Increased investment by the residential and industrial private sector in renewable energy generation — primarily in rooftop photovoltaic (PV) — is seen as the next big disrupter in SA cities. This is accelerating as a result of renewed load-shedding and concerns about Eskom.

In principle, metros and municipalities throughout the country support this disruption, as they too want to diversify their energy mix and reduce the carbon emissions associated with fossil fuel-based electricity generation.

The sticking point is that the national electricity regulatory system is not set up to accommodate a diversified energy mix, nor the decentralised management of it. Municipalities may not participate in the renewable energy independent power producer procurement programme and may only install their own renewable energy or other power-generation plants at capacities of less than 1 MW, or if they have a generation licence from the energy regulator, Nersa.

At the same time, reduced revenue as a result of the increased residential and industrial self-generation of electricity, or grid defection, is posing a threat to the long-term financial sustainability of our metros and municipalities, which are required by law to purchase their electricity from Eskom. Electricity revenue is not allocated to support only the electricity services they provide — it is also used to cross-subsidise several other essential services.

Against this backdrop, an in-depth investigation into the existing electricity distribution system at metro and municipal level in SA  be done in 2019, funded by the WWF Nedbank Green Trust. The investigation will be coupled with the “development of workable models for metros and municipalities, and recommendations for alternative sources of revenue and funding from renewable energy”, says Louise Scholtz, WWF-SA manager of special projects.

Key partners in this investigation are the SA Local Government Association, SA National Energy Development Institute, Association of Municipal Electricity Utilities, the City of Cape Town, eThekwini Metropolitan Municipality and City Power (Johannesburg), as well as selected smaller municipalities.

“Municipalities are acutely aware of the fiscal cliff they will face if they cannot respond effectively to the impacts of reduced electricity sales,” Scholtz says. “As a result, they are grappling with the conflicting outcomes of encouraging increased private-sector investment in renewable energy, while ensuring their long-term financial sustainability.”

If municipalities could generate their own electricity or purchase it from independent power producers (IPPs) at competitive prices, and not be forced to pay the Eskom fixed price, this would help to tackle this threat to municipal budgets.

Scholtz says that feasibility studies on municipal-owned photovoltaic have been developed for selected municipalities. The City of Cape Town is busy with a comprehensive audit of its current renewable energy footprint, using aerial photography. The city has also filed a high-court application to allow it to purchase electricity from IPPs.

Current disputes over how the electricity regulatory system must change need to be resolved. Policies and processes also need to be developed to ensure that private owners of renewable energy systems who are connected to the grid register with their municipalities and pay a connection fee, as all electricity users must do. This is key from a municipal planning perspective.


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