Even though government paved the way for municipalities to generate or procure their own electricity from independent power producers (IPPs) a little under two years ago, only 25% of them are equipped with either a basic or comprehensive small-scale embedded generation (SSEG) process, or are putting one in place.

A further 25% of municipalities do not have the internal capacity to establish or manage these processes, but may come do so with some support, while the remaining 50% of municipalities are not in a state to handle any additional responsibility, owing to long-standing financial difficulty or mismanagement issues, Sustainable Energy Africa director Mark Borchers noted this week.

He shared his insight on how large-scale embedded generation was being rolled out across local government during a webinar hosted by the Association of Municipal Electricity Utilities and the South African Institute of Electrical Engineers on August 23.

He explained that while SSEG had been happening at municipalities for quite some time, and many had managed this reasonably well, bringing large energy users into the network was a “whole new movement” that needed understanding of legalities and required proper processes to be in place.

Among the local government authorities that have successfully pulled off SSEG and larger-scale embedded generation is the City of Ekurhuleni, in Gauteng.

The city’s chief engineer, Hendrik Raedeni, said the metro had an embedded generation integration framework in place, as well as an IPP programme. Ekurhuleni comprises nine towns, each with an independent distribution grid.

Through the city’s IPP programme, which was launched in 2017, 47 IPPs have been appointed through a request for proposals process to supply electricity in the metro.

The city has signed 90% of the required power purchase agreements (PPA) with these IPPs, with three IPPs busy with grid integration studies at the moment and ten having letters of intent to fund from investors in place.

The estimated start of construction for some of the IPPs is December this year and January next year, while the first generation units from these projects will be online in 12 months’ time.

The city only accepted embedded IPPs with capacities of 5 MW and above, with no wheeling involved.

Ekurhuleni does have a wheeling framework in place nonetheless, and believes it can present a new revenue stream opportunity for itself and other local government authorities.

The 47 IPPs have total proposed capacity of 683 MW, of which 298 MW will comprise solar, 139 MW waste-to-energy and 195 MW gas.

Raedeni said Ekurhuleni hoped to save just under R14-billion through this programme, which would have otherwise been paid to Eskom over 20 years. The programme helped to ensure more affordable energy for customers, avoided power losses as no long transmission lines were involved, created jobs and mitigated against climate change.

To pull off a successful energy procurement programme, Raedeni suggested municipalities start with small but fundable projects, and ensure good credit ratings, since they aid PPA fundability, as does good payment records to Eskom.

“Investors want risk to be shared and need to be assured government will pay its dues,” he stressed.

Council for Scientific and Industrial Research (CSIR) principal researcher Warrick Pierce, meanwhile, emphasised that the electricity market was evolving and that municipalities’ business models and planning processes should do the same.

He highlighted that they could no longer remain dependent on one source of supply, nor remain a traditional bulk reseller of electricity.

The CSIR has witnessed an evolution to more decentralised energy operations, with more regional and local municipal energy master plans arising.

Pierce said Municipal Energy Master Plans (MEMPs) proved useful in balancing supply and demand, and were considered least cost options, if done well and based on long-term planning.

The CSIR has, in collaboration with...