By Larry Claasen
And lower tariffs could also be on the cards.
THE City of Cape Town’s efforts to reduce its dependence on troubled power utility Eskom by increasing its own electricity generation capacity is developing into a business incentive.
The city, which has launched a wide array of projects to mitigate Eskom’s inability to supply sufficient electricity over the past few years, hopes to attract more businesses to Cape Town because it is able to offer security of supply.
“Security of supply is of the utmost importance and is one of the reasons for wanting to make the city load shedding resilient for up to four stages where possible by 2026. This is to show the business and investment community that the city is open for business,” says Kadri Nassiep, the City of Cape Town’s executive director for energy.
The city’s move to become more independent has seen it investing in its own small-scale generation, buying electricity from Independent Power Producers (IPPs), and running a wheeling pilot program, which will eventually allow IPPs to sell electricity over its grid directly to businesses.
Promising signs
There are signs that the city’s commitment to providing a constant supply of electricity is starting to come into the decision-making of some businesses, says Nassiep.
“One only has to look at the number of energy-intensive data centres that already have and are in the process of establishing sites within the city supply boundary,” he notes.
Nassiep says that more power players coming into the market opens the way for lower electricity tariffs. For now, however, providing a constant supply is the top priority.
“We would like to think that it would lead to lower tariffs if the supply of energy is more diversified and the sole reliance on Eskom is reduced. But the first prize would be just to have a stable and consistent supply of energy to sell.”
The wheeling tariff
Though the City of Cape Town is setting itself up to benefit from a deregulated energy market, allowing IPPs to sell directly to businesses could diminish the revenue it earns from selling electricity to consumers.
Nassiep says the city looks at the issue holistically. Firstly, it gets revenue for allowing wheeling over its grid and also earns a Use-of System revenue.
Secondly, it means whatever amount is wheeled will be energy that it does not have to purchase from Eskom.
Nassiep also points out that the city’s objective is to be “revenue and cost neutral.” This means that its wheeling income “will not enhance revenues” and that it might even see the city lose some revenue.
Prepared and unprepared
Although the City of Cape Town has invested a lot in becoming energy-independent, many other municipalities and large metros have not kept pace.
According to the 2023 South African Local Government Association’s (SALGA) Status of Embedded Generation (EG) in South African Municipalities report, only 43% of the 165 municipal distributors allowed for EG on their network.
This means South Africa could soon easily become divided between metros that offer energy security and lower tariffs and those that don’t.
