Premier
With regard to the assertion made in his SOPA 2022 that wheeling (which is the private-to-private trading of energy) across municipal networks is being explored in seven Western Cape municipalities, given the recent unlocking of national electricity regulations:
(a) What are the details of this wheeling, including (i) the amount of energy being traded and (ii) the cost of the electricity and (b)(i) what are the details of the seven municipalities and (ii) what criteria were used to select them?
- One of the key mechanisms identified to contribute towards the province’s low carbon energy target is the enablement of energy wheeling (i.e. the transportation of energy from a generator to a remotely located end-user through the use of an existing distribution network).
To enable wheeling through the municipal grid, municipalities should have a Council-approved wheeling framework before they can develop a wheeling tariff that must be approved by the National Energy Regulator of South Africa (NERSA). A wheeling tariff enables municipalities to charge a fee for the use of their grid i.e. generates electricity revenue for municipalities.
The support being provided by the Western Cape Department of Economic Development and Tourism, to the specified municipalities is in the form of technical and financial knowledge transfer with the aim of developing wheeling framework documents as well as drafting NERSA applications for the approval of wheeling tariffs. The documents are developed from standard frameworks that are customised to the needs of each municipality following extensive municipal collaboration and engagements.
- There is currently no energy being traded across municipal networks in the specified municipalities. However, through the implementation of the wheeling frameworks and NERSA-approved tariffs being developed through the project, it is expected that significant low-carbon energy production will be unlocked in the short to medium term.
- For the end-user, there are two portions to the cost they would pay for wheeled energy. The first portion is the cost charged by the Independent Power Producer for the supply of the energy. The details of this cost are subject to (confidential) agreements between the end-user and the energy supplier but are expected to be significantly less than current supply costs.
The second portion of the cost that the end-user pays is to the municipality through whose grid the energy is wheeled, for the use and upkeep of the municipality’s electricity network and administrative fees like metering and billing. Through the work of this project, we are aiming at keeping this portion of the cost neutral to the end-user – this means that the municipal portion of the end-user fee will be similar whether the energy originates from Eskom or from an IPP.
If we combine these two aspects of the charges, the end-user should see a reduction in energy charges. As these are private-to-private agreements, market forces will dictate that it will only be feasible if the total end-user cost is less than the alternative, which is currently Eskom supplied power through the municipal network.
- (i) The seven selected municipalities are:
- Stellenbosch Local Municipality
- Saldanha Bay Local Municipality
- Overstrand Local Municipality
- Drakenstein Local Municipality
- Bergrivier Local Municipality
- Cape Agulhas Local Municipality
- George Local Municipality
- The seven municipalities were chosen based on the following criteria:
- Private sector interest in wheeling identified in the area through business engagements, including where businesses have approach
- Municipalities with interest
- Municipal interest/buy-in to enable wheeling
- Proven record of the municipality implementing small scale embedded generation policies
- Municipalities with a dedicated renewable energy champion
The above criteria were used to ensure that the support provided in this project will have the most immediate effect, with the idea that valuable information and guidelines collated and developed will consequently be used to enable other municipalities in the province to follow suite in enabling and promoting wheeling.
