Cape Town Moves to Set Up Own Electricity Supply

Cape Town wants to set up its own independent power producer office to secure renewable energy, following President Cyril Ramaphosa’s announcement during his Sona address that municipalities in good financial standing will be allowed to procure their own power from IPPs. However, the City says the turnaround could be 2-3 years.

Executive director for energy at the City of Cape Town, Kadri Nassiep says the City has engaged national treasury with a view to setting up its own independent power producer (IPP) office along the lines of the renewable energy independent power producer programme (REIPPP).

He says “we have also engaged CSIR to prepare our mini-IRP that will direct our call for proposals”. Electricity provision in the country is guided by the integrated resource plan (IRP) which sets out what electricity will be sourced and when. Government has used the IPP office, which falls under the department of mineral resources and energy, to procure renewable energy in earlier REIPPs. The IPP office has begun an exercise to source 2,000 to 3,000 megawatts of emergency supply on an urgent basis.

Cape Town’s intention to set up its own IPP office, which will implement its own IRP, would constitute a dramatic re-shaping of the energy landscape. Nassiep says “we still have to refine tariffs, but we are looking at it already”. Budgets need to be realigned, he says, but that’s not a huge issue. “So we are cautiously optimistic, but let’s see what [mineral resources and energy minister] Gwede Mantashe publishes in terms of schedule 2.”

Mantashe announced earlier in February at the Mining Indaba in Cape Town that the government would be gazetting a revised schedule 2 of the Electricity Regulation Act, which will enable self-generation and facilitate “distributed generation” by municipalities.

The City of Cape Town has fought a protracted battle with the minister and regulator Nersa over the right to source its own electricity. The dispute has its origins in 2015 when then Cape Town mayor (Patricia de Lille) asked the then energy minister (Tina Joemat-Pettersson) to allow the City to source renewable energy, but did not even get a reply. The case has been set down to be heard in the high court on 11-12 May. Given the constrained electricity supply, the City of Cape Town had argued for an earlier court date, but has not been able to secure this.

Asked if the court case will still go ahead, Nassiep said: “In my opinion yes. We still need clarification from the court regarding our rights. “For instance, the minister might opt to issue [a] once-off determination in favour of munis and then not again. Or he can opt to keep it later to a cap of 500 megawatts, which might limit us unfairly. So it’s still needed.”

Nassiep says that “unfortunately” there is a likely two- to three-year time horizon for Cape Town’s own sourced power to come on stream because of financial closure issues, environmental impact assessments, power purchase agreements as well as connection charges and ordering of connection and plant equipment. The Centre for Environmental Rights (CER) has joined the Cape Town court action, the CER’s Nicole Loser saying that local government has a constitutional duty to provide clean and healthy electricity, “which does not pollute our air, water, soil, or damage our climate”.

Loser says the Sona remarks were “very vague” on the details of municipal procurement. “Also not clear is if there will be the needed legal reform to address the current uncertainty around municipal procurement of whether Mantashe will simply issue the determination requested by the City.”

Cape Town mayor Dan Plato cautiously welcomed Ramaphosa’s announcement. “However, urgent clarity is required from the national government on the legal and regulatory nuts and bolts of how this must happen. “We need urgent clarity from the government on the roles and responsibilities for municipalities and other stakeholders in terms of the new generation capacity regulations in the Electricity Regulation Act,” said Plato.

He says the City is doing a study to determine how best to overcome energy poverty, through various projects including installing solar kits, solar home systems, increasing free basic electricity and improving access to gas. “Improving access to affordable electricity is a key deliverable that we are investigating at the moment.”

Ramaphosa also announced that “a Section 34 ministerial determination will be issued shortly to give effect to the IRP 2019, enabling the development of additional grid capacity from renewable energy, natural gas, hydropower, battery storage and coal”. “We will initiate the procurement of emergency power from projects that can deliver electricity into the grid within three to 12 months from approval,” he said.

Nersa will continue to register small-scale distributed generation for own use of under one megawatt, for which no licence is required and will ensure that all applications by commercial and industrial users to produce electricity for their own use above one megawatt are processed within the prescribed 120 days, Ramaphosa said. “It should be noted that there is now no limit to installed capacity above one megawatt.”

He said that a bid window for round five of the renewable energy IPP will be opened and that the government will work with producers to accelerate the completion of bid window four projects. “We will negotiate supplementary power purchase agreements to acquire additional capacity from existing wind and solar plants.”

While the electricity generation shortfall the country faces was quantified at the release of the IRP in October at 2,000 megawatts, this has subsequently been revised in later official pronouncements to 3,000 and then 5,000 megawatts. A document issued after the January lekgotla of the ANC’s national executive committee put the shortfall at 5,000 to 7,000 megawatts.

 

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Sources: [1], [2]. Image sources: Matthew Henry [1], Arqm Ahmd [2].