The National Energy Regulator of South Africa (Nersa) has granted Enpower Trading a licence to trade energy. This is the first issuing of such a licence in over a decade and brings to a total three licensed energy traders in the country.
Enpower will now be able to help accelerate private investment in new electricity generation capacity in South Africa.
Energy trading plays a critical role in ensuring the relationship between independent power producers (IPPs) and customers.
Enpower will source competitively-priced, predominantly renewable energy from multiple IPPs and wheel this energy across the national and municipal grid networks to offtakers, selling to customers at a discount to the prevailing tariff.
There have been significant policy changes to support the energy transition and an increase in the number of IPPs but Enpower says IPPs are still not coming online fast enough to meet South Africa’s electricity demand.
Enpower CEO James Beatty says that despite there being many primarily renewable energy projects which are shovel-ready, they remain unfinanced as a result of being expected to sign into a 20-year power purchase agreement as a basis for building such projects. This is despite merchant demand outstripping supply.
“Enpower is collaborating with the development finance community and private sector to unleash the merchant market segment where demand is met through dynamic trade,” he says.
In addition to buying excess power generated by existing IPPs, Enpower will also guarantee offtake, thus ensuring bankability, independent of government support, for new generation projects, the company states.
Because energy traders are able to pool customers and offset any fluctuations in demand, they are able to enter into the kinds of long-term power purchase agreements which investors want, Enpower says.
The company says it has significant financial backing and recently closed a round of investments in which funding was secured from highly experienced traders in the global and African gas and power markets.
Enpower has existing customers in several municipalities in the Western Cape and was recently accepted into the wheeling pilot project in the City of Cape Town.
“We recognise that there are still a lot of regulatory and other challenges which need to be addressed. But the opportunity for energy trading to have an immediate impact is massive,” says Beatty.