s coal plants are on average more than 40 years old. Last year was the worst yet for the rolling blackouts in terms of both duration and intensity — records that, based on Eskom''s own system warnings, 2022 is likely to challenge as the coal fleet continues to deteriorate.
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