Interest in private Renewable Energy systems is heating up in direct proportion to the cooling down of ESKOM’s generation capability. This combined with the City of Cape Town’s call for all properties with Small Scale Embedded Generation (SSEG) systems to register with the City is raising a flurry of questions.
Renewable Energy systems are rapidly replacing centralized generation and distribution. In 2017, for instance, sun and wind produced just 6 percent of the world’s electric supply, but they made up 45 percent of the growth in supply, and the cost of sun and wind power continues to fall by about 20 percent with each doubling of capacity. (Source: A Future Without Fossil Fuels? Bill McKibben )
Typical of Creative Disruption the renewable energy transition is fraught with mistrust and mis-information. Early adopters push for change while local authorities look at how to respond to keep the wheels of commerce and industry rolling while ensuring access to affordable electricity for all.
Working with a colleague, Peter Atkins, from the Energy Governance – SA network, I set out to get answers for some frequently asked questions about SSEG. The enabling legislation is out of date and new guidelines and technology standards are slow to materialise. So, what is the current situation? The answers we received from the City of Cape Town and Green Cape below offer some clarity, even as they raise new questions! The answers are a combination of press releases and personal communications and are not direct quotes.
QUESTION: There is a perception that the City and the authorities in general are slow to pro-actively support SSEG.
The fee for SSEG in Cape Town is seen as a disincentive, as is the condition that SSEGs must be net consumers. The National Energy Regulation SA (NERSA) guidelines for implementing SSEG and the DC wiring codes have still not been approved years after the early adopters installed PV.
ANSWER: 22 authorities in the Western Cape now have processes for SSEG, either for commercial and domestic or only for commercial. The tariffs can be found on https://www.westerncape.gov.za/energy-security-game-changer/small-scale-embedded-generation-sseg-feed-tariff-map. The map is a guide as some of the tariffs have more layers not shown. Or click here 2019 03 Fees for Residential SSEG in Western Cape
The City of Cape Town is committed to supporting and increasing its purchase of renewable energy and has a target of 20% by 2020 and aims to be a Carbon Neutral City by 2050. Technically it is easier to purchase from larger commercial Independent Power Producers than from dispersed household SSEGs. However, at the current slow scale of SSEG, the barriers are more regulatory and administrative than technical. For Example, the condition that SSEGs need to be net consumers, that is they need to buy more electricity than they may sell, is being challenged with a fair degree of optimism.
Local authorities are hamstrung by ESKOMs monopoly on generation and transmission. The City has lodged an appeal through the High Court to get the right to purchase electricity directly from Independent Power Producers. In February, Cape Town MAYCO member for Energy and Climate Change, Phindile Maxiti, called on the city advocates to petition the Gauteng High Court to expedite the matter. Interim good news is that the ceiling for individual SSEG systems that can operate without a generation license (but still need to be registered) is likely to be raised from the current ceiling of 1MW to 10MWs.
There are also technical barriers to a faster uptake of SSEG. While the City has formalized a registration process and a NERSA-approved feed-in tariff, the NERSA guidelines for SSEG still need to be drafted and gazetted. Another frustration is the lack of a DC wiring code which means that grid-tied SSEG systems have be signed off by a professional engineer at an added cost.
It is encouraging that the Draft Updated IRP 2019, as discussed with Nedlac, includes an allowance for 200 MW per year of embedded/distributed PV. It has been confirmed that this allowance excludes off-grid PV below 10MWs. There is talk that the 200MW allowance will be increased in the final IRP to 500MW.
As the uptake of SSEG increases, so additional technology challenges will need to be addressed. The existing distribution system is not designed to be bi-directional or to accept feed in from dispersed sources.
The technology exists to upgrade to smart grid systems, the question is how to fund this?
The average Cape Town electricity consumer is on Lifeline which is a subsidized tariff. While the rich are moving off grid or reducing consumption by installing SSEG systems, the poor are not able to pay for the cost of supply. The loss of revenue from consumers who can afford to pay is compounded by the loss of revenue through reduced sales. Efficiency measures encouraged by excessive ESKOM increases and a slower economy have translated into Cape Town using less electricity today than it did in 2007.
Rather than going off -grid households with SSEGs could become pro-sumers, (producers and consumers) and contribute to clean, cheaper generation. However, because of the installation costs public-private partnerships are needed to fund opportunities. Green Cape suggests that in the future, households and commercial enterprises within a neighbourhood who are interested in SSEG with feed-in may need to work together to provide some of the funding for their local smart grid infrastructure. Green Cape is investigating a system called PACE (Property Assessed Clean Energy) which essentially creates an administrative hub to link property owners with approved Renewable Energy installers, funders and the local authority so that interested home owners with a good credit rating can have a SSEG system installed and pay it off on their rates account. Speculatively, could this system also build in funding for upgrades to the distribution infrastructure to overcome local bottlenecks?
QUESTION: What is situation regarding low-income communities and access to affordable electricity with growing SSEG.
ANSWER: Low-income households need to register for the Lifeline Tariff with the City to get up to 60 free kWhs/month and so that they are on the subsidized kilowatt hour charge. If the City wins the court case and can buy cheaper electricity directly from independent power producers, this benefit will be passed on to electricity customers. It is also possible for low-income communities to install SSEG but because of the challenges with funding and security, it may make sense for these communities to invest through the highly successful stokvel or other mechanisms and buy shares in a local community-funded IPP or a mini-grid. In exchange the community could receive a percentage of free electricity or a negotiated fixed price for electricity for the life of the system. It is also worth investigating whether funding from National Treasury for the allocation of Free Basic Electricity could be use to co-fund local mini-grids.
QUESTION: There is a perception that the City of Cape Town SSEG tariffs are a disincentive to SSEG.
ANSWER: This possibly arises because of the difference in infrastructure fee between the SSEG service fee and the Home User service fee. The City is moving to cost-reflective tariffs to ensure that it can deliver quality services. According to City staff the SSEG tariff is based on the true cost of the City’s electrical infrastructure. The new Home User Tariff does not cover the full cost of infrastructure. For this reason, the energy charges on the Home User and Domestic Tariffs are also higher than on the SSEG tariff. The Cape Town’s electricity tariffs are designed so that above 600kWh per month SSEG (without feed-in), Home User and Domestic are all equivalent. 600kWh is the changeover point between the consumption blocks as recommended by NERSA.
Graph 1: A comparison of City of Cape Town domestic electricity tariffs. SSEG in blue, Home User in orange, Domestic in grey and Life Line in yellow.
This tariff structure appears to penalize households with low monthly energy usage who pay the same infrastructure fee as the large domestic consumers. The same applies to SSEG households with low consumption and low electricity export volumes. As the City is committed to reducing its carbon footprint, and to increasing its purchase of Renewable Energy, perhaps the 600kWh per month change over point and the infrastructure costs of small consumers should be revisited!
NERSA recently awarded ESKOM an effective 14% increase in electricity costs. Once again, local authorities, which are the face of service provision for half of SA households, will have to work out how to absorb this cost without extreme negative feedback from their citizens.
The City had a policy intention of equalizing the infrastructure fee for SSEG and Home User. Several of the local authorities in the Western Cape have the same monthly infrastructure fee for residential and SSEG. It appears however that many of them had a residential infrastructure fee before the SSEG fee was introduced. The new tariffs will be advertised for comment in April at which time we shall find out if the intention to close the service fee gap is being implemented and can air any grievances with the costing model.
A comparison of some of the SSEG fixed and energy import and export costs for local authorities around Cape Town makes interesting reading. The most interesting and frustrating aspects were the variety and complexity of tariff structures. NERSA has called for local authorities to simplify their tariffs. This should improve transparency around cost of supply and assist customers to understand how they pay for consumption and therefore how to manage their energy costs. Looking at the complexity of some tariffs which are based on the size of the circuit breaker and or whether the supply is single or three phase, pre-paid or credit meter and then also whether consumption is during peak, standard or low demand, it is apparent that many tariffs are historical artefacts. Now, superimposed onto this system, is the Creative Disruption of SSEG. By comparison, Cape Town has a simple system. The tables at the end of this article provide a clear idea of how complex the tariff systems are for different local authorities. They also provide a comparison of the costs.
QUESTION: It appears that electricity pre-paid purchase systems are used to claim service arrears from other departments such as Water. If so on what basis does this happen?
ANSWER: YES, this is true, the size of the deductions may range depending on the value of the property. For instance, for a property valued at below R500 000 the amount of the pre-paid electricity payment that may be syphoned off for debt repayment is between 30 -50 % and for properties over R1m the amount may be between 70 – 90%. Prior to that action being taken, the municipality’s debt collecting policy allows residents to make payment arrangements with the interest being put on hold for as long as the arrangement is honoured. Deductions from pre-paid electricity are only implemented after notices and letters of demand sent to the account holder are ignored. The water debt would be written off for residents classified as indigent, provided they allowed the City to install a water management device on the property.
QUESTION: What new energy services the City could offer to support SSEG.
For Example communal battery storage and management, direct electricity sales using wheeling and new consumers for midday PV such as electric busses, service vehicles etc.
ANSWERS: As the price of batteries comes down so a form of collective storage makes sense. Jaco Botha of SolarEff, speaking at the CT Energy, Water & Waste Forum on 14 March, said that it has become cost-effective, for consumers on time-of-use tariffs, to charge batteries using off-peak electricity and then discharge the electricity during peak demand times. This reduces the load and cost at peak demand. Surely, charging communal battery banks with surplus PV also makes sense? Apparently, work is underway on a National Battery Storage Policy.
Ceres in the Witzenberg municipality is piloting a wheeling process and fee so that SSEGs can sell to private clients and pay the City of Ceres for the cost of using the local grid. This is called wheeling. Cape Town is following the process with interest as wheeling could be one of the new services that local authorities can offer (Hildegard Fast of the WC Government at the CT Energy, Water & Waste Forum on 14 March).
Regarding use of surplus midday PV, the City is developing an EV framework to look at opportunities and processes for charging Electric Vehicles. Charging has a high demand and could create TOU spikes which is a potential problem for the grid if not well managed. Once again regulations are required – around consumption demand, times of use and tariffs. here are also very few tariff examples that are appropriate for South Africa at this stage. Overseas, many energy suppliers complete with each other to offer a range of at home and away from home charging services. The most affordable options for charging at home would require smart meters with time of use recording capability and time of use tariffs to take advantage of times at off peak demand. While this is likely to be the future, currently, only pilot projects exist in the South African market and these have not been designed specifically for EVs.
CONCLUSION: The future of Residential SSEG
Local authorities acknowledge the inevitable transition to increased and dispersed SSEG and IPPs. They are looking at opportunities for own generation based on landfill gas, biogas from waste water treatment plants and other local opportunities. With acceptance of a shift to dispersed Renewable Energy comes the realization that a new array of energy services is required. Not all of these services have been identified at this stage in the energy transition. Critical at present are models to fund the tariff subsidies to ensure that energy is affordable. Funding to transition to technologies such as Time of Use billing, smart bi-directional meters, upgraded grids, EV charge stations and community energy storage etc. are also required
While these are all technical and economic issues, on a philosophical level SSEG and IPPs offer a new chapter in the history of human energy. We have progressed through a past characterized by a range of ethical and unethical energy ownership and management models. Collectively these included collaboration, for example to clear new fields and dig wells, the use of draught animals, slave labour, and with the discovery of fossil fuel, the development of large power utilities and corporations. Renewable Energy provides the opportunity, once again, for small and large local scale private and community ownership of energy generation. The challenge is whether humanity has matured enough to use the sun that shines on all of us for all of us!
Table 1: a comparison of the SSEG tariffs between local authorities in the Western Cape 2019 03 Fees for Residential SSEG in Western Cape
Table 2 Compares the costs across different municipalities of buying and selling 350kWhs and 500kWhs of electricity. The sums give the combined cost of the service fee plus the imported energy minus the sale of energy. A lower value of 350kW of imported and exported energy and a higher value of 500kWs are used for comparison. Click here to read the values
Table of residential SSEG tariffs in the Western Cape
KimK 05 April 2019