Eskom Tariffs

Eskom’s tariff restructure not all bad, says energy solutions provider

Eskom’s tariff restructure not all bad, says energy solutions provider

23RD FEBRUARY 2021

BY: MARLENY ARNOLDI
CREAMER MEDIA ONLINE WRITER

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Eskom’s recently tabled tariff restructure programme, which proposes changes such as charging consumers a fixed connection fee, may indeed improve the landscape for renewable energy in South Africa, says Energy Partners Intelligence business development head Tygue Theron.

He tells Engineering News that while there has been a fair amount of criticism levelled against the State-owned utility’s proposed plan, as well as recent developments that are expected to result in a 15.63% increase in tariffs from April 1, there is another way to look at the situation.

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“One of the biggest points of contention is the proposal that users are charged a split tariff, consisting of a volumetric usage cost and a fixed daily connection cost.

“While consumers who rely on solar power are saying that this will result in a longer period before they get a return on their investment, therefore lowering the feasibility of investing in a solar energy system, it could actually be better for renewable energy in South Africa in the long run,” Theron notes.

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He explains that Eskom is, in fact, coming out in support of greater renewable energy adoption in the country, while also acknowledging that this will expose the utility to additional costs.

“I believe one of the biggest developments for renewable energy adoption locally, was when Eskom CEO André De Ruyter joined the call for lifting the generation licensing cap on renewable systems.

“Simultaneously, we have to recognise that surplus renewable energy will have to be stored and distributed through the national grid, and that Eskom’s coal-fired generation facilities still have to be able to provide power during the early morning and evening hours. These are maintenance and operational costs that the utility would not be able recover under the current tariff model.”

Ultimately, Theron points out that the proposed tariff restructure could indeed lead to greater stability for South Africa’s power grid. “We have run quite a few models so far and we have found that this change, as well as the other proposed tariff changes, will not have too much of an effect on businesses.

“While it may increase costs for home users, it would help us get closer to our renewable energy goals while relieving some pressure on businesses in the country.”

Theron adds that the tariff restructuring will yield lower costs for energy intensive households and higher costs for less energy intensive households, mainly owing to the proposed removal of incline block tariffs.

Households that make use of alternative generation, such as solar photovoltaic (PV), will be paying half of their bill in the form of fixed charges, which cannot be offset by the installation.

If the tariff restructuring had to happen today, the financial feasibility of solar generation will essentially halve, potentially increasing the payback period from the current six to ten years.

However, the expected year-on-year tariff increases, paired with the declining costs of solar PV hardware, suggest that favourable payback periods of three to five years can be achieved as soon as 2025/26.

In response to whether Eskom truly supports greater renewable energy adoption in the country, Theron says Eskom has been supporting the lifting of the 1 MW generation licence cap and has been traying to get its tariffs to be cost reflective and sustainable, in preparation for the move to renewables.

Moreover, Theron says the combined 14 GW generating capacity that the Renewable Energy Independent Power Producer Procurement Programme and the Risk Mitigation Independent Power Producer Procurement Programme will bring is a substantial portion of the total generation capacity of Eskom.

This means that this portion will replace the highly inefficient portion of sales from Eskom, which can mitigate future losses, which can aid Eskom’s financial standing.

However, the planned decommissioning of 11 GW of coal capacity will necessitate the introduction of other capacities as soon as possible.

OPTIONS FOR BUSINESSES

Theron says Energy Partners Intelligence, which is a subsidiary of solar energy, refrigeration and steam services provider Energy Partners, typically sees 30% of its clients not being on the optimal Eskom/municipal tariff structure. In switching to the optimal tariff, it can save businesses between 10% and 30% of annual costs, without the need for large amounts of capital.

Energy Partners Intelligence is able to simulate clients’ energy data on multiple tariff options to find the cheapest option.

Further, there is the option of metering, considering that dysfunctional municipalities often overcharge users. Metering allows businesses to verify billing and mitigate against over-billings. Meter data can also provide insights into behavioural energy waste.

“We find that if clients do not monitor their energy consumption, there is likely a rate of between 5% and 15% of overconsumption occurring,” says Theron.

He also suggests that businesses consider energy management programmes to save on costs. These programmes are designed to reveal opportunities to lower cost and consumption, typically ensuring efficiency, power quality, scheduling and control.

Theron points out that energy management programmes often save clients as much as 40% on annual costs.

Moreover, there are multiple technologies that are approaching financial feasibility, such as battery storage. The service provider predicts that this technology will become feasible for the average business as soon as 2025.

This will allow a consumer to offset expensive peak energy charges and maximum demand charges, as well as allow a consumer to store the energy generated by solar PV, meaning that more energy can be used from alternative generation as needed.

Going off-grid is still too expensive for most consumers and businesses in South Africa, but this space will continue to develop as technology prices decline and grid rates continue to increase. 

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