Ekurhuleni noses ahead in city electricity race

A program to procure as much as 700 megawatts of electricity that began in 2016 is coming to fruition.
Image: Dwayne Senior/Bloomberg

Ekurhuleni, the industrial hub of more than 3 million people to the east of Johannesburg, may have a head start in the race between South African cities to buy their own power to alleviate crippling outages imposed by the national utility.

A program to procure as much as 700 megawatts of electricity that began in 2016 is coming to fruition, with one funder saying a project to build a 41 megawatt solar plant at a cost of about R1 billion ($64 million) will begin by the end of this year.

“We have secured the equity, and once that closes we can finalise debt and basically start overnight,” said Justin Naidoo, the chief executive officer of African Growth Partners, which is working with five independent power producers. “We will be ready to start building the project before the end of the year.”

South Africa has been subjected to intermittent planned power outages since 2008 because Eskom, the state power utility, can’t meet demand. Cape Town and Durban, the second- and third-biggest cities, have asked for proposals for companies to provide them with power and Johannesburg, the biggest, plans to do the same.

In addition to reducing power cuts, the cities will also primarily source power from renewable sources, meaning that there will be less impact on global warming.

While the government in 2020 changed legislation to make it easier for cities to buy electricity from suppliers other than Eskom, Ekurhuleni had already started its own process to get power on board and was able to quickly apply, the city said in a response to questions.

In December the city signed 20-year power-purchase agreements with 41 out of 47 companies that had bid to supply power, and those firms are now finalising where they will build the plants and secure funding. Some companies may start producing power in 12 months time, the city said.

Cape Town, by contrast, is still gathering proposals by prospective contractors and may select bids later this year. Johannesburg is yet to formally request proposals.

African Growth has secured $100 million of funding for projects such as the one it is backing in Ekurhuleni, Naidoo said. It’s also considering backing five projects that will use biogas from waste dumps in the city to produce power, he said.

© 2022 Bloomberg

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