Eskom RE Wind

Eskom struggles and tariff hikes strengthen case for distributed generation – SAWEA study

Eskom struggles and tariff hikes strengthen case for distributed generation – SAWEA study

11TH MARCH 2019 

BY: SIMONE LIEDTKE 
WRITER

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Commissioned against the backdrop of volatility and uncertainty in the electricity landscape, a new study by the South African Wind Energy Association (SAWEA) has highlighted the role that distributed generation renewable energy (DG-RE) could play in the South African electricity market.

The study, which was launched on Monday, examined 14 scenarios in five different South African municipalities.

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The study found that wind and solar systems embedded in distribution networks could reduce the load on municipalities, lower the price of electricity, prevent electricalinterruptions, reduce losses and provide an effective and efficient contribution to resolving South Africa’s power crisis.

“Within the current regulatory environment, improvements in renewable energy technology and falling prices are not reaching consumers directly and quickly enough and it is within this context that the report should be considered,” said SAWEA CEO Brenda Martin.

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Distributed generation refers to a variety of technologies that generate electricity at, or near, where it will be used, such as solar photovoltaic (PV) panels, wind and combined heat and power and may, or may not, make use of existing electricity infrastructure for distribution to customers.

“Distributed generation can directly serve loads behind-the-meter as we have seen increasingly in South Africa over the past years, but they can also make use of existing public network infrastructure to supply offtakers that are not colocated with the energy plant. This type of scheme presents a number of advantages at various levels, and this is what we wanted to better understand through the study,” SAWEA technical working group chairperson Kevin Minkoffexplained.

He added that State-owned Eskom’s tariff increases and continued struggles only strengthened the business case for DG-RE plants and the role these could play in supporting the sustainable delivery of power.

The report also highlights opportunities for investors interested in projects other than utility-scale, as it reveals opportunities and potential routes for corporate powerpurchase agreements (PPAs), which support the purchase of electricity at an agreed price for an agreed period, typically between 10 years and 20 years.

Instead of buying power directly from utilities, several businesses are now beginning to consider how to buy electricity from independent generators, as well as investing in generation assets themselves, within the limits of the current regulatory framework.

“PPAs have economic and environmental advantages,” said Martin, adding that large multinationals were beginning to apply their sustainability pledges to their global supply chains and data centres, which had led to a significant uptick in corporate PPAs globally.

“However, in South Africa, current regulations are restricting the uptake of corporate PPAs. To support growth of the industry, the SAWEA report calls for regulatory reforms to allow for direct PPAs between municipalities and energyintensive users and details how this could provide security of supply to heavy industry at lower tariffs”.

Martin highlighted that it was important for local municipalities and utilities to revise planning methods, devise new technical specifications and update commercial arrangements.

Investing in DG-RE plants can help corporates to meet environmental targets, giving them an instrument to evidence compliance with increasing climate change reporting and corporate governance requirements.

The report also stated that Eskom would benefit from DG-RE projects as the loss of revenue would be offset by a reduction in the cost of distribution.

Further, the practice of “wheeling”, whereby renewable energy plants pay a fee to use the national grid to transportthe electricity from the production site to the end-user, could also benefit the State power utility. 

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