The war for the territory over electricity distribution is intensifying, with at least one independent power producer (IPP) entering the ring and more are expected to follow. This is because Eskom and the municipalities are already clashing over the right to distribution.
In addition to determining who gets the revenue stream from selling electricity in a specific area, the question of who the distributor is will also be crucial when it comes to the tariffs consumers will have to pay.
Greenstone Energy has asked the energy regulator Nersa for permission to distribute the electricity it generates from its own Gas-fired power station in Linbro ParkJohannesburg, a 18 properties managed by the Adamjee Property Company (APC).
66 days without electricity
In a presentation at a public hearing on the matter held by Nersa, Greenstone said that residents of these properties have, in addition to load shedding, been subjected to 1,594 hours without electricity in the past 12 months. That’s about 66 days.
The properties include two schools, two churches, a hotel, a convention center, a mixed-use public area, three office blocks and seven residential complexes with 1,781 homes and various services.
The area is currently supplied directly by Eskom and Greenstone proposes an independent distribution network which, if approved, will see end users completely disconnect from Eskom.
Eskom opposes the application.
Greenstone has already registered its gas generation plant with Nersa in terms of the license exemption granted for plants up to 100 megawatts (MW).
It is the first facility of its kind to also apply for a distribution license, and according to Tommy Garner, president of the South African Independent Power Producers’ Association (Saippa), it won’t be the last.
Garner said he is aware of at least two similar applications in preparation.
Greenstone indicated that Adamjee Energy, part of APC, will be the sole buyer of all energy generated at the plant. It is planned to apply for a commercial license from Nersa.
According to APC’s presentation to Nersa, he struggled to keep tenants on his properties due to frequent power outages and this had an impact on his finances.
“The customer is looking for alternative options for power supply due to load shedding, infrastructure theft, infrastructure failure, rising high tariffs and capacity costs,” said Greenstone. It has considered several decentralized options, but due to economies of scale and efficiency advantages, it favors centralized power generation with a cross-linking system to distribute electricity to end users.
The 1 MW gas generation plant will eventually be increased to 10 units with a combined capacity of 5.8 MW, with 24-hour control and monitoring.
According to the Greenstone program, the commissioning of the generation plant and distribution network is expected to be completed by July.
However, Eskom is not impressed. He told Nersa that he currently supplies 220 customers in the Linbro Park area, including residential and industrial users.
It claims that this is Eskom’s licensed supply area and Nersa’s rules dictate that development at the edge of an authorized supply area is not available to a new licensee. Eskom claims to be able and in charge of distributing electricity to properties.
“It is a prohibited activity for two customer supply licenses within the same supply area,” said Eskom.
Nersa will contradict its own rules if it approves Greenstone’s application, Eskom said.
The utility also points out that having two sets of cables in the same road reserve poses safety risks.
‘Only’ 29 days without feeding
Eskom also disputes the extent of the power outages in the area. According to his records, it was “only” 29 days, in addition to the shedding of the cargo.
Garner states that by not providing adequate service to end users, Eskom violates the terms of its distribution license, but Nersa fails to enforce those terms.
He says there are technical solutions to the security problems.
According to Garner, Nersa fails to proactively adjust its rules to fit the rapidly changing electricity supply industry. He believes that the regulator does not have the right skills and capabilities to do so.
Nersa reports to the reluctant Department of Mineral Resources and Energy where political will is lacking, Garner says.
He says sustaining the current poor electricity supply using diesel generators costs residents about R5.50 per kilowatt hour (kWh). Gas production will cost between R2.50 and R3.50 per kWh and renewable energy between 70 cents and R1 per kWh.
However, the latter is intermittent and needs the support of other technologies.
Eskom against municipalities
Moneyweb recently reported that Eskom asked Nersa for an amendment to its distribution license to supply electricity to the Mooikloof Smart City, which is being developed by Balwin Properties, listed on the JSE, outside Pretoria. The city of Tshwane opposes this application because it will deprive it of the opportunity to earn approximately Rand 1.5 billion for the sale of electricity to end users in the development. Nersa has not yet decided the question.
Meanwhile, the South African Local Government Association (Salga) has asked the High Court of Pretoria for a declaratory order to confirm that municipalities have the exclusive right to distribute electricity in their areas of jurisdiction.
If successful, Eskom will have to enter into a service provision agreement with municipalities in which it supplies end users directly and municipalities will be able to charge a surcharge in addition to Eskom tariffs.
This will adversely affect mines and farmers in particular.
Eskom opposes the application. No date has been set for a hearing on the matter.
This article originally appeared on Moneyweb and has been republished with permission. Read the original article here.