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The National Treasury has granted the City of Cape Town an exemption from competitive bidding or tendering processes for the buying of electricity from companies or households.
The exemption was needed because South Africa’s public finance legislation did not foresee energy procurement from independent power producers, only from State-owned power utility Eskom.
“The result is an insurmountable admin burden not suited to the dynamic, decentralised process of buying and selling electricity that is wheeled into the grid by a great number of small-scale generators all of whom are being paid at the same price, and at a cost that is cheaper than Eskom,” says Cape Town mayor Geordin Hill-Lewis.
“The City [of Cape Town] can now pay cash for power fed into the local electricity grid. Businesses and, in time residents, will receive cash for selling their excess power into Cape Town’s grid. This is possible after the National Treasury exempted the city from competitive bidding processes not designed for the coming energy revolution.
“The sale of excess power by homes and businesses with small-scale embedded generation (SSEG), among other generation solutions, will contribute to Cape Town’s goal of achieving four stages of loadshedding protection within three years,” he adds.
The city says its power purchases will be fair, equitable, transparent and cost-effective in compliance with Section 217 of the Constitution.
“The city, further, does not envisage entering into further contracts with feed-in customers and is instead finalising a pro forma standard agreement,” Hill-Lewis says.
The city plans to immediately roll out the paying of cash for power. Payments to commercial customers will be possible before June and within the year for any Capetonian, with the necessary City-approved generation capacity. This has made it more attractive for citizens who are considering investing in a solar system.
“We aim to buy electricity from as many city-supplied customers as are willing to sell to us. These customers may now produce as much power as they can from their approved systems and feed it into Cape Town’s grid. Under this plan, we will also pay these customers an incentive over and above the National Energy Regulator of South Africa- (Nersa-) approved tariff, as they help us turn the corner on loadshedding.”
Further, as the City of Cape Town’s network of home power producers grows, so will its energy security. This has the potential to be a powerful force to end loadshedding over time, together with its independent power producer procurement programme, and power heroes programme incentives for voluntary energy savings, says Hill-Lewis.
Nersa has approved a rate of 78.98c/kWh for this financial year for Cape Town to pay power sellers. The city also adds a 25c/kWh incentive tariff on top of this.
“We are focused on ending loadshedding over time, and the city has steadily been laying the groundwork to enable payment for excess small-scale power, including by dropping a policy requirement for power sellers to be net consumers of energy, which previously only allowed for municipal bills to be credited for excess power instead of actual cash payments.
Further, the groundwork includes a wheeling trial for commercial and industrial users which is helping to iron out technical and billing issues ahead of mass-scale rollout, as well allocating R15-million of the City of Cape Town’s budget to pay for energy generated by small-scale embedded generators for the remainder of this financial year until June.
SSEG and wheeling customers that want to feed energy into the grid need to have their system approved and have an advanced metering infrastructure meter installed by the City of Cape Town. This is a bidirectional meter that allows accurate reporting of the amounts of energy consumed and generated.
“We know this meter is still too costly for many, and we are working on finding an alternative option of comparable quality and reliability. Customers who want to upgrade their systems to make use of this existing development need to have the upgrade approved by the city,” Hill-Lewis adds.
