Dire Eskom situation needs to spark National Government to take urgent action on IPPs 

19 January 2021

The latest round of continuous Eskom load-shedding ended last night at 23:00. It was in effect for five days in a row and it has been absolutely destructive amid a time of COVID-19, certain livelihood-damaging COVID-19 regulations and the extreme economic woes of South Africa. In October 2020, amendments to the electricity regulations were finally gazetted which could pave the way for municipalities to source power independently from Independent Power Producers (IPPs). The City calls on National Government to expedite the processes that will enable the procurement from independent producers to become a reality so that municipalities such as Cape Town can go forth and start breaking the sole reliance on Eskom for power provision. Time is of the essence. We cannot continue to go on like this. 

The City has been preparing for a future where more affordable and cleaner energy can be procured by municipalities. We have been an advocate of this much-needed change to the energy regime for more than a decade. Importantly, we have been a strong proponent of enabling more security of energy supply and being able to determine what is required in terms of our own energy requirements and development goals.

The City’s plans includes building and procuring its own renewable generation capacity. We implore the Department of Mineral Resources and Energy to provide clarity on the process as soon as possible so that we can move forward with the execution of our plans. 

Own build 

The City also hopes to have a photovoltaic (PV) plant (solar-powered) built by the City on the ground by approximately 2022/3 if all goes according to plan, but with the current Municipal Finance Management Act and Energy Regulation Act regulations it could take up to five years from when a Determination is provided to having the first power from an IPP in our grid. Specialist studies are under way.

Procurement

We are in discussions with the national IPP office to assist us in developing a framework for a municipal procurement programme for cities. We are also procuring the services of a legal firm to establish the contractual terms of the power purchase agreement to ensure its compliance with legislation, national regulatory frameworks and the City’s policy landscape. We have done a lot of work and the National Treasury supports our initiatives and also the public and transparent procurement processes we committed to from the start. Tender processes and the successful bids would need to be completed ahead of any potential procurement.

We are working with the CSIR to develop a City-level Integrated Resource Plan which will provide the optimal mix. The last assessment done by the CSIR for the City indicated the low cost optimal mix included purchasing as much renewable energy as possible. All renewable energy technologies will thus be welcomed if they meet the criteria.

However, clarification is awaited on the practical implementation of the new amended regulations. Including:

·       The status of own generation (municipal generation) projects is unclear, with the regulations referring only to buying and procurement of electricity and not to own generation. Thus, as a City, we are still requiring the same clarity and Ministerial Determination we have been seeking as it pertains to own generation.

·       Municipalities need to understand how the regulations will be implemented within the context of the current Integrated Resource Plan (IRP) for Electricity, which is fully allocated up to 2024. It is not clear where the allocation for municipal procurement will come from in the IRP and whether the Determinations provided in September 2020 will be amended to include municipalities or whether a new Determination will be issued to include municipalities.

·       It is not clear what timelines will apply to the processing of municipal applications by the Department of Mineral Resources and Energy, especially the time for review of feasibility studies. This still needs to be clarified to ensure implementation without lengthy delays.

In August 2020, the North Gauteng High Court chose not to rule on the merits of our application challenging that a Ministerial Determination is necessary before power may be procured from IPPs, as originally stated in Section 34 of the Electricity Regulation Act over its applicability and constitutionality.

The Court ruled the City and the National Department should follow intergovernmental channels to clarify the roles and responsibilities. The City has been trying to gain clarity via the intergovernmental channels. We remain committed to the renewed engagement process we started in September 2020 and hope to receive the necessary clarification from the Minister as soon as possible.

The City has always maintained that local governments have the constitutional power and obligation to procure renewable energy and this is necessary to move away from the sole reliance on Eskom for energy supply. The City already has extensive energy saving campaigns (making Cape Town one of the most efficient cities in South Africa), it has extensive PV and small-scale embedded generation programmes in place, which are ready to be extended.

The City also ensures it can protect its customers as far as possible during load-shedding.

The City is proactively setting up all necessary requirements for such IPP procurement programmes should it be confirmed. As mentioned, the City could start doing so within the next three years, but we do not control the process and would be dependent on the National Government processes. All of these efforts show we are ready for the diversification of our energy mix for cleaner, more affordable and secure energy.

Currently, the City spends about 65% of the income from electricity tariffs to buy bulk energy from Eskom. With the cost of renewable energy going down constantly as new technology is deployed, it holds such potential for big cities to procure cleaner energy for their customers at potentially lower bulk prices, while at the same time making energy more accessible. 

Another big focus for us is to look at different energy resources to ensure all residents have access to reliable and safe electricity, including low income households. All cities, being the drivers of the economy, have growing informality and we need to look at how we address this with new technology, moving away from the business-as-usual approach and ensuring that we create more energy equality so that all our residents will have access to cleaner, more affordable electricity resources. 

We will keep standing up for residents and businesses whose livelihoods and lives depend on a reliable energy supply. 

Issued byGreg Wagner, Spokesperson to the Executive Mayor, 19 January 2021