Cape Town to pay cash for residents’ excess power

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RYK VAN NIEKERK: The City of Cape Town recently received the green light to buy electricity from homeowners and businesses who are privately generating power themselves. That’s typically electricity generated by solar panels on their roofs, not used by the households or businesses. National Treasury has given the metro the green light to do so, and the metro will pay a cash amount for this surplus electricity. The energy regulator, Nersa, had already determined that the metro could buy from private providers at a rate of 79c/kWh, but the metro will give residents and business owners an increases incentive to sell their power to the metro, and will pay R1.04/kWh for it.

On the line we have Kadri Nassiep, the Executive Director for Energy for the City of Cape Town.

Kadri, thank you so much for joining me. The City of Cape Town is the first metro to receive the necessary approvals to do this, but how will this initiative work? What can people and businesses who have electricity to sell to the city expect?

KADRI NASSIEP: This is a longstanding programme. It has actually received quite a boost, particularly from the mayor’s intervention as well as the exemption granted to us by the minister of finance. That exemption allows us to go to our customers and then to arrange for that extra power, and the surplus power, then to be fed back into our network – and we pay for that. So that exemption was granted. It builds on an existing programme, as I’ve said.

The commercial customers and residential customers already have the ability to put up systems under our small-scale embedded generation programme, and then to effectively roll back their meter.

They haven’t been allowed to export more than they consume, so we’ve changed the rules and we’ve said, okay, starting with the commercial sector now, you can then actually export as much surplus power as the network can absorb based on the point of intake, and we will pay you. We’ve already given out the figure, which is the 78.9c which is the feeding tariff, plus the 25c which is the incentive added to that.

So that process has started for the commercial sector. We’ve engaged the market and we are ready to contract with them in the coming month or so. Beyond that, the residential sector will come on board later, probably towards the end of the year, as we still have to refine the technical limitations on how much can be absorbed in a particular environment and [what] we can actually accordingly manage. So that process, a bit of technical due diligence, will have to be done on the net. Then from there we offer the same type of scheme to our residential customers.

RYK VAN NIEKERK: I think the key question is how much electricity you think you would be able to buy, and what difference it would it make to load shedding in the city.

KADRI NASSIEP: I don’t anticipate it’s going to make a huge difference from a load shedding perspective in terms of how the City of Cape Town is able to mitigate load shedding, but it will make a big difference obviously for the customer, whether commercial or residential, who installs these systems. So there’s no doubt in my mind that it’s going to have a huge impact for them.

The sweetener for them in terms of the installation of their own system is that they get this feeding tariff from the city for any surplus that they might have, which I think is a great thing just to, as I said, sweeten the deal. So that’s going to have a contribution.

Currently we have over 18 megawatts of projects connected to our grid and what’s in the pipeline is probably double that.

So there’s a lot of power sitting there. In essence a lot of that will be used by the customers themselves, and only the surplus of course will be shed in. So it’s going to have a limited impact. Bear in mind, one stage of load shedding in winter is about 60MW and in summer it’s about 45MW. So you’re going to need quite a bit of surplus being fed in to make a significant contribution or dent in the demand from Eskom.

RYK VAN NIEKERK: I believe businesses and households who want to participate in this initiative need to buy what they call an ‘advanced metering infrastructure’, or an AMI, and this is pretty expensive. How much does this meter cost?

KADRI NASSIEP: The city advocates a bidirectional meter; the term for that is the ‘advanced metering infrastructure’ or AMI. You purchase that via the city. We will facilitate that, of course, and the meter itself is required because you’re now feeding power back in; there’s a reverse flow of power so it needs a special meter.

The cost is quite high, it’s about R11 000-odd. We are currently looking at going out on tender for different meters, and hopefully those meters are going to be far more affordable, hopefully half the price. That has been a concern in the past – that the cost of the meters is quite high and we think that cost can come down dramatically.

There’s also a meter-reading fee, which is about R90-odd per month, and we are looking at reducing that meter-reading fee to about R25 a month, just to also ease some of the burden felt by consumers, particularly the SSEG [small scale embedded generation] customers.

RYK VAN NIEKERK: You will pay these customers R1.04 per kilowatt hour. Is that less than what you currently pay Eskom for power?

KADRI NASSIEP: It’s actually a bit more, because if you look at the cost of power, particularly in the middle of the day, which is when you’ll be ideally generating with solar, and the cost of energy during the middle-of-the-day off-peak period is probably about 80c 7c-odd. So we are paying you roughly what Eskom would be charging us, but we’ve added on the 25c incentive to encourage people to take up the programme.

So it’s actually costing us money as the city’s administration; it’s costing us about R12 million to R13 million extra per year currently to support the scheme. It’ll obviously cost us a lot more as people sign up now for the added benefits.

RYK VAN NIEKERK: Kadri, I assume you’ve now set a precedent for other metros to follow suit, because you’ve gone through the approval process. Do you foresee that maybe other networks can also do this and get the necessary approvals quicker than you did?

KADRI NASSIEP: I have no doubt that they can ramp up their processes now that there is an exemption granted. I think the minister of finance could grant the same exemption to other municipalities as well. So I don’t see an impediment to that.

For many metros it’ll make business sense to introduce this for their customers.

I also know Johannesburg will be looking at a benchmarking exercise with us, just to look at some of our practices and compare them to other metros.

Nelson Mandela [Bay] has looked at this issue before, so there’s every indication that they might go down this road even further. And I’m sure that between eThekwini, Ukulele and so on they would also be interested, with Tshwane, to go down this road.

RYK VAN NIEKERK: Kadri, many thanks for your time tonight. That was Kadri Nassiep, the executive director for energy for the City of Cape Town.