Sun setting on Eskom's monopoly
Eskom may be in a shambles and electricity prices are likely to skyrocket, but for some domestic consumers solar power is saving them thousands of rands – and the planet thousands of kilograms of carbon – each month.
The hefty cost savings and shift to renewable energy is being made possible by the City of Cape Town’s small-scale embedded generation programme (SSEG), which was launched late last year. It allows residents and commercial users, with installations such as solar photovoltaic (PV) systems or small wind turbines, to sell power back to the grid.
But municipalities have traditionally relied on electricity revenues to subsidise their other services and the potential loss of revenue has been a major hurdle, which has prevented many local governments from implementing similar projects, even though it would reduce stress on the grid and help them to go green.
Renewable energy specialists believe the old model is not sustainable. As electricity prices continue to rise, coupled with poor supply, “creeping grid defection” threatens municipalities’ long-term financial viability, as more customers opt to generate their own power.
Constantia residents Leigh de Decker and her partner Mark Bleloch were among the first to sign up with the city after installing a 6.3 kilowatt (kW) system, with 21 solar panels, on their property.
They had tried to make their home as energy-efficient as possible, from installing solar water heating and using LED lighting to using an energy-efficient borehole pump, but their electricity bill was still between R3 500 and R5 000 each month. With a 1.2 hectare property occupied by two families, a large vegetable garden to irrigate and a swimming pool, the bill was only likely to grow.
“We started to explore other ways of reducing our electricity costs,” De Decker said. “This is an incredibly attractive model for households with the kind of electricity consumption that we had.”
The programme allows participants to sell energy back to the municipality for slightly more than 56c a kilowatt-hour (kWh) – the same rate at which the municipality buys power from Eskom.
Participants also get a discount on the power they buy from the city when they do draw electricity from the grid, such as during the evenings or when the weather is bad. This consumption charge is slightly more than R1.09/kWh – a large saving compared with the R1.54/kWh charged to domestic consumers who use less than 600kWh a month and the R1.87/kWh charged to consumers who use more than 600kWh.
But the city does charge a R13.03 service fee a day to participants in the programme.
De Decker said the programme made most sense for domestic consumers who had medium to large electricity bills – more than R1 000 a month.
Participants must also meet certain requirements. These include the installation of an advanced bidirectional electricity meter, capable of recording power imported from and exported to the grid. This is done at their own expense, but the city will install it.
Participants must also be net consumers of energy. In other words, they must consume more power from the grid than they produce.
The cost to install a solar system depends on the site and the quality of the modules installed.
According to De Decker, to install their system at current prices would cost between R180 000 and R200 000. But, by her own admission, they did opt for the “Mercedes Benz” of solar systems. De Decker expects to recover the cost within four and a half years. If electricity prices increase, it could drop to three years, or less, she said.
Eskom is applying to the National Energy Regulator to reopen its last multiyear price determination, which means electricity tariffs are likely to be increased.
According to the couple’s records, since they signed up with the city in October, their photovoltaic system has saved them R9 409.74 and offset the release of 4.8 tonnes of carbon.
Battery pack and inverter
For safety reasons, the system cannot produce power when load-shedding takes place, according to Bleloch, who is a solar engineer. During power cuts the couple use a customised unit, which includes a battery pack and inverter to run essential electrical appliances.
But this can be recharged by their solar installation when the power returns.
Bleloch said, by using satellite data for their area for the past 13 years, the couple could accurately estimate how much sun they could expect to get and the power they would be able to produce. In the Cape’s rainy winter months, for instance, it would produce 40% less power. But during winter the couple irrigated far less, reducing their load by about 30%, he said.
Expensive battery storage was an option for those who could afford it, but it was cheaper to remain connected to the grid and to draw electricity when needed, he said.
Electricity sales contribute a reported 30% to 40% of municipal revenues. But, although Cape Town was grappling with the issue, the city had taken “a progressive approach” to support the switch to alternative power sources, said Lance Greyling, the city’s head of investment. “You can’t stop it; it’s an inevitability.”
It wanted to find ways to adjust to this and the programme was designed to minimise the loss of revenue, he said. But it came with the benefit of added economic activity, particularly in the case of commercial users. The city was aiming to become a hub for the country’s green economy, Greyling said, and it had applied to have the Atlantis industrial area declared a special economic zone, earmarked for green technology.
Not a threat
The mayoral committee member for utility services, Ernest Sonnenberg, said the uptake had not been sufficient to pose a threat to the city’s ability to supply services. By February, only one residential and two commercial customers were recorded. “However, they are the first of what is expected, over time, to become a significant portion of our customer base.”
The city generated about R9.9-billion in electricity sales. The daily service charge ensured that the expenses associated with facilitating the programme were covered and were not being subsidised by those who could not afford to buy into PV technology, he said.
Davin Chown, the chairperson of the South African Photovoltaic Industry Association, said municipalities found themselves in a tough situation anyway. The loss of economic activity because of power cuts, the resultant damage to small businesses in particular and the effect on jobs were already eroding municipal revenues.
Municipalities were gradually accepting that the electricity supply deficit and increasing costs were driving consumers to alternatives, Chown said, and they had to consider new ways to deal with their problems. The Council for Scientific and Industrial Research has proposed a central power purchasing authority, which would buy surplus electricity from consumers and compensate municipalities for lost revenue.
Chown said the prevalence of rooftop PV systems could be much greater than the published numbers suggested, because it did not have to be reported. “People simply install a system on their roofs,” he said.
The association calculates, based on estimates of its members, that 31 megawatts-peak have been installed, which is substantially more than the estimated 10MW based on a 2014 consultation paper published by the National Energy Regulator of South Africa.
The opportunities for this kind of power generation are significant. Germany, which receives far less sun than South Africa, reached a peak of 24 gigawatts in 2014.
Anthony Keen, who participated in the trial phase of the Cape Town’s programme, said, despite the difficulties, municipalities were at last recognising the need for these kinds of programmes. The Nelson Mandela Bay Metro was an example. It had introduced net metering for residents with solar PV installations, he said.
Terence Mordaunt, another Cape Town resident who signed on to the programme a week ago, is pleased with his decision. He lets his home out as a “mini-hotel” when his family is away. The 1.2-hectare property has a borehole and pool pump and electricity was getting “noticeably more expensive”, he said.
He expects to recoup his investment within five years but, if electricity prices continue to rise, this could happen in three, he said. “We have hardly noticed the change,” he said – “except now I can flash on to my iPad to see how much electricity I’m generating.”