The City of Ekurhuleni is accelerating an ambitious programme to procure almost 700 megawatts (MW) of green electricity generation capacity from 47 independent power producers (IPPs).
Most of the projects fall within the 10MW upper limit and are thus covered by former energy minister Jeff Radebe’s May 2019 notice, which allows for deviation from the current Integrated Resource Plan for a total of up to 500MW of generation capacity annually.
This should simplify the licensing process, according to Thembani Bukula, former full-time member of energy regulator Nersa and current PowerX CEO.
Projects that exceed 10MW have to apply to the minister of energy via the Department of Energy, according to Jabulile Kgomo, project manager for alternative and renewable energy at the City of Ekurhuleni.
The programme is expected to bring billions of rands in investment to Ekurhuleni and, with special conditions relating to local employment, also create jobs for residents.
While the city asked for bids in 2016 and made the 47 awards in 2017, the project then stalled until unlocked by Radebe’s notice, says Kgomo.
The awards were made subject to three conditions:
- Compliance with section 33 of the Municipal Finance Management Act (MFMA) to provide for a municipality to conclude contracts over periods longer than three years;
- The conclusion of a power purchase agreement (PPA) between the IPP and the municipality; and
- The IPP obtaining the required generation licence from Nersa.
The capital investment will be for the account of the IPP, but the city will sign a power purchase agreement that would guarantee the off-take over a period of 20 years.
The city is currently conducting a public participation process in compliance with section 33 of the MFMA and members of the public may submit comments until September 16.
The council will then consider a report on the project incorporating these comments and, if approved, will continue to conclude the power purchase agreements, says Kgomo.
With the PPA in hand the IPP can then apply for the necessary generation licence.
The programme includes a variety of energy technologies including solar photovoltaic (PV), waste-to-power, utilisation of landfill gas and fine coal dust.
Ekurhuleni will only consider tariffs equal to or less than the Eskom Megaflex tariff. The IPPs will be paid their full tariffs for the first three years of the 20-year PPAs, with discounts applied for the remainder of the period. The average discount rate for solar PV projects amounts to 8.7% and for natural gas technology 12.4%, for example.
IPP despondence turns to excitement
John Mashao, technical director of Akani Energy, which has been awarded a 10MW solar PV project, says the company was quite despondent when the project stalled, but the new developments are very exciting. He expects a meeting between the city, successful bidders and possible sub-contractors within the next week or two. He hopes to start construction before the end of the year and says the plant should be up and running within six months thereafter.
Alfred Phiri, engineer at Alcha Energy Solutions, which has been awarded a 36MW fine coal generation project, says the project might be split into different units, each not exceeding 10MW. This will ensure that it qualifies for Radebe’s deviation.
According to Phiri, the project is being financed by both local and international investors and the capital cost could be more than R1 billion. It would use fine coal dust – a by-product of Eskom’s coal-fired power stations.
“We are ready to start,” Phiri says, adding that a 10MW plant could be constructed in four to six months and a 36MW plant in a year.
Specialist energy legal consultant Sue Rohrs says obtaining ministerial determination for projects of more than 10MW could be a challenge. The minister of energy has never before granted anybody but Eskom permission to buy from IPPs, she says.
The City of Cape Town in fact went to court in an effort to force the minister to grant it such a determination, or alternatively have the relevant provision in the Electricity Regulation Act declared unconstitutional. The application was heard earlier and the high court reserved judgment.
Rohrs says Ekurhuleni is, together with Cape Town, at the forefront of the move to green energy at local government level.
If successful, she expects other municipalities to follow.
Ekurhuleni hopes to procure 10% of its energy needs from green energy providers by next year, according to Kgomo. She says Ekurhuleni’s power purchases from Eskom would not decrease, but as a growing city it would procure its additional needs from IPPs.