Background

The threat and reality of load shedding in South Africa has led to increased investment by the residential and industrial private sector into renewable energy (RE) generation. In principle, metros and municipalities throughout the country support this investment, as they too want to diversify their energy mix and reduce the carbon emissions associated with fossil-fuels-based electricity generation. However, the national electricity regulatory system is not set up to accommodate a diversified energy mix, nor the decentralised management of it.

Furthermore, reduced revenue as a result of the increased residential and industrial self-generation of electricity is posing a threat to the long-term financial sustainability of our metros and municipalities, which are currently required by law to purchase their electricity from Eskom. Electricity revenue is not allocated to support only the electricity services they provide − it is also used to cross-subsidise several other essential services.

In response to this quandary the WWF Nedbank Green Trust has launched an in-depth investigation into the existing electricity distribution system at metro and municipal level in South Africa in order to develop workable models for metros and municipalities. The study will also make recommendations for alternative sources of revenue and funding from renewable energy (RE) to cash strapped municipalities.

Key partners in this investigation are the South African Local Government Association, South African National Energy Development Institute, Association of Municipal Electricity Utilities, the Centre for Renewable and Sustainable Energy Studies at University of Stellenbosch, the metros as well as selected smaller municipalities.

Municipalities are acutely aware of the fiscal cliff they will face if they cannot respond effectively to the impacts of reduced electricity sales. As a result they are grappling with the conflicting outcomes of encouraging increased private-sector investment in RE, while ensuring their long-term financial sustainability.

If municipalities could generate their own electricity or purchase it from independent power producers at competitive prices, and not be forced to pay the Eskom fixed price, this would help to address this threat to municipal budgets. Given the increasingly rapid convergence since 2011 between the average Eskom and RE tariffs, particularly wind and solar, and in light of studies from the Council of Scientific and Industrial Research showing that new wind and solar provide the cheapest source of energy, there is significant opportunity for municipalities to procure directly from independent power producers. Decreasing technology costs also open up potential opportunities for building and generating their own RE. Either of these options would limit their exposure to future Eskom tariff increases, and impact positively on their finances.

The 2019 WWF Nedbank Green Trust investigation builds on work by WWF-SA and its partners, metros and municipalities. In 2018 a household and industrial energy survey was conducted in partnership with the Centre for Renewable and Sustainable Energy Studies at Stellenbosch University to determine who converts to RE, what motivates them to do so and how this could assist city planners. National sampling for the survey consisted of 2 678 online respondents from all over South Africa.

Feasibility studies on municipal-owned photovoltaic (PV) have also been developed for selected municipalities. The City of Cape Town is currently busy with a comprehensive audit of its current RE footprint, using aerial photography. As things stand, most South African cities have a very poor analysis of their RE footprint. The City of Cape Town has also lodged a high-court application to allow it to purchase electricity from independent power producers.

Current disputes about how the electricity regulatory system must change need to be resolved. Policies and processes also need to be developed to ensure that private owners of RE who are connected to the grid register with their municipalities and pay a connection fee, as all electricity users must do. This is key from a municipal planning perspective. Equally important is the need to address grid defection through a suitable tariff system that will make it attractive for private owners of RE to feed into the grid.