The Western Cape’s Municipal Energy Resilience (MER) Initiative has signed memoranda of understanding (MoUs) with all six of the candidate municipalities participating in the initiative. 

This follows a ceremonial signing with the executive mayor of Stellenbosch Alderman Gesie van Deventer, on behalf of the Stellenbosch municipality, which will be participating in the first phase of the MER Initiative in this financial year.

The Drakenstein, Mossel Bay, Overstrand, Saldanha Bay and Swartland municipalities will also participate in the initiative. 

The signing of these MoUs is a critical step in Phase 1 of the MER Initiative and follows a readiness evaluation to determine which municipalities are most equipped and meet the conditions required to take advantage of the energy regulations to develop their own power generation projects and procure power from independent power producers (IPPs), says Western Cape Finance and Economic Opportunities Minister David Maynier.

“We will now be supporting and assisting these municipalities to ensure that municipal electricity networks are prepared to undertake pioneering renewable energy projects,” he notes.

Maynier says the work will explore multiple pioneering renewable energy technologies and scales, cost options, scale of investment required, location issues, risks, municipal readiness needs, infrastructure needs, timelines to get capacity onto the grid, transaction and procurement mechanisms, and regulatory issues.    

“While we have been finalising the MoUs with these municipalities, we successfully concluded a request for information (RfI) calling on all potential private and public sector organisations, including municipalities, to provide information on renewable energy projects which will assist in defining the potential pioneering projects that can be implemented in relevant candidate municipalities in the Western Cape.  

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​“Additionally, we are also collaborating with the City of Cape Town and welcome their recent announcement of an RfI for innovative funding and financing instrument solutions for their Renewable Energy Programme,” Maynier acclaims.

He says the RfI is aimed at development banks and multilateral development funds for projects that the city will own and operate, located on city-owned land and buildings (typically within the city distribution grid) and ranging in size from less than 1 MW to 100 MW per project, with the potential to explore larger-scale projects connected to State-owned power utility Eskom’s network.

“We will continue to do everything we can to support municipalities and businesses to participate in the growing the green energy sector and to become more energy resilient so that together we can create a more energy resilient future in the Western Cape,” Maynier comments. 

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The City of Cape Town is calling private and public sector financiers to submit proposals for the low-cost finance of renewable energy projects that will be owned and operated by the city.

The city hopes to have a ground-mounted solar photovoltaic (PV) plant built and operated by around 2022/23.

This is in addition to the plan to procure some of its energy from independent power producers in future, it said.

‘The programme will be made up of a number of projects ranging in size from less than 1MW to 100MW per project and all projects will be located on city-owned land and buildings, typically within the city distribution grid,” said deputy mayor Ian Neilson.

​“It will comprise a range of technologies and sizes, including both rooftop and ground-mounted solar PV systems, developed and implemented over a period of 20 years, until 2040.”

The renewable energy provided is expected to be derived predominantly from solar photovoltaics and wind generation systems accompanied by utility-scale energy storage, with the opportunity for other renewable or lower-carbon energy sources to be included.
The finance provided must also cover all costs required to connect the projects to the distribution grid.
The minimum operational life of each project is expected to be 20 years and accordingly, the tenure of the funding instrument should be in the region of 15 to 20 years.
The finance provided should cover all costs of development and construction of each power plant and can be in the form of loans/debt, grants, equity, credit guarantees, or a blend thereof.
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The South African contract Karpowership is chasing could be a game-changer for the group, making Eskom its largest client globally. What will we pay and how much will the Turkish conglomerate pocket? AmaBhungane does the sums.

One well-publicised estimate puts the cost of the South African Karpowership contracts over 20 years at more than R200-billion. This number is simply the “evaluation tariff” the company provided when it bid for allocations under the emergency Risk Mitigation Independent Power Producer Procurement Programme (RMI4P), multiplied by the absolute maximum amount of power Eskom can buy from the company in terms of the programme’s rules*.

This comes to R225.7-billion over 20 years or R11.3-billion per year.

The RMI4P rules also provide for a minimum guaranteed “take or pay” element where Eskom has to pay for a certain amount of power, irrespective of whether it actually needs it. 

This is equal to 70% of the maximum possible sales, ie, R7.9-billion per year or R158-billion over 20 years. 

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This is the revenue at the level of the local subsidiary Karpowership SA which is 49%-owned by a local consortium. All of that comes from Eskom. 

These, however, are ballpark figures because the actual tariff Karpower and other bidders will charge is tied to reigning gas prices, among other conditions.

These figures represent revenue, which is a good measure of what Eskom will pay, but a bad measure of how much money Karpowership will make. 

They include fuel costs which the company simply buys and sells onward as a “pass-through”. If you remove that from the equation you get the elements that really make up Karpowership’s income. 

The main one is the capacity charge or, for simplicity’s sake, the rental cost of the powerships. 

There are also smaller items that the parent company charges the local subsidiary for, like spare parts.

Rental income and spare parts, which together make up the bulk of total revenue, all go to the international group. Smaller expenses will, however, occur in South Africa. According to documents that Karpowership submitted as part of its local bid, the local component of costs come to about 9.3% of the operating expenditure, excluding fuel.

So what is the contract worth to Karpowership? 

As part of an ongoing court case involving allegations of corruption in the RMI4P process, Karpowership has filed parts of its RMI4P bid that show the breakdown of expenses at one of its three proposed projects: Coega.

According to this document, the rent paid abroad will be roughly R35-billion, with another R6-billion paid for spare parts over the 20 years. This seems to exclude the fuel ship that will accompany the powerships. That’s an additional R11.7-billion.

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South Africa’s renewable energy programme has begun to move towards sustainable goals and a just energy transition.

A decade into South Africa’s renewable energy programme, evidence of a maturing sector continues to come to the fore. Most recently, the launch of a programme that will help the sector to be a legitimate actor in the just energy transition, through deliberate involvement in the Sustainable Development Goals of the country.

The Renewable Energy Independent Power Producer Procurement Programme (REI4P), is recognised as a highly effective policy instrument, designed to accelerate and sustain private investment in renewable energy by channeling private sector expertise and investment and additionally plays a significant role in the social landscape of South Africa. 

Now, with the launch of the Initiative for Social Performance in Renewable Energy (INSPIRE) last week, the country will have a centre of excellence to drive leadership in the energy transition through training, convening, research and innovation.
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Ntombifuthi Ntuli, CEO of the South African Wind Energy Association (SAWEA) explained: “It can be said that the sector is certainly coming of age. With a baseline of information gathered over the last ten years, through planning and executing socio-economic development (SED) initiatives for renewable energy projects, we are ready to shift from compliance-driven initiatives to more impact-driven programmes.”

“Our vision is to see more collaboration amongst the Independent Power Producers (IPPs) and also with other sectors of the economy, such as mining. Collaboration will enable us to co-create programmes with the communities, and at the same time, pool our resources to ensure more impactful initiatives, which INSPIRE, will help us capacitate.”

INSPIRE, led by Synergy Global Consulting under the guidance of Dr Holle Wlokas, aims to advance the field of social performance in South Africa’s renewable energy sector, by creating a centre of excellence to drive leadership through learning, knowledge sharing, partnership and innovation.

Speaking at the launch of this programme, which is implemented in partnership with WITS University, Dr Wlokas highlighted the advancement of the maturing REI4P sector and the growing understanding of the complex challenges to make a meaningful and long-term contribution to the development trajectory of communities and economies around the country.

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Renewable sector works towards sustainability goals and a just energy transition
“As the sectors understanding of economic development and the wider field of social performance has matured over the past couple of years, we have seen companies grow dedicated teams to manage the work scopes. The number of professionals employed in this scope has risen from a mere handful at the onset of the REI4P to close to a hundred, and more even when counting site-level Community Liaison Officers,” Dr Wlokas explained.

Learning from more established industry sectors, it is recognised that the capacity of social performance practitioners is absolutely critical in enabling the development outcomes of the REI4P to be realised.

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Imagine a prosperous future without load shedding where enough energy is supplied by an affordable energy system that catalyses a large-scale industrialisation programme. A system that injects new life and capital into South Africa’s struggling rural towns. It’s easy if we try.
By Mark Swilling, Nthabiseng Mohlakoana, Merin Jacob, Ndamulelo Mararakanye, Bernard Bekker and HJ Vermeulen
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The publication of the list of preferred bidders for the Risk Mitigation IPP Procurement Programme (RMIPPPP), the subsequent opening of Bid Window 5 by the Department of Mineral Resources and Energy (DMRE) and the recent presidential announcement about the new 100MW limit for self-generated licence-exempt renewables has focused attention on the accelerated construction of renewable energy generation in South Africa.

This brings the procurement of renewable energy from Bid Window 1 to Bid Window 5 to a total of 9GW, with a further potential procurement of 1.8GW from the RMIPPPP. Although this may not be as much as civil society groups, industry associations, research organisations and even Eskom may have wanted, the total of 10.8GW renewable energy, ie 24% of capacity currently installed in South Africa, does suggest that South Africa may well be catching up with the rest of the world that is transitioning fast into a renewables-based energy future.

The establishment of the Presidential Climate Change Coordinating Commission (P4C), with a clear mandate inherited from the National Planning Commission’s Just Transition Scenarios, will inevitably lead to the government confirming the globally accepted “Net Zero by 2050” target that was referred to in the Low Emissions Development Strategy approved by the Cabinet in September 2020. The Net Zero target refers to achieving net zero carbon emissions by 2050. This does not mean no carbon emissions, it means that the total output of emissions and total capture of emissions in carbon sinks should equal zero.

It’s an ambition that South Africa’s Nationally Determined Contributions (NDC) being prepared for COP26 later this year will need to fully embrace. The strongest commitment statement to date to the energy transition comes from the Presidential Economic Advisory Council (PEAC): “What used to be a choice is now mandatory. Those countries not adapting to a green transition will find themselves behind and excluded.”

The above developments, together with the recent announcement by the president that the cap on licence-exempt self-generation will be lifted from 1MW to 100MW that could unlock as much as 5GW of additional capacity in the near future, must undoubtedly be celebrated by all stakeholders.

According to the Council for Scientific and Industrial Research (CSIR) an ambitious commitment to building 5GW of renewable energy per annum for decades is urgently required — this equates to the generating capacity of two-and-a-half Koeberg nuclear power stations. This is needed to replace South Africa’s ageing coal-fired power stations and could unlock nearly R500-billion worth of investment over the next 10 years, creating 50,000 jobs per annum in construction and operation of wind and solar plants.

This, in turn, would trigger an upstream industrialisation programme that will catalyse the re-industrialisation of the South African economy that will rapidly drive down unemployment levels. All good news. Expanding and decarbonising the generation capacity through investment in renewable energy, however, represents only one aspect of the transition to a stable and sustainable energy scenario.

Once generated, electricity must be transmitted from distributed generation sites to load centres via the electricity grid. The existing grid, however, is unevenly developed — it is strong in the northeast where the coal deposits are, and weak in the southwest where the best wind and solar resources are located. Is the national grid, therefore, fit for future purpose?

National demand for electricity by businesses and households is variable, and it changes according to summer and winter seasons. While weather-dependent wind farms at two different locations might generate the same amount of energy per year, the times during which they dispatch energy onto the grid may differ drastically. One wind farm might generate power when the grid needs it (eg during the morning and evening peak times in winter), another in a different region may generate power at different times. This raises a crucial question: how well will the new weather-dependent renewable energy generators synchronise with the demand patterns of the end users (households and businesses) across different seasons?

Investments in renewable energy will unlock economic growth, especially in the regions where the plants and grid infrastructure are sited. However, will these benefits be optimally and equitably distributed across the South African landscape? Communities around wind and solar farms are well positioned to benefit developmentally from these projects. But this depends on the capabilities of local governments, local businesses and civil society to take advantage of new inward investment flows. This has implications for the location of projects. It would not be desirable, for example, to put projects into locations where there are high levels of corruption and mismanagement.

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Department of Mineral Resources and Energy (DMRE) director-general Advocate Thabo Mokoena reports that government intends using the South African Renewable Energy Masterplan (SAREM), which is currently being drafted, to position the country as a “globally significant” producer of inputs used in renewable-energy plants.

In a keynote address to the virtual Enlit Africa conference on Tuesday, Mokoena said the SAREM would help “coordinate the renewable-energy requirements” to support such an industrialisation drive and to boost manufacturing employment.

The DMRE, together with the Department of Trade, Industry and Competition, was currently prioritising the establishment of a multi stakeholder SAREM executive oversight committee, which would guide and champion industrialisation across renewables value chains.

Speaking during a recent webinar hosted to coincide with the six-month countdown to the upcoming COP26 climate talks, to be held in Scotland in November, Green Cape’s Francis Jackson said that, once convened, the committee would be able to confirm the target timeline for finalising of the plan and its adoption.

He indicated that, historically, the yearly South Africa Investment Conference had been an opportunity for masterplans to be announced, but stressed that this did not preclude prior adoption should the plan be endorsed ahead of the conference, scheduled for early November.

“The present focus is the establishment of the executive oversight committee as well as the research and consultation phase.

“Inputs from the research and consultations are contributing to an emerging set of opportunities, barriers and bottlenecks and trade-offs.

“These require the executive oversight committee’s engagement to take to the next level of prioritising levers to unlock them,” Jackson told Engineering News separately.

A matrix of value-chain elements was being considered, with priority being given to those primary materials, components and subcomponents used in the manufacture and assembly of the renewables technologies outlined in the Integrated Resource Plan of 2019 (IRP2019), including solar photovoltaic (PV), wind and battery storage.

“Care is being taken to ensure that the perspectives of global value-chain players eyeing the market for investment in local production capacity, as well as incumbent local manufacturers’ perspectives, are represented in the problem-solving.”

MANUFACTURING OPPORTUNITY

Value-chain elements have not yet been “strategically prioritised”, but the objective is to outline a rational sequencing of support that harnesses “the low-hanging fruit that catalyse related value-chain elements”.

“For example, wind turbine towers and blades are obvious primary component opportunities, should procurement and project pipeline certainty be clear,” Jackson outlines, adding that the integration of local components in nacelle assembly could grow over time.

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City of Joburg to issue a request for information for the construction of a 150MW solar plant, as well as 50 megawatts of rooftop solar panels

Africa’s financial capital, Johannesburg, has announced plans to meet 35% of its power needs from renewable energy sources, the municipality said in a presentation on Thursday. The City of Joburg will seek proposals for privately supplied renewable energy by August. Johannesburg is also gearing up to issue a request for information for the construction of a 150-megawatt solar plant, as well as 50 megawatts of rooftop solar panels.

The City of Joburg also plans to seek information for the installation of a 100 megawatts battery energy storage system (BESS).

South Africa’s state owned utility Eskom which supplies 95% of the country’s power needs has been battling to supply power to South African cities consistently. With persistent power blackouts known in South Africa as load shedding predicted to last for the next 5 years, many municipalities are now looking for alternative sources of power to plug the electricity supply gap. 

“We would need to go out to the market to ask for independent power producers for an expression of interest to find out how many of them are able to come with their own capital,” said Paul Vermeulen, chief engineer for renewable energy at City Power.

City Power, the municipality’s power utility, says it will enter into long term power purchase agreements with IPPs for the purchase of renewable energy. ​

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Joburg to utilise SA’s power sector reforms
The South African government this year announced amendments to the country’s electricity regulations to allow municipalities to purchase power from sources other than Eskom, effectively breaking the utility’s monopoly of power supply in South Africa. Many municipalities in South Africa including the City of Joburg have announced plans to utilise the amendments to the regulations and develop own generation capacity as well as procure power directly from IPPs.

The government is also amending the Electricity Regulation Act to allow for self generation systems of up to 10MW to be exempted from licensing by the regulator NERSA. A study by local think tank, Meridian Economics, found that up to 5 000 MW of additional generation capacity could be unlocked in the near term if South Africa raises the threshold by to 50 MW.

South Africa is hoping its power sector reforms will kick start its economic recovery process from the COVID-19 devastation and bring in much needed foreign direct investment. The government is rolling out a series of new procurement initiatives for renewable energy with an estimated 6,8GW planned for procurement over the next year. South Africa’s previous bid windows for renewable energy attracted around US$20 billion in investment in less than a decade.

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In South Africa, the Western Cape Government’s minister for finance and economic opportunities, David Maynier, formerly published a Request for Information (RFI) for their Municipal Energy Resilience (MER) Project.

Minister Maynier is calling on all potential private and public sector organisations, including Western Cape municipalities, to provide information on renewable energy projects that would develop into new generation capacity in the Western Cape.

Potential respondents are requested to submit an RFI Response Form in accordance with the instructions in the RFI that is available, free of charge, for download from 11 June 2021.

The last date for submission of the completed RFI Response Forms is 18h00 on 12 July 2021.
https://www.westerncape.gov.za/110green/files/atoms/files/WCG%20MER%20RFI.pdf
Enquiries should be directed to Adrian Rudolph via e-mail on Adrian.Rudolph@westerncape.gov.za

Maynier said: “This is an important step forward in our MER Project which was launched last year to support municipalities to take advantage of the new energy regulations to generate, procure and sell their own power so that we can become more energy secure in the Western Cape.”

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Information submitted through the RFI will enable the Department of Economic Development and Tourism to consider options and develop the strategic approach to assist municipalities in the Western Cape to develop and/or procure new electricity generation capacity from all types of renewable energy generation and supply systems and technologies, including self-generation, battery energy storage systems, as well as hybrid generation and storage solutions.

Maynier added: “The MER Project is just one of the many ways to build energy resilience and buffer businesses and households from the impact of loadshedding in the Western Cape.”

The minister emphasised that the announcement by President Cyril Ramaphosa on 10 June 2021 that Schedule 2 of the Electricity Regulation Act will be amended to increase the licensing threshold for embedded generation projects from 1MW to 100MW is a “welcome move that will boost our initiatives to build energy resilience in the Western Cape”.

He said: “To ensure we maintain momentum and move forward as quickly as possible, we need the Department of Mineral Resources and Energy to finalise Schedule 2 of the Electricity Regulation Act to provide further clarity and certainty to the market.

“We remain in an energy crisis and large-scale private sector participation in energy generation, in partnership with government, will be key to addressing the current shortfall in the Western Cape.”

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Government’s decision to increase the threshold for embedded private power generation could unlock investments of up R100 billion over the next five to seven years and add 15,000MW of capacity to South Africa’s strained electricity grid.

This is according to experts who spoke to Sunday newspaper Rapport about President Cyril Ramaphosa’s surprise announcement on Thursday that private companies and individuals will now be allowed to build generating projects of up to 100MW in capacity without a licence from the National Energy Regulator of South Africa.

The president said while measures taken by Eskom to maintain its ageing infrastructure and increase electricity availability in the county were positive and necessary, they were not enough to address the immediate and significant energy shortfall in the country.

“Incremental measures will not be sufficient to meet the scale of this challenge,” Ramaphosa said.

“This intervention reflects our determination to take the necessary action to achieve energy security and to reduce the impact of load-shedding on businesses and households across the country.”

Ramaphosa said this would also remove a significant obstacle to investment in embedded generation projects.

“Generators will also be allowed to wheel electricity through the transmission grid, subject to wheeling charges and connection agreements with Eskom and relevant municipalities.”

An amendment to the Energy Regulation Act giving effect to the new threshold will be gazetted in the next 60 days, Ramaphosa stated.

Cyril Ramaphosa South African President
Intellidex’s capital market investments head Peter Attard Montalto estimated that the investments could add a further 15,000MW of generating capacity.

To put this into perspective, Eskom currently has around 45,000MW of generating capacity.

The additional capacity would be roughly equivalent to the total supply which has been unavailable in recent days due to breakdowns of generating units and planned maintenance.

Eskom’s most recent load-shedding update on Friday showed the utility had 13,625MW of capacity unavailable due to breakdowns, while, 1611MW was offline for planned maintenance.

North-West University political analyst Piet Croucamp told Rapport the decision was made after a number of businesses and groups had met with the president at the Union Buildings over the past few weeks.

This included African Rainbow Capital’s Patrice Motsepe, mining groups, and Business Unity South Africa.

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President Cyril Ramaphosa has announced that government will lift the threshold for embedded generating electricity capacity from 1MW to 100MW, allowing households and businesses to privately build much bigger self-generating power.

“We are today announcing a significant new step in further reforming our electricity sector towards achieving a stable and secure supply of energy,” Ramaphosa said.

The president said that the increase to the embedded generating capacity threshold will be crucial in developing a response to the energy crisis that is ambitious, bold, and urgent.

“The amended regulations will exempt generation projects up to 100MW from the NERSA licencing requirement, whether or not they are connected to the grid,” stated Ramaphosa.

He said that this will remove a significant obstacle to investment in embedded generation projects.

“Generators will also be allowed to wheel electricity through the transmission grid, subject to wheeling charges and connection agreements with Eskom and relevant municipalities.”

However, Ramaphosa said that generation projects will still need to obtain permits to connect to the grid.

An increase in the threshold required for licencing has been recommended by energy analysts for years.

Ramaphosa said that government identified energy security as the most important enabler of economic growth.

“There is no doubt that the prospect of a continued energy shortfall and further load-shedding presents a massive risk to our economy,” he stated.

“Our ability to address the energy crisis swiftly and comprehensively will determine the pace of our economic recovery.”

Ramaphosa said that resolving the energy supply and reducing the risk of load shedding was South Africa’s single most important objective in reviving economic growth.

The president stated that Eskom was working hard to improve the performance of its existing fleet of power stations despite all the challenges that it was currently facing.

However, while these steps were positive and necessary, they were not enough to address the immediate and significant energy shortfall that threatens South Africa’s economic recovery.re to edit.

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“Incremental measures will not be sufficient to meet the scale of this challenge,” Ramaphosa said.

“This intervention reflects our determination to take the necessary action to achieve energy security and to reduce the impact of load-shedding on businesses and households across the country.”

Ramaphosa stated that this move should be seen as evidence of the government’s intention to tackle the economic crisis head-on, by implementing major economic reforms that will transform the South African economy.

“It also demonstrates our commitment as government to listen carefully to experts, to engage closely with our social partners, and to take on board new ideas to address our long-standing challenges,” Ramaphosa said.

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