Nersa embarks on ‘controllable experiment’ with congestion curtailment

And approves net-billing rules.

Energy regulator Nersa has come one step closer to approving a congestion curtailment regime that will free up grid capacity and enable the National Transmission Company of South Africa (NTCSA) to accommodate 3 700MW of additional generation capacity to the grid.

Nersa’s electricity sub-committee (ELS) at its meeting on Tuesday decided to recommend final approval to the energy regulator. Since the members of the two greatly overlap, it is expected that the recommendation will be accepted.

ADVERTISEMENT CONTINUE READING BELOW Read: South Africa needs more power lines to support green-energy plan What grid congestion really means  Grid operators: Managing more renewables increasingly challenging

This and the finalisation of the grid allocation rules are the two big things the industry has been waiting for – and both are currently with Nersa, says Brian Day, chair of the South African Independent Power Producers Association (Saippa).

The NTCSA submitted the application to Nersa to address grid congestion, which is a problem in especially the Eastern, Northern and Western Cape, where solar and wind resources are best.

In 2022, 23 wind power projects with a combined capacity of 4.1GW were not awarded grid access in the sixth round of South Africa’s Renewable Energy Independent Power Producer Procurement Programme (Reipppp). This was due to the country’s constrained grid, which makes it difficult to integrate new generation capacity.

Read: Time running out to salvage 23 rejected wind energy projects [Jan 2023]

Because the congestion is limited to certain periods of the day – such as midday, when solar resources are best – curtailing generation output during those periods will allow the NTCSA to connect more independent power producers (IPPs) to the grid, and these IPPs can increase capacity during the rest of the day.

The IPPs must however be compensated for the energy they were prepared to supply but for the curtailment, and this is what Nersa must decide on.

This cost will be passed on to consumers.

The impact of this compensation on electricity tariffs is not yet clear and Nersa will monitor the implementation of the congestion curtailment regime closely.

“It is an experiment, but a controllable experiment,” Nersa chair Thembani Bukula said during the ELS discussion.

The approval will be for three years only, at the end of which Nersa will do a full review.

The ELS recommended that curtailment be limited to 7.5% of monthly production instead of the 10% the NTCSA applied for, which will limit the cost.

Not an alternative to grid expansion

Nersa made it clear that the approval of congestion curtailment does not relieve the NTCSA of its obligation to expand the grid. As it builds new grid capacity, the congestion will be alleviated, and the level of curtailment is expected to drop accordingly.

Nersa officials told the ELS the additional 3 700MW capacity the NTCSA will be able to connect to the grid once it implements congestion curtailment will benefit all electricity users. It will limit the use of open-cycle gas turbines (OCGTs), which are much more expensive to run.

Day has no doubt that the curtailment will be the most cost-effective option.

“OCGTs run at R7-R8 per kWh”, while curtailment will be compensated at the level of a few cents per kWh.

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“In addition, it will allow for earlier coal decommissioning with all the benefits of a lower carbon impact on the economy and by having enough generation capacity, load shedding, which is extremely costly, can be avoided,” he says.

In practice, he believes few plants will be curtailed to the maximum level of 7.5% per month.

He says final approval of the congestion curtailment regime will be “a massive development for the industry and hugely welcomed”.

Net-billing rules

At the same meeting, the ELS approved the net-billing rules for licences for electricity distributors.

This will guide municipalities in the development of tariffs at which to credit consumers who generate their own electricity with solar panels for any excess electricity they push into the grid.

The tariff must be lower than it would cost to buy electricity from Eskom.

Eskom already has a well-established system that accommodates net-billing on its Homeflex tariff.

The matter has been with Nersa for almost two years after the National Energy Crisis Committee (Necom) developed rules to encourage consumers to load their excess energy onto the national grid to alleviate load shedding.

The regulator further developed the rules after consulting with stakeholders.

The main issue that Nersa grappled with was whether it has jurisdiction over the matter. It has however reached consensus in this regard and will oversee the tariff to prevent any negative impact on other electricity users and ensure that connections comply with grid specifications.

Nersa officials told the ELS that net-billing is expected to lower electricity cost and, because the electricity is generated close to where it is used, it should limit technical losses associated with the long distances over which Eskom power must be transmitted.

David Mertens from the Association of South African Chambers (Asac) welcomed the net-billing rules. He said a framework for municipalities to set tariffs for wheeling electricity through their distribution networks is however still outstanding. “It leaves a vacuum with much uncertainty around wheeling, which is not conducive for investment.”

Read: Dear Nersa, where are the wheeling tariffs? Historic first for Growthpoint as it wheels electricity in Cape Town Shoprite Group pilots electricity wheeling at Cape Town headquarters

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