- Eskom’s decision to exclude electricity traders from its recently launched virtual wheeling platform has drawn sharp criticism as a deliberate tactic to restrict private energy traders in wheeling PPA arrangements in South Africa.
- The move goes against government’s policy agenda of creating a competitive wholesale electricity market introduced by President Cyril Ramaphosa in August 2021. Read more
- Eskom will also exclude municipalities that owed money to Eskom for bulk supply, from entering wheeling arrangements with independent power producers and energy traders.
- Municipal debt, at over R100 billion, is an existential threat to Eskom. Read more
Eskom’s independent National Transmission Company South Africa (NTCSA) holds a monopoly on the country’s transmission infrastructure through which energy is wheeled. The national transmission grid as it stands, is under-capacity and new generation renewable energy feed-in has been restricted in some provinces. Eskom, at the same time, is weary of losing existing customers to electricity traders and more recently has started to challenge Nersa over its awarding of trading licenses to energy traders. Eskom is also on a drive to establish its own renewable energy business as a separate division with the help of qualified independent power producers. Read more
South Africa’s Ministry of Electricity and Energy (DEE) and National Treasury is making progress in the implementation of South Africa’s pioneering Independent Transmission Projects (ITP) Programme, a flagship public-private initiative to rewire the country’s transmission infrastructure, unlock billions in infrastructure investment, and anchor industrial renewal. Read more
Third-party wheeling is a common practice across the world and was introduced by Eskom in 2008 and subsequently also by a few local Municipalities. In South Africa, third-party wheeling has traditionally been between larger generators and buyers of electricity connected at medium and high voltages (higher than 1kV). Under this approach, there is a direct relationship between the generator and the buyer, and the wheeled energy credit is processed on the customer bill for the electricity delivered but not supplied by the Licensee (Eskom).
Traditional third-party wheeling however, requires an amendment to the Electricity Supply Agreement (ESA) between the Buyer and Eskom for Eskom connected off- takers. But where off-take of wheeled energy occurs within a municipality, the ESA between municipalities and Eskom also requires amendment. Up till now, these pre-conditions have resulted in a limited uptake, thus third-party wheeling has largely been restricted to larger Eskom-connected buyers.
Aggregators can help customers access more competitive energy prices
Electricity traders or energy aggregators as they are commonly referred to, act as intermediaries, buying electricity from IPPs (often renewable energy sources) and selling it to private customers. They play a key role in bringing more renewable energy onto the grid by streamlining the process of procuring and distributing electricity from these sources. Aggregators also offer different contract terms (short-term and long-term) to meet the diverse energy needs of their customers, from small to heavy industrial users. Aggregators can also provide grid services if allowed.
Renewable energy aggregator NOA Group recently reached financial close on the 349MW Khauta South Solar PV project. Power from the Khauta project will be wheeled via the Eskom grid to a portfolio of companies across sectors including mining, manufacturing, data centres, and real estate. Among the confirmed off-takers is Redefine Properties, which will use the green energy to help decarbonise its property portfolio and reduce exposure to rising energy costs. Read more
Should electricity traders (aggregators) be allowed to operate in South Africa? What is your view?
Author: Bryan Groenendaal
