No ‘solar levy’ for South Africa – but users will pay a higher fixed fee

 ·25 Jul 2022

South Africa’s solar installers and providers are trying to distance themselves from reports of a “solar levy” being considered by power utility Eskom, saying that no such plan exists.

This comes after reports identified proposals from the power utility to change the structure of its tariffs so that users who use less power pay higher fixed monthly fees.

Under Eskom’s current fee structure, variable and fixed costs accumulated in producing electricity are paid for through a single electricity tariff — calculated per kWh of consumption. A user who consumes 0kWh of electricity currently pays a fixed fee of R218 a month, escalating as power consumption rises.

However, Eskom said that tariffs need to be modernised to reflect the changing electricity environment. Under the proposed tariffs, the same household that uses 0kWh of energy from Eskom will pay an additional R720, taking the total to R938 a month.

While solar power users are not specifically mentioned or targeted by Eskom in its data, any households that make a concerted effort to lower their dependency on Eskom’s grid, and end up using less grid power as a result, would invariably draw the higher charges laid out in the proposal.

Players in the solar industry say that this calculation – and the R938 fee – has been widely misinterpreted to be a “solar levy”, which is not the case.

Alumo Energy managing director Rein Snoeck Henkemans, said no proposed special levy for solar users exists. Instead, Eskom will apply to the National Energy Regulator of South Africa (Nersa) for a new tariff structure for all homeowners that will include a fixed cost and variable cost.

“The idea that solar users would be charged a special levy or penalty is misleading,” he said. “Only if approved, fixed charges would apply to anyone who is connected to the national grid without any discrimination between municipal or solar users, which by necessity would include solar users who are still grid-tied.

“This would be to cover the cost of providing the connection – especially for those times when solar users switch to the grid as a backup battery system. Variable costs would then depend on the individual user’s energy consumption.”

Snoeck Henkemans admitted that solar users would likely see their fixed fee “slightly higher” than ordinary municipal users to account for higher demand, administration, and supply costs – however, these users would save money in the variable cost charge, as they are using less power from Eskom.

“Additionally, many households also receive a discount on the energy they feed back into the grid, depending on their area and municipal provider, which means that solar users can save thousands on their bills over time,” he said.

These include residents in the City of Johannesburg, the City of Ekurhuleni, the City of Cape Town, Eskom clients, and soon eThekwini in KwaZulu-Natal.

Eskom stressed that it has not yet made an application to Nersa to change its fee structures, noting that this submission will be made in August.

However, the group confirmed that part of the application would be for the introduction of a regulatory framework which would allow energy-producing households to sell their excess power back to the grid.

“Eskom will be applying to Nersa to allow customers who are generating their own power but are also connected to the grid, to sell the electricity to Eskom. If approved by Nersa, things will go both ways – you will get credit for the electricity you are distributing to the grid,” the group said.

The City of Cape Town on Monday (25 July) announced it is starting a programme to buy power from commercial and industrial producers who will be allowed to send power to the grid for cash, mayor Geordin Hill-Lewis said.

Private electricity producers must register with the city to qualify for the programme, Hill-Lewis said, adding that the city plans to roll out a programme to residential producers once a commercial programme has been established.

President Cyril Ramaphosa is expected to lay out urgent interventions this week, which will help the country address its power crisis. A leaked presentation about the interventions shows that the president wants to boost and encourage private generation in the country by reducing the red tape involved with getting own-generation projects online.

Read: Eskom warns of load shedding again – two days after ending it

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