Business leaders in the energy sector have called on Eskom and the Transmission System Operator (TSO) to provide more clarity for independent power producers participating in the wheeling of power where they experience an imbalance between energy production and transmission.
Speaking at the Africa Energy Indaba in Cape Town on Wednesday, these business leaders said the power utility has been “quietly sidestepping” these questions as Eskom continues its journey to unbundle into three separate entities: one for generation, one for transmission and one for distribution.
Africa Greenco CEO Ana Hajduka said as the industry tries to establish its operations in the various wheeling regimes in South Africa’s cities, the government will need to provide more clarity on how the price of supply is formulated in the wheeling market.
“I think the question is more for the politicians on how they will pass on the message on what the price of supply is. And that’s a very difficult message that they will have to somehow explain well,” she said.
Wheeling refers to the delivery of energy from a generator to the end user in a different location through an existing transmission or distribution network.
While independent power producers in South Africa cannot participate in the Southern African Power Pool, with Eskom as a single buyer, wheeling of electricity is significant in Africa as efficient electricity wheeling addresses energy needs ahead of open-market mechanisms.
Hajduka said one of the major benefits that has emerged from the commencement of wheeling is the price competitiveness of the market, but warned that uncertainty undermined these competitive prices in the long term.
“We are forgetting the fact that someone has to pay for the transmission and development plan. Who’s going to pay? We’re all going to pay, the participants in the market, especially because it's going to be done again via a private model, so it will have to feed in as a regulated tariff input cost,” she said.
“I think the question is really almost not for the TSO because the TSO is battling with this on a daily basis and has been … shouting and screaming about this for the past decade in Eskom’s case, but no one was willing to listen. But now we have to listen — there is no other alternative.”
Enerweb chief innovation officer Gerard van Harmelen echoed Hajduka’s sentiments, saying this has to be addressed to maximise the benefits of wheeling markets in South Africa as the local sector reforms.
In this monthly reconciliation, any standard hour, whether that standard hour is in the middle of the day or it’s on a Sunday evening or Saturday evening, is treated the same. They sort of cancel this balancing effect completely
— Gerard van Harmelen, Enerweb chief innovation officer
“Currently in South Africa with the wheeling arrangements, the wholesale wheeling and the retail wheeling, if you can call it that, the virtual wheeling, the arrangements are sidestepping these issues and you see it very clearly in this monthly time-of-use reconciliation,” he said.
He said as more renewables are introduced, irregular generation presented a challenge to the market in a number of ways. “So the actual cost of balancing, which is one of the big ones, balancing on an hour-to-hour [basis], when wind is down and you have a really cloudy day and the generators are not producing and Eskom has to produce and on another day they over-generate.
“That balancing on an hour-to-hour basis is not applied. Even in this monthly reconciliation, any standard hour, whether that standard hour is in the middle of the day or it’s on a Sunday evening or Saturday evening, is treated the same. They sort of cancel this balancing effect completely.”
Van Harmelen tipped his hat to the City of Cape Town and Nelson Mandela Bay metropolitan municipalities for modifying their wheeling policies to reflect the requirement for hourly balancing in the wheeling markets. “But in Eskom, the current TSO is quietly sidestepping the issue,” he said.
Pace Property Group CEO Siyabonga Mbanjwa said traditional and virtual wheeling presented exciting prospects. Power plants have been connected to the grid, power has been sold to Eskom, and other buyers are now coming onto the system.
“Some of the few listed property funds that have signed these agreements, if you take the admin costs for Eskom, the overall cost is working out to be cheaper than what you would pay a municipality,” he said.
He warned that if costs start to escalate, the incentive of the market is lost, but that cost effectiveness was a huge benefit in the market.
Amendments to the Electricity Regulation Act propose a regulator framework to ensure wheeling facilitates investment in the electricity supply industry and promotes diverse energy, competitiveness and a fair balance between the interests of customers and investors in the electricity supply industry.
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