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Electricity generation by farmers for farmers? ‘No’ says state

Eskom can’t connect photovoltaic energy suppliers to the grid unless they’ve been registered by Nersa, but Nersa stopped doing registrations in February.

The failure of the National Energy Regulator of South Africa (Nersa) to register small-scale solar photovoltaic installations in Eskom electricity distribution areas is costing farmers dearly, says Ig du Plessis, director of power consultancy Sonfin.

It is also stifling the development of an industry that could provide economic growth and employment, he says.

Du Plessis says Nersa stopped such registrations in February this year to develop a registration process and has just published a consultation paper about a once-off R200 fee that would be required from each applicant.

These installations are exempted from the extensive process involved in obtaining generation licences from Nersa, but are required to register in terms of regulations published in November 2017. More than a year later Nersa is still not geared to do such registrations.

No provisional registrations either

The registration process is merely administrative, and Nersa has in fact acknowledged that the applications it has received are fully compliant. It nevertheless refused to do provisional registrations pending the finalisation of the registration regime.

In the meantime, the applicants, mostly irrigation farmers, are foregoing monthly savings in energy charges of up to R100 000 (on a one megawatt system), while paying interest on multi-million rand loans for the development cost of their photovoltaic systems.

Members of the public have until January 16 to comment on the method Nersa used to calculate the R200 registration fee, or to propose a different method. Nersa estimated at the November meeting of its electricity sub-committee that the process would be finalised by March next year but acknowledged that the timeline might change if it receives many public submissions.

Weary of the risk of further delays Sonfin’s attorneys have written to Nersa to tender the R200 registration fee on behalf of the company’s clients and requesting preliminary registration.

Non-farming installations are being registered

In the meantime, similar installations are increasingly being registered in municipal electricity distribution areas such as Cape Town, which means farmers are being discriminated against, says Du Plessis. These registration processes are managed by the municipalities themselves as holders of the distribution licences.

In November AgriSA wrote to energy minister Jeff Radebe to request his intervention to speed things up. AgriSA cites the example of a specific “fully BBBEE farm” that has already invested R9 million in its 300 kW solar photovoltaic plant, without gaining any benefit from its investment. “This investment is now going to waste every day they are not able to generate electricity.”

According to AgriSA the farm borrowed the R9 million from the bank at an interest rate of 10%. Throughout the delay of eight months and counting, the farm must continue repaying the loan as well as an estimated R400 000 to Eskom in electricity charges, which the system was meant to save it over the period.

Cost stresses may lead to job losses

“This all adds up to an astronomical amount which in the end will result in the loss of job opportunities on the farm,” AgriSA told Radebe.

It attached a letter from Nersa to Eskom dated August 28, stating that its application complies with all Nersa’s registration requirements.

Du Plessis explains that Eskom will not connect any photovoltaic system to its grid unless it is registered with Nersa.

Once registered, the electricity consumer can enter into a new agreement with Eskom to do ‘net-metering’ and banking on the Eskom network. This means it will be credited for the electricity it generates and feeds into the Eskom system, with this credit offset against the cost of the electricity it later extracts from the system.

Du Plessis says the systems are designed to save customers up to 90% of their energy charges (the units they use) and they are left with the obligation to pay the balance as well as the fixed charges.

Farmers who irrigate their land, using a lot of electricity during seasonal operations, would in particular benefit from these systems, he says.

R1m grid connection point investments

Nersa requires applicants to show that the proposed photovoltaic (PV) system complies with Eskom’s requirements and that Eskom is prepared to connect it to the grid. To get to that point, applicants must fork out substantial amounts of money, including around R1 million for the connection point which will connect their PV system to the network. Du Plessis says it could take up to two years before an applicant will reach the point that the connection work can begin; they must first receive a cost estimate letter, followed by a budget quote (cost estimate).

If the process runs smoothly, the owner should be able to recover their investment through savings on their electricity bill in less than seven years.

The current delays are however impacting negatively on the business case, Du Plessis says.

Sonfin currently has four clients who have collectively invested almost R50 million, where the construction of the PV systems is complete but Eskom refuses to connect them without proof of Nersa registration.

It has another five clients who have committed at least R1 million to ensure Eskom compliance, but cannot proceed without certainty from Nersa.

Once Nersa gets its process sorted out the industry will grow exponentially, says Du Plessis. He says Sonfin is aware of more than 100 applications that have already been submitted to Eskom and are at different stages of processing.

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Just commission the systems – they do not know any better and will not escape from their comfortable offices to investigate. If found out then drag it through 5 years og court proceedings.

– Seriously though all they need to do is take it into an off grid system and use it as such – then eksdom en neerse cannot do anything.

agree with Casper – neither use their existing network on your property , but create your own

Exactly, why not just use you solar power?

There are significant technical issues with connecting to the grid to supply power, like phase synchronization with a complex grid that isn’t just plug in.

yet read that these have “business” plans that want/need Eskom to pay them for “excess” electricity. See they do not have the capacity to store electricity either.

Use your own solar power and shut up about Eskom not wanting to connect you.

And use what for lighting and cooking after sunset?

I share Casper’s (and others) sentiment: go off-grid completely, or at least isolate a critical section (of the farm or business) for receiving PV-solar power, and reduce overall reliance from Eskom.

Will go so far to say “the public needs to go rogue” and treat Nersa/Eskom live Gautengers treated Sanlal E-Toll with disdain.

The Govt does want it wants….so can the public! Beware! They can’t even police/enforce everything.

This is what a tax revolt is all about: public resistance to Govt-supplied extortion.

The police have become monitors. Hence SAPS has become SAMS

The problem is who do sizable producers sell to? The municipalities are bankrupt and one cannot deal with them. So you need larger private sector buyers who are prepared to pay a premium for electricity, although with Eskoms intended price increases, that is not going to be the situation for much longer.

Then if you are a sizeable producer who manages to find a private sector client, you are forced to use Eskom’s grid to get the power to your client, or erect your own expensive cabling.

But for most farmers in SA, solar is a proposition at R1.20 per kw/h.

Simple solution. Solar is virtually perfect for distributed power production. Build plants on individual farms and don’t tie them to the grid. Everybody wins.

Except Eskom, who will start wondering why its rural income is dropping drastically.

Not really. Like the article states, the farmers use most of the electricity during irrigation, the rest of the time the usage is much lower. Probably all neighbouring farms operate similarly, so they can not supply each other. A farm which requires 100kW power during irrigation might use only 20kW or less at other times, but if they want to be independent of Eskom they have to invest to be able to produce 100kW when required, which means probably 2-300kW generating capacity or very expensive battery storage. This would mean much higher monthly loan repayments than the cost of Eskom power. Add to this the threat of EWC and the farmers might not even qualify for a loan.

Try to spread the load and augment with a generator?

@TryingToRetire
How do you spread the load when all the irrigating equipments are running simultaneously? With proper Eskom supply they might even irrigate during the night, but certainly they can irrigate for far longer hours than with solar which obviously will not generate anything during the night and very little close to sunrise and sunset and on cloudy days. Irrigation is seasonal, it is like saying spread the harvest to several months.

The answer is obvious.

Use your PV system when it produces peak power and switch to Eskom after sundown.

DO NOT INTEGRATE THE SYSTEMS.

In other words because the PV system is not plugged into the Eskom system they can’t complain about feedback etc. But its perfectly feasible to use PV power to fill resevoirs and to pump water during the day.

Selecting some intellectual intelligence for a trip to Germany to see how its done and implement it without stalling. Stuff the EKSDOM protection comments.

For sure! 🙂 During a 2012 two-week trip through western Europe, I’ve seen PV-solar plants (in Germany, but especially in sunnier Italy) in all nooks and crannies on available land.

Germany is a leading innovator. And they use PV-solar, despite not having the abundance of sun in SA. We’re not using our natural energy optimally (yet).

Eskom’s annual increases will make PV-solar all the more worthwhile…

The Germans invested heavily in renewables which caused the electricity price to increase drastically (higher than in SA). The other problem is that because of the electricity supply by renewables can increase and decrease very quickly they had network instability problem for several years. They also lucky compared to SA that the electricity supply of Europe is interconnected and they can draw power from other countries, for example France. The French export their nuclear generated electricity all over Europe and their price is one of the lowest on the continent. Of course with the ANC in charge it would be crazy to go for nuclear in SA.

Hun you put it better.

So many simplify the issue to Eskom not wanting to paly ball.

A few people and business want to make money from supplying electricity and they need to plug into the grid to do so.

If your PV system is good well go off grid. Nobody is keeping you from doing that.

Look at the full south african electricity picture – my only conclusion about eskom and nersa is that the once excellent electricity producer is very scared of any competition from the private sector – for that reason it is made as difficult as possible for the private sector to participate in the production and selling of electricity– immediately eskom’s 27000 employees (where only 50% of them are actually needed) would be at risk. What eskom does not want to admit or its management does not actually understands is: -if eskom continues on the business track that it is currently on it’s a matter of time and they will be irrelevant with or without any requirements to register for a stupid once off R200 registration fee at Nersa. Days ago Eskom warned us about load shedding but does want to accept help when it comes from the private sector – to them another massive loan is the answer – a worry for sometime in the future, while a permanent solution is right on their doorstep.

Agree. Also another plus is potential jobs / business opportunities in smaller-scale PV & battery suppliers.

Reminder ..Good ideads are not allowed in RSA…ANC hates it when things work well in the private sector

Why would I as a bankrupt customer (eskom) possibly pay you to generate my own electricity? Unless it cost me more to generate than solar all these IPPs can just go away.
Sorry farmers you’ll need to wait till there’s money

Wow, Moneyweb, you may need to filter these comments better.

why? Would you keep signing up new suppliers (farming IPPs) when you are already bankrupt? That would be trading recklessly and and quick way to land you in sequestration court.

Trying to make money from a bankrupt customer is about the stupidest business model one could ever pursue.

Another business model that ranks up there with the finest is to cut the income lifeblood of the electricity utility while opting for grid-tied energy which existence depends on the survival of that very utility. A second smart idea is to expect that ailing utility to provide massive reserve capacity for backup power when the sun power is not available. Still one better, that is to have your food security still dependent on that teetering supply utility.

Crunch the numbers and look at them carefully. All you need is to be able to tell if one number is larger or smaller than another number.

1. Fact is, it’s extremely difficult to produce your own electricity at a cost lower than mainline grid supply, which has massive advantage of scale (even, or maybe especially, Eskom).

2. Ergo, any off-line generation (solar, wind, whatever you can do yourself, maybe not micro-hydro) is going to be produced at high and higher cost. (Sorry, greenies, this is true in the real world, not on limited computer models. Yes, Germany and Denmark have large renewable generation capacity, but this is the most expensive generated and distributed energy in Europe.)

3. Your off-line generation will have surplus capacity at times of low consumption, that you may want to sell off to the Main line supplier. BUT this will be more expensive that the main line can supply, so you cannot expect to make money from this sale, you can only hope to recover a small amount of off-peak energy production.

4. From the above, why should the mainline supplier like Eskom ever consider buying from you? That would be dumb business.

Ever tried to sell beer to a brewery? At a higher price than their own product?

Navigator:

Yes and No

For sensible users – eg cold storage, wineries, grape and fruit irrigation, large air conditioning users – their energy need is very seasonal and very well timed to the best time of day and year for solar. So if they can self-consume in those periods they reduce their impact on peak demand that would otherwise need either bigger baseload capacity or diesel peakers.

Rooftop projects often, by design or necessity, have E, N and W facing solar giving a longer flatter energy curve. So some generation is in peak period but let’s assume most is standard rate (looked at in Time of Use tariffs). Giving 1:1 credits for excess solar taken by the local distributor saves the distributor all of the levies and transmission costs that they would have paid Eskom on top of the kWh rate for those kWh.

If a user’s solar project, properly accounted for including cost of capital and maintenance costs the user more than the current standard tariff then the user should fire their advisor/consultant. Counting tax benefits, sensible systems come in under 80c/kWh at the moment.

The one that needs a look is the virtual IPP where company puts systems on client roofs and sell them the solar energy at inflated prices – mostly 110/115c. That should IMO be clamped down on as it likely contravenes bylaws and threatens council income base.

Meanwhile agriculture was the only sector to grow in the latest reports. So now they want to ruin that as well? And don’t think there won’t be a tax on farm solar power when ESKOM rural income drops.

Just yet another example of the State purposefully sabotaging any positive efforts by good honest citizens

Its a fact:

Your govt is at war with you

There is a lot more wrong than NERSA:

1. Who on earth is robbing that farm to the tune of R9m for a 300kVA system? Price should be R3.6m maximum and that leaves lot of leeway.

2. Why would people initiate large projects without all the paperwork signed off before hand? How did the banks finance this? Imagine I asked the bank for mortgage and they paid it out before transfer in my name.

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