South African private energy producers seek fair deal on output curbs

Industry executives claim that South African private energy producers want compensation for revenue lost due to Eskom's request to limit the electricity supplied to the national grid.

Eskom has sent a proposal to South Africa's energy regulator for the introduction of a compensation mechanism to compensate Independent Power Producers (IPPs), who have lost revenue due to curtailment rates up to 10%.

Eskom has been asked to curtail power due to a lack of high-voltage power lines and pylons, which have created choke points in its transmission system.

As efforts to open Africa's largest electric market gain momentum, several regulatory reforms are being proposed.

Ian Burger, technical director of private power developer SOLA Group said: "We hope that there will adequate compensation for the generation that has been curtailed."

Burger stated that Eskom requested the SOLA Group’s two Lichtenburg PV solar plants, each of which produces just over 100 Megawatts (MW), to reduce output by as much as 80% in order to produce only 20MW per day.

SOLA Group provides power to Tronox, a miner.

Eskom's studies show that cutting renewable energy is significantly cheaper than upgrading the grid to connect the same amount to the grid.

Eskom expects to free up 3,470 MW in capacity by reducing the generation of independent producers.

The energy regulator Nersa published a draft policy on congestion curtailment in July based upon Eskom's request for approval to classify the service as "constrained ancillary generator service".

Eskom could use formulae to compensate renewable energy plants when power is curtailed due to grid congestion.

The devil is still in the details, but it's possible to further reduce the costs for consumers by focusing on IPPs that have the lowest tariffs, rather than everyone at once, said Kilian Hagemann. CEO of G7 Renewable Energies.

Eskom has been able to provide uninterrupted electricity for the last five months. This feat was achieved in 2020. Eskom is now less reliant on renewable energy as a way to boost the grid.

Eskom anticipates that congestion curtailment will be implemented regularly from 2026, and curtailment levels will increase as more renewable energy projects are brought online. Reporting by Wendell Roelf, Editing by Olivia KumwendaMtambo and Mark Potter

(source: Reuters)