The Council for Scientific and Industrial Research (CSIR) aims to partner with a metropolitan council and a district municipality to compile pilot municipal energy master plans for electricity (MEMPs), which will provide the two councils with insight into the best electricity supply blends for their respective grids.
CSIR Energy Centre head Dr Clinton Carter-Brown tells Engineering News Online that recent changes to the electricity supply industry globally and domestically are making it increasingly attractive for South African municipalities to procure electricity from local energy sources.
Key drivers have been the fall in the cost of small-scale embedded generation, such as rooftop solar and battery storage, and the step change in the cost of supply from Eskom, whose tariffs have risen by more than 400% since 2006.
Councils report that they are receiving ongoing approaches from potential independent power producers (IPPs), as well as customers seeking to install generation solutions for their own use. In addition, city authorities are well placed to pursue waste-to-energy and energy efficiency projects.
Several cities have already started to investigate alternative supply options and the City of Cape Town has initiated legal proceedings against the Department of Energy (DoE) in a bid to secure the right to enter into direct procurement relationships with IPPs.
An energy master plan, Carter-Brown says, will arm a municipality with the information it requires to assess the “optimal blend” between wholesale purchases from Eskom and embedded distributed resources. Such a plan will also offer greater insight into how a council can meet the twin objectives of lowering the costs of electricity to consumers and reducing emissions.
The CSIR is partnering with German development finance institution GIZ in piloting the MEMPs initiative, which will be conducted in collaboration with the DoE, Eskom and the South African Local Government Association. A steering committee is being established to manage the initiative, including the selection of the targeted municipalities.
Requests for proposals will be released soon and the CSIR expects to be in a position to have completed its selection of a metropolitan council and a district municipality before the end of 2018.
The actual MEMPs modelling, which will focus on electricity while assessing the potential to expand into transport and heating, will be completed during the course of 2019.
“The modelling results will create an understanding of the future municipal energy system in South Africa, which can then inform the design of municipal energy business models, services and tariffs,” Carter-Brown explains.
The MEMPs concept was presented by the CSIR at the recent Association of Municipal Electricity Utilities technical convention, where delegates raised concern over the sustainability of the current municipal utility business model.
Similar anxieties were expressed at the South African Local Government Association Energy Summit held in March, where it was agreed that new electricity distribution models were needed in light of the disruptions taking place in the electricity supply industry.
Carter-Brown believes that, if widely adopted, local energy master plans could improve prospects for the creation of sustainable municipal electricity distributors, which currently recover costs and generate surpluses based on a mark-up on the Eskom bulk supply tariff. This volumetric approach will come under pressure in the event that embedded systems reduce energy consumption within the local grid.
“In order to balance costs and revenues the utility may look to increase retail tariffs, but doing so may further drive the consumer business case to increase self-sufficiency, and possibly even drive grid defection. This is the well-known ‘utility death spiral’.”
A master plan could help a municipality in designing a more sustainable tariff architecture that disentangles the fixed and variable costs.
A MEMP should also improve the quality of the input assumptions used for distributed generation by drafting the national plan, known as the Integrated Resource Plan (IRP).
South Africa’s draft IRP 2018 sets a yearly allocation of 200 MW for small-scaled embedded generation. The DoE has confirmed that there is no specific empirical basis for the allocation. Rather, the inclusion is a reflection of the reality of the emergence of small-scale electricity generators in the domestic power system.
“In future, the national plan should be informed by an understanding of what is likely to be procured at the municipal level,” Carter-Brown concludes.