Roundup of major energy and electricity news and developments in South Africa: 28 Oct to 10 Nov 2024

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Issue 135, Nov 2024

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Roundup of major energy and electricity news and developments in South Africa: 28 Oct to 10 Nov 2024

1. Eskom threatens City of Johannesburg with “load reduction” due to arrear debt.
2. SolarAfrica Energy selects PowerChina as EPC contractor for 342 MW solar project in SA.
3. AFD to provide €6.5m grant for development of new Eskom pumped storage project.
4. SA spends R17.5bn on solar PV and battery components in first nine months of 2024.
5. Renergen and SolaGroup in bitter natural gas vs. solar PV land-rights dispute.
6. Eskom to challenge award of electricity trading licences by NERSA in court action.
7. IPP Office to oversee pilot procurement of private independent transmission projects.
8. Minister Mantashe seeks investors in oil and gas for new state petroleum company.
9. Massive electricity revenue losses due to tampering and fraud involving prepaid meters.

To see an archive of all energy and electricity sector roundups to date, please visit www.eebi.co.za/news

1. Eskom threatens City of Johannesburg with “load reduction” due to arrear debt.

Eskom has announced plans to interrupt power to Johannesburg starting in December 2024 due to the City of Johannesburg’s (CoJ) and City Power’s significant unpaid debt. CoJ currently owes Eskom R4.9bn, with an additional R1.4bn due by the end of November 2024. Eskom claims that CoJ’s failure to pay has forced it to borrow funds at a premium to cover operational costs – costs that should be funded through electricity revenue. Municipal arrear debt to Eskom, standing at R90bn at the end of September 2024 and increasing at R1bn to R1.5bn a month, threatens Eskom’s financial sustainability. However, CoJ disputes the R4.9bn debt, alleging Eskom has overbilled by R3.4bn, and accuses the utility of a “pay now, dispute later” approach that leaves the city at a disadvantage. Eskom, under the Promotion of Administrative Justice Act (PAJA), has issued a public notice inviting stakeholders to submit comments or objections regarding the planned power cuts, with a decision expected by mid-December 2024. City officials argue that power cuts would harm residents and businesses, and have requested that Eskom retract its notice and instead participate in constructive negotiations. The City has sought legal avenues to prevent disruptions and insists that Eskom engage through the Intergovernmental Relations Framework (IGR) for dispute resolution. Eskom maintains that it has exhausted all alternatives, while CoJ reiterates its commitment to ensuring residents’ continuous access to power and stresses the need for fair billing and collaborative solutions. Both parties remain entrenched, with residents and businesses caught in the middle, awaiting the outcome of negotiations and Eskom’s final decision.

2. SolarAfrica Energy selects PowerChina as EPC for 342 MW solar project in SA.

In a significant development for South Africa’s renewable energy sector, SolarAfrica Energy has selected PowerChina to oversee engineering, procurement and construction (EPC) for a large-scale solar power project. The 342 MW De Aar Central Solar Power Plant, set to be one of South Africa’s largest single-unit solar facilities, will be constructed in the Northern Cape. This project aims to supply clean energy to industrial users and data centres, aligning with South Africa’s push for sustainable energy resources to meet growing electricity demands. The contract signing on 23 September 2024 marked an important milestone, with PowerChina strengthening its role in South Africa’s green energy initiatives. The partnership also falls in line with China’s Belt and Road Initiative, which promotes infrastructure development across Africa and other regions. PowerChina, known for its extensive experience in renewable energy EPC projects, will lead the construction efforts, which are expected to contribute significantly to South Africa’s renewable energy targets. This project forms part of a broader drive to transition to cleaner energy sources in South Africa, as the country works to reduce dependency on coal-based power. SolarAfrica Energy, having merged with Starsight Energy in 2022 and supported by private equity firms Helios Investment Partners and African Infrastructure Investment Managers (AIIM), continues to focus on expanding solar capacity across the continent. The De Aar solar plant is anticipated to play a role in enhancing energy security in South Africa, supporting national and continental energy goals with sustainable solutions.

3. AFD to provide €6.5m grant for development of new Eskom pumped storage project.

Eskom has received a €6.5m (approximately R125m) grant from Agence Française de Développement (AFD) to aid the development of the Tubatse Pumped Storage System (PSS) project in Limpopo’s Elias Motsoaledi Local Municipality. This initiative, designed to provide 1.5 GW of power with a 21 GWh storage capacity, forms a key part of South Africa’s shift towards a more sustainable and reliable energy supply. The Tubatse PSS project will play a critical role in stabilising the grid by storing surplus power generated from renewable sources like wind and solar, which can be dispatched during periods of high demand. This grant, part of the European Union’s Global Gateway initiative, will be used by Eskom to conduct essential preparatory work. Specifically, it will finance a transaction advisor to assess the feasibility of public-private partnership (PPP) arrangements, with private sector involvement considered crucial for the project’s success. Eskom’s current timeline envisions procurement for the PPP in 2026, followed by a construction period from 2025 to 2033. The Tubatse PSS project aligns with Eskom’s Just Energy Transition (JET) strategy, which seeks to reduce reliance on coal and promote cleaner energy sources. Dan Marokane, Eskom’s CEO, expressed confidence in the project’s potential, emphasising its importance in meeting South Africa’s carbon reduction commitments while enhancing energy security. AFD’s involvement, alongside European Union backing, reflects growing international support for South Africa’s low-carbon energy initiatives, with the Tubatse project set to bolster both economic growth and environmental sustainability.

4. SA spends R17.5bn on solar and battery components in first nine months of 2024.

South Africa has imported R17.5bn worth of solar photovoltaic (PV), wind power, inverter and battery components in the first nine months of 2024, highlighting a continued demand for renewable energy solutions in the country. This significant expenditure underscores a growing reliance on imported renewable energy technologies to bridge power supply gaps and support decarbonisation efforts. The Department of Energy and Electricity (DoEE) reports that the strong demand for solar PV, wind power and battery storage aligns with South Africa’s strategy to diversify energy sources and reduce dependency on coal. However, the DoEE emphasised that the volume of imports also signals an urgent need for local manufacturing capacity. By developing domestic production facilities for renewable components, South Africa could reduce its dependency on imports, lower costs and stimulate local job creation in the renewable energy sector. Industry analysts suggest that establishing local manufacturing facilities for solar, wind and battery technologies would not only create employment but also contribute to economic stability. DoEE Deputy Minister Samantha Graham-Maré has pointed out that investing in a local supply chain could support the government’s economic recovery plans, with potential spillover benefits to surrounding industries. Local production would also reduce the lead times and costs associated with importing technology, fostering a more resilient and self-sufficient renewable energy sector. This import surge reflects South Africa’s accelerating transition to renewables, with policymakers now assessing how best to balance foreign technology imports with strategies for sustainable, home-grown manufacturing and job creation in the green energy space.

5. Renergen and SolaGroup in bitter natural gas vs. solar PV land-rights dispute.

A legal conflict has erupted between natural gas and LNG producer Renergen and solar energy developer SolaGroup over land rights in South Africa’s Free State province. The dispute centres around land targeted for energy developments, which both companies claim rights to for their respective projects. Renergen, which operates the Virginia Gas Project, asserts that its land lease agreements, originally intended for gas infrastructure, cover areas now eyed by SolaGroup for solar installations. SolaGroup, partially owned by African Rainbow Energy and Power (AREP), is advancing plans for a large-scale 150 MW solar PV project for off-takers including Amazon, AB InBev and Sibanye Stillwater, arguing that it holds rights to sections of the same land. Renergen alleges that SolaGroup’s developments could interfere with its gas operations, as well as with infrastructure and safety protocols critical to its liquefied natural gas (LNG) production. The escalating conflict has now reached the courts, with Renergen seeking an injunction to prevent SolaGroup from proceeding with its project on disputed parcels of land. Both companies argue that their respective projects are essential for South Africa’s energy future, with Renergen focused on providing energy through LNG and SolaGroup aiming to expand solar capacity amid rising demand for cleaner, lower-carbon power. The case highlights growing tensions in South Africa’s energy sector as companies vie for land rights to support clean energy goals. As the matter awaits judicial resolution, the outcome could set precedents for land use and collaboration in South Africa’s evolving energy landscape. Both companies maintain that their projects serve the public interest, though this legal battle underscores the complexities of energy development in shared spaces.

6. Eskom to challenge NERSA’s award of electricity trading licences through court action.

Eskom has announced it will challenge the National Energy Regulator of South Africa’s (NERSA) decision to grant a number of electricity trading licenses, arguing that the regulator’s move violates NERSA’s own regulatory framework and threatens grid stability. Electricity trading licences are granted by NERSA to applicants following a comprehensive evaluation and public consultation process, and enable licensed traders to buy and sell electrical energy nationally. Eskom asserts that it was not consulted by the applicants before NERSA’s public participation process, a claim that is disputed by the licensees. Eskom further avers that the electricity trading licences infringe its exclusive electricity distribution licence, and that the traders will be cherry-picking “Eskom’s customers”. NERSA, on the other hand, says Eskom only has an exclusive licence for the operation of distribution networks in designated areas, and not an exclusive licence for the buying and selling of electrical energy. Eskom says will seek a judicial review and possible reversal of the trading licences, claiming that NERSA’s approval of trading licences risks creating competition in Eskom’s primary market, potentially leading to inefficiencies and higher costs for consumers. NERSA, however, has defended its decision as part of a broader shift towards a competitive electricity environment, which it argues could lead to innovation and better pricing for consumers. The Democratic Alliance (DA) has also criticised Eskom’s legal action, labelling it anti-competitive and urging Eskom to desist from its intended court challenge. This legal battle underscores the friction between Eskom’s traditional monopoly and South Africa’s evolving energy landscape, with implications that could reshape regulatory authority and market dynamics in the electricity sector.

7. IPP Office to oversee pilot procurement of first independent transmission project.

South Africa’s Independent Power Producer Office (IPP Office) has been tasked with managing the pilot procurement of the country’s first independently owned and operated transmission project. This marks a significant step towards opening the transmission grid to private sector investment. The initiative is part of a broader government strategy to involve private entities in the development of essential power transmission infrastructure, especially as the country anticipates a surge in renewable generation capacity. The National Transmission Company of South Africa (NTCSA) recently revised its 10-year transmission development plan, TDP 2025 – 2034, to reflect increased energy generation targets. The plan aims to integrate approximately 56 GW of new generation capacity into the transmission network from 2025 to 2034 and requires constructing 14,500 km of new transmission lines and installing 210 transformers with capacity of 133,000 MVA. The new procurement model is expected to attract both domestic and international investors, who will be critical in helping to expand the national grid and improve its resilience. The pilot project will focus on creating additional grid infrastructure, crucial for accommodating new independent power producers and ensuring a stable grid. IPP Office officials believe the project could serve as a template for future private transmission investments, setting precedents in regulation and operation. By diversifying the ownership and management of transmission assets, the government aims to alleviate Eskom’s heavy operational and financial burden and accelerate grid expansion. However, the plan faces challenges, including regulatory adjustments and the need to align various stakeholders on long-term objectives for South Africa’s energy infrastructure.

8. Minister Mantashe seeks investors in oil and gas for new state petroleum company.

South Africa’s Minister of Mineral & Petroleum Resources, Gwede Mantashe, is actively seeking international investment to bolster the nation’s oil and gas exploration sector, despite rising environmental concerns. Speaking recently, Mantashe emphasised the strategic importance of oil and gas in South Africa’s energy mix, underscoring the role these resources could play in addressing energy security. Mantashe’s call for investment comes as the Department of Mineral and Petroleum Resources (DMPR) looks to establish a new state-owned oil, gas and petroleum company aimed at developing domestic energy resources. The minister acknowledged a potential backlash from environmental groups, as South Africa has been under increasing pressure to transition away from fossil fuels in favour of renewable energy sources. “We are going to get a lot of criticism for fossil fuels – we will get shouted at, but we must do it”, he said. Mantashe argued that a balanced approach – incorporating both renewables and fossil fuels – would best serve the country’s energy and economic needs. In addition to potential exploration in South Africa’s offshore territories, Minister Mantashe indicated that the country’s onshore shale gas reserves could be a valuable asset. By attracting foreign partners, the minister aims to leverage international expertise and funding to kickstart projects, which he believes could help stimulate economic growth and job creation in energy and related industries. The appeal for investment in oil and gas signals the DMPR’s intent to continue to explore fossil fuel options in the face of growing environmental considerations. However, the initiative is likely to face scrutiny as debates around South Africa’s energy future continue.

9. Massive electricity revenue losses due to tampering and fraud with prepaid meters.

South African municipalities are grappling with severe revenue losses due to widespread prepaid meter tampering and fraud, costing municipalities an estimated R8.6bn in lost revenue. Eskom losses with prepaid meters are expected to be even greater. The South African Local Government Association (SALGA) estimates that in certain regions, over half of the installed prepaid meters are not vending electricity and are either faulty, bypassed, illegally reprogrammed or otherwise manipulated, allowing users to consume electricity without paying. This was revealed in a recent briefing to Parliament by Co-operative Governance & Traditional Affairs (COGTA) DDG Kevin Naidoo, who was accompanied by officials from Eskom and SALGA. This ongoing fraud and electricity theft not only undermines municipal and Eskom revenue but also places pressure on already strained electricity distribution networks, leading to what has become known as “load reduction” (power cuts) in overloaded areas. The revelations were made in an update by COGTA, Eskom and SALGA to Parliament on the status of the prepaid meter Token Identifier (TID) rollover project. This project involves a software update to some 11-million prepaid meters in South Africa by 24 November 2024, failing which they will no longer accept further prepaid electricity tokens and will stop vending electricity. Aging technology and systemic fraud involving prepaid electricity meters in South Africa poses a significant risk to the financial health of the the country’s electricity distribution industry and raises concerns over the long-term sustainability of public electricity provision in South Africa. The high level of fraud and electricity theft further highlights that technology “solutions” are not a panacea to complex socio-economic conditions that require a functional social contract between electricity distributors and customers.

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Independent Energy Pool (IEP Global)

Independent Energy Pool (IEP Global) is a business-to-business energy pool, allowing energy users and energy traders to buy and sell electricity. IEP’s ecosystem allows transacting of electricity in a balanced and standardised environment. The pool incorporates the ability to trade renewable energy certificates, as well as the tracking and reporting of ESG criteria.

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