The R1.5 billion owed to solar producers, and the plan to pay it by August
By Adrian Ephraim
Power producers will be paid the full estimated value of their curtailment compensation before technical verification, as the National Transmission Company South Africa (NTCSA) works to clear R1.5 billion in outstanding claims by the end of August.
Independent power producers whose solar output has been switched off to keep the national grid stable will now be paid the full estimated value of their curtailment compensation claims upfront, easing a cash flow squeeze that has fallen hardest on the B-BBEE equity partners in South Africa’s renewable energy projects.
The mechanism was set out by the NTCSA and its Central Purchasing Agency at a bilateral meeting with the South African Photovoltaic Industry Association (SAPVIA) on 22 July, convened after curtailment instructions to producers rose from roughly 100 a month earlier this year to more than 1000 a month. That more than tenfold jump generated a substantial backlog of deemed energy claims and stretched the processes used to verify and settle them.
In a separate statement on 24 July, NTCSA said the value of claims under verification and settlement had fallen from about R2 billion in mid June to R1.5 billion, and that it aimed to finish the remaining assessments and pay approved claims by the end of August. Roughly 300 claims have already been approved under the new process.
The transmission company administers power purchase agreements covering 117 projects with a combined capacity of 10 083 MW, and pays out about R45 billion to producers each year.
For SAPVIA, the delays had become more than an accounting problem. “Delayed curtailment compensation has placed significant financial strain on IPPs, and B-BBEE equity partners have been disproportionately affected because they carry the least headroom to absorb a payment delay,” said Dr Rethabile Melamu, chief executive of the association.
“Resolving these cash flow bottlenecks is not an administrative detail. It is fundamental to protecting broad based transformation in this sector and to maintaining investor confidence in South Africa’s energy transition.”
How the payments will move faster
NTCSA has introduced a two step provisional payment process that works within the existing power purchase agreements, so no contracts need to be reopened. Operational data is now pulled directly from the system operator’s SCADA control systems rather than from regional distribution teams, which the company says cuts verification delays considerably. It then pays the full estimated claim value upfront and completes the technical checks afterwards, with little or no adjustment expected in most cases. NTCSA expects payment flows to normalise immediately.
Why the grid is switching solar off
The rise in curtailment stems from the way the grid is balanced during daylight hours. Coal fired stations cannot be ramped up and down quickly, so they stay online through the day at minimum stable levels to guarantee capacity for the morning and evening peaks, when solar output disappears. With flexible sources such as hydro and pumped storage adjusted first, the last balancing tool available to the system operator is to curtail renewable producers that dispatch their own power.
SAPVIA has been at pains to point out that curtailment is a standard feature of grids with high renewable penetration around the world, and that the real question for the sector is not whether power is curtailed but how quickly and predictably producers are compensated when it is.
“Faster payment addresses the symptom. The structural answer is to build a system that can absorb midday solar rather than waste it,” said Melamu. “That means storage at scale, market signals that reward daytime consumption, and a grid that is planned around the generation mix we actually have.”
A longer game on storage and daytime demand
Beyond the immediate fix, the two organisations have agreed to meet monthly to track claims and grid dynamics, and to work together on ways to soak up excess daytime generation. That work includes speeding up battery energy storage by tackling the regulatory and implementation hurdles facing producers who want to add storage to existing plants, shaping demand through wholesale market mechanisms and price signals that encourage daytime electricity use, and drawing on the experience of international bodies such as SolarPower Europe and the German Solar Association.
SAPVIA, which represents members across the solar value chain, commended NTCSA for engaging industry directly and for reporting openly on curtailment volumes and claims performance.
