IN the same way that Eskom is grappling with unbundling its generation, transmission and distribution units, Nelson Mandela Bay Municipality (NMBM), like many others, is moving from a retail business, which just buys and sells electricity to a network provider type of business.
This new type of business requires a drastic shift as profits will need to come from the sale of customer service and network capacity.
On the technical front, NMBM has very clear guidelines with regards to renewable energy. A concise document defines six small-scale embedded generation (SSEG) models and two independent power producer (IPP) models. Guidelines for connecting to the NMBM grid and implementation procedures are outlined.
The Parsons Power Park Project
The R2.7 billion solar PV Parsons Power Park Project (PPPP) is pioneering the way as the first of its kind in the metro. With the environmental impact assessment (EIA) clearance issued and the Use of System Agreement finalised and ready for sign-off, the path is clear for construction.
The project is a joint venture initiated two years ago by Natura Energy and the owners of the property on which the 150 MW solar PV plant will be based, Raw Renewables.
Managing director of Natura Energy, Ezio Vernetti says that the NMBM is ”very conducive to facilitating the wheeling of power across the network and that the project has not encountered any major hurdles. We are aiming to commence construction in the fourth quarter of this year and supply energy by the fourth quarter of 2024.”
“Beyond our pledge to offering customers competitive power, the Parsons Power Park project has a commitment to the unique natural environment of Nelson Mandela Bay. 160 hectares of the plant site will formally be designated as a private nature reserve and protected area. This new nature reserve borders the Van der Kemps Kloof conservation area and expands the Municipality’s efforts in critical biodiversity preservation of the indigenous fynbos flora and fauna,” says Vernetti.
With over 50% of the municipality’s power being supplied to businesses, securing alternative sources to Eskom for job security and the municipality’s economic sustainability is critical.
The PPPP is aimed at the commercial and industrial market and is conveniently located 500m from the Rowallan Park Distribution Substation.
The first phase of the project will be for 25 MW, for which there appears to be ample demand. Vernetti says: “We have secured, in principle, contracts for the full 25 MW capacity of the first phase of the project which will be sold to multiple off-takers connected to the NMBM network.”
Billing process and costing
Vernetti says “the only challenge is brought about by the novelty of wheeling and the requirement to adapt internal municipal processes such as billing reconciliation to the new wheeling policy.”
According to NMBM guidelines, and based on an SSEG generating and distributing energy within the municipality, the tariff structure and cost to the customer will be based on time-of-use-charges (peak, standard and off-peak) based on active energy usage, less a credit for the energy wheeled back onto the network. There is also an energy demand charge calculated on the maximum peak kVA of electricity demand reached in the billing period. A monthly SSEG support charge pays the municipality to administer the wheeling system.
Regardless of the distance, customers opting to participate in wheeled supply from IPPs will be charged a wheeling fee. For direct Eskom customers, this fee is set and paid to Eskom. For municipal customers, the fee is set by and paid to the municipality. The NMBM’s wheeling charges, payable by the end-user, are published in the municipality’s tariff book under the wheeling tariffs. For an industrial user, the wheeling fee works out to about 30c/kWh of energy received from the IPP.
“Wheeling across multiple operator networks should be avoided, as it adds costs and administrative complexity,” says Vernetti. It’s possible to pay both Eskom and the municipality and Vernetti says “wheeling charges may result in the economics becoming unattractive.”
With Eskom’s massive tariff increases at 18.65% due to kick in on April 1 for Eskom customers and July 1 for municipalities, an accurate analysis of tariff and energy cost is required to firm up an IPP energy supply business case.
Wheeling charges are standard tariff charges raised to all parties that use the grid. The use-of-system, are unbundled tariff structures and rates that recover the costs associated with the delivery of energy and making capacity available on an electricity network, according to Eskom.
Regarding the regulation of wheeling tariffs, Nersa does not approve these tariffs because there is no methodology in place to enable a “just and fair” decision which can be sustained if the Regulator is challenged. They are therefore set at the municipality’s discretion.
As a response to an ever-growing need for green energy supply at competitive tariffs, Vernetti says he believes many such initiatives will be developed around the country.
The municipality is expected to issue a request for information (RFI) within the next few months for 180 MW, which is 30% of the metro’s total capacity. The scale of the energy required will require supply by a Nersa licensed IPP.
