Landmark move as South Africa gets more private electricity to take on Eskom

 ·29 Mar 2022

The National Energy Regulator of South Africa has awarded a private electricity trading licence for the first time in over 12 years, as the country looks to move away from Eskom’s power monopoly.

The license enables Enpower Trading to source competitively-priced, predominantly renewable power from multiple independent power producers (IPPs) and small-scale generators, transport or ‘wheel’ this energy across the national and municipal grid networks, and sell it to customers at a discount to prevailing electricity tariffs.

Nersa’s awarding of this licence represents a critical step forward in the Department of Energy’s roadmap, which plans for the unbundling of Eskom’s generation, transmission and distribution business units to enable the transition from a single-buyer model to a more competitive domestic open market model, Enpower Trading said.

“Our vision is to enable much-needed additional generation and storage capacity, and to help foster an efficient power market by offering offtake solutions to IPPs, competitive tariffs to customers, and the sustainability of supply to municipalities and their constituents,” says Enpower Trading director Charl Alheit.

“Our licence is a very important step that is aligned with the government’s aim to liberalise the South African energy market. We are proud to be a part of this process and fully support these recent changes in legislation,” adds Alheit.

An August 2021 amendment to the Electricity Regulation Act exempts embedded electricity generation projects between 1 MW and 100 MW from the previous requirement of applying for a generation licence, requiring them only to register with Nersa.

This regulatory relaxation is expected to drive an increase in the number of South African IPPs and small-scale embedded generators (SSEGs) and consequently, the availability of independently-produced renewable energy.

How it works

  • Enpower Trading signs an energy offtake agreement with Nersa-registered IPPs, which are connected to either the municipal or Eskom grid.
  • A use of system agreement (UoSA) is then entered into between the municipality, as the distributor, and Enpower Trading.
  • Customers sign a Power Purchase Agreement (PPA) with Enpower Trading, which outlines the amount of energy to be supplied at which rate.
  • Enpower Trading pays the municipality for the use of the grid, ensuring that the municipality does not lose the income derived from its mark-up on electricity sales.

The group said it is specifically targeting municipalities looking to future-proof their business model and transition their business focus away from the sale of electricity and towards the sale of distribution network services.

“We’re essentially unlocking additional capacity in the market without government or municipalities having to add additional liabilities to their balance sheets, and further making sure the municipality remains whole from an income perspective in the process,” said Alheit.

Read: Government invests R1 billion into natural gas project in South Africa

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