South Africa’s nation power provider Eskom has struggled to meet demand © Photo by RODGER BOSCH/AFP via Getty Images
South Africa’s nation power provider Eskom has struggled to meet demand © Photo by RODGER BOSCH/AFP via Getty Images

Firms to be paid for any excess power they generate

26 January 2023

Businesses in Cape Town, South Africa, with surplus electricity will be given cash payouts for feeding power into the local grid after central government exempted the city from official procurement processes.

The city won the go-ahead from the National Treasury to pay private electricity suppliers to help meet energy needs as the country faces some of its most critical power shortages.

Cape Town mayor Geordin Hill-Lewis said the policy would help protect the city against load-shedding – where the utility cuts power across differing areas to prevent overloading the system. 

Initially the scheme will be rolled out to businesses only but over time the city would also pay residents, Hill-Lewis said.

He said the exemption is necessary because South Africa's procurement laws were not designed to allow energy procurement from independent power producers, only from state utility Eskom.

Under normal rules the requirement of a competitive tender would “make the programme a non-starter”, Hill-Lewis said.

“The result is an insurmountable admin burden not suited to the dynamic, decentralised process of buying and selling electricity that is wheeled into the grid by a great number of small-scale generators, all of whom are being paid at the same price,” he said.

He said Cape Town had been preparing for the ground-breaking policy by dropping a requirement for power sellers to be net consumers of energy. This previously only allowed suppliers to earn credits for excess power, rather than cash payments.

The city has also launched a trial of the scheme, involving commercial and industrial users, and allocated a R15m ($880,000) budget to pay for energy generated by small-scale embedded generators until June.

“The future is now, as we aim to immediately rollout the paying of cash for power. Payments to commercial customers will be possible before June, and within the year for any Capetonian with the necessary city-approved generation capacity. If you’re thinking of investing in a solar system, it just got more attractive,” said Hill-Lewis.

“We aim to buy electricity from as many city-supplied customers as are willing to sell to us. These customers may now produce as much power as they can from their approved systems and feed it into Cape Town’s grid. Under this plan, we will pay customers an incentive above the Nersa-approved tariff as they help us turn the corner on load-shedding.”

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