By Larry Claasen
The move to extend the electricity trading pilot is seen as a good decision given the complexity involved in wheeling.
THE City of Cape Town’s Pilot Wheeling Project, which is the first step to allowing private electricity trading in the City, has been extended.
The project, which officially started in September 2022, with 15 participants and expected to last a year, has been extended because of technical and regulatory hurdles encountered in the wheeling process.
Wheeling is the practice of sending electricity to and from multiple destinations over a power grid. Though it is key to facilitating energy trading, this process is technically difficult because municipal systems are generally designed to send electricity from one supplier to multiple users.
The city along with many other municipalities are looking at wheeling to bring alternative energy supply to their residents. By bringing in new providers they can mitigate the impact of load shedding resulting from Eskom’s inability to constantly supply electricity.
The creation of energy markets could also result in a drop in electricity prices, as the new players would potentially be able to sell electricity directly to businesses over the grid at a lower rate.
The first electricity was wheeled between Growthpoint Properties and Etana Energy in September 2023.
Good move by the City
POWERX Business Development Executive Tim Shamrock says the extension is a good move, as allowing for electricity trading while there were still technical and regulatory uncertainties would undermine the creation of the market.
POWERX is not the only one of the companies participating in the pilot but is also the first company licensed by the energy regulator, NERSA to trade electricity.
Shamrock says the process of allowing trading over a municipal grid is extraordinarily complex.
For a generator/trader to wheel energy to a customer within a municipality it requires municipal support, access to the customer’s meter data, establishment of municipal billing systems and processes to account for the wheeled energy, as well as various agreements that need to be signed between the city, the customers and energy providers to enable the trade.
Aside from the complex nature of wheeling, the number of greenfield projects in the pilot located outside the city’s borders has added to the delays. Shamrock says the red tape in commissioning these types of projects is huge, as they must go through an onerous registration process with NERSA as well as the necessary steps with Eskom to obtain approval to connect to the grid.
Greenfields projects also require extensive environmental, geotechnical and infrastructural assessments. Once the requisite approvals have been obtained, an application must be made to connect to Eskom’s grid. Eskom then conducts a grid impact study to assess whether there is sufficient capacity in the area for transmission of the energy that will be generated.
Any costs associated with the necessary upgrades to the grid infrastructure in order to accommodate the project’s generation capacity must be paid and only then can the project commence construction.
In addition, there are certain amendments that need to be effected to existing agreements to reflect the proposed trade at the point of connection of the project as well as the point of delivery of the energy.
Finding a path
The pilot project was meant to look at the nuances involved with wheeling electricity across the grid and to find a path to commence the process.
Shamrock says the City ran out of time when it came to finalising the framework, but the extension now allowed for unseen delays in reaching its objectives.
He notes, the extension also preserves enthusiasm for energy trading.
“It does not create an unrealistic expectation in the market, and it also avoids constant extensions when objectives are not fulfilled by the target date, which would ultimately tarnish the initiative with bad publicity.”
