by Charl Alheit, Enpower
A new South African private electricity trading company is set to transform the country’s power market after recently being awarded a landmark licence that allows it to transport energy from independent power producers (IPPs) to private end-users in any location across the municipal and national electricity grid.
Awarded in February 2022, Enpower Trading is the second private electricity trading company in South Africa to be granted a trading license by the National Energy Regulator of South Africa (Nersa), and the first to be awarded such a licence in over 12 years.
The license enables Enpower Trading to source competitively priced, predominantly renewable power from multiple IPPs and small-scale generators, transport or ‘wheel’ this energy across the national and municipal grid networks and sell it to customers at a discount to prevailing electricity tariffs.
Our vision is to enable much-needed additional generation and storage capacity, and to help foster an efficient power market by offering offtake solutions to IPPs, competitive tariffs to customers, and the sustainability of supply to municipalities and their constituents.
Nersa’s awarding of this licence represents a critical step forward in the Department of Energy’s roadmap, which plans for the unbundling of Eskom’s generation, transmission and distribution business units to enable the transition from a single-buyer model to a more competitive domestic open market model.
Our licence is a very important step that is aligned with the government’s aim to liberalise the South African energy market. We are proud to be a part of this process and fully support these recent changes in legislation.
An amendment to the Electricity Regulation Act, promulgated in August 2021, exempts embedded electricity generation projects between 1 MW and 100 MW from the previous requirement of applying for a generation licence, requiring them only to register with Nersa.
This regulatory relaxation is expected to drive an increase in the number of South African IPPs and small-scale embedded generators (SSEGs) and consequently, the availability of independently produced renewable energy.
How it works
Enpower Trading signs an energy offtake agreement with Nersa-registered IPPs, which are connected to either the municipal or Eskom grid.
A Use of System Agreement (UoSA) is then entered into between the municipality, as the distributor, and Enpower Trading. The customers sign a power purchase agreement (PPA) with Enpower Trading, which outlines the amount of energy to be supplied at which rate.
The company pays the municipality for the use of the grid, ensuring that the municipality does not lose the income derived from its mark-up on electricity sales.
Benefits for commercial customers and IPPs
Customers who sign a PPA agreement with Enpower Trading will receive a lower tariff than the prevailing electricity tariffs and are also subject to lower annual tariff increases.
Commercial and industrial power users considering their own energy generation installations will no longer need to invest in costly self-generation and can rather use that capital in their business processes or invest in energy storage solutions to counter load shedding. The added benefit of purchasing power from a trader is the increased flexibility of the contracting period which will allow customers to move away from long tenors, providing a more tailored PPA solution suited to their individual business needs.
Customers poised to benefit most from the arrangement are large industrial and commercial customers, particularly those with a significant national or regional property footprint.
“Owing to our multisource capabilities, we will be able to provide baseload along with the intermittent renewable solutions. Customers are accessing energy that is not produced by Eskom, which generally means it’s greener and it’s cheaper,” says Enpower Trading’s managing director, Nikolai Germann.
IPPs will also benefit from the arrangement, as the company would act as a reliable offtaker of excess generation and purpose-built plants without needing to navigate government procurement processes.
“The larger independent producers looking to sell energy are particularly restricted, as, to date, they have only really been able to sell to Eskom. Enpower Trading is effectively providing them with another place to sell their energy,” adds Germann.
Benefits for municipalities
Municipalities are increasingly looking to future-proof their business model and transition their business focus away from the sale of electricity and towards the sale of distribution network services.
Enpower Trading has built its license application on a cooperation model with South African municipalities wishing to do just this. The company’s trading platform is designed to facilitate and accelerate investment into the sector while protecting the municipality from losing revenues that fund municipal service delivery.
One of the critical benefits of this solution is that a municipality would not lose any customers, but rather enable its customers to purchase cheaper electricity while ensuring this income is not lost.
Without any additional financial commitments, a municipality can continue to service and invoice its customers, reducing its dependency on Eskom. A municipality may also enter into multiple UoSAs with competing traders as the market develops, and no municipal payments or financial commitments are required.
The benefits for the municipality in terms of local economic development and investment in the municipality include investment in local power generation, attractive power tariffs and the provision of green energy. Municipalities are thus able to boost local economic development with no public capital outlay.
We’re essentially unlocking additional capacity in the market without government or municipalities having to add additional liabilities to their balance sheets, and further making sure the municipality remains whole from an income perspective in the process.
Looking ahead
Having already signed two UoSAs with Western Cape municipalities (George and Overstrand), the company now seeks to replicate its business model with other South African municipalities.
It is already engaged numerous other municipalities, including Johannesburg’s City Power with a view to offering renewable energy at attractive power tariffs to industries and businesses.
The company is also in discussions with local IPP developers and investors in the energy sector where it would act as a bankable off taker for new capacity to be developed.
About Enpower Trading
Enpower Trading was formed by solar finance and development company SolarAfrica Energy and pan-African power development and trading firm Enterprise Power in 2020. The company’s directors have a proven track record in solar PV and IPP development, from financing, deployment, construction, commissioning to operation, as well as energy trading in sub-Saharan Africa.
Contact Enpower Trading, Phone 078 680-4191, info@en-power.co.za , https://en-power.co.za
