Think carefully before selling excess solar to Joburg’s City Power

On the face of it, Joburg City Power’s newly promulgated rates for the buying of excess solar power produced by households seem reasonable. The city will credit customers 88.36c per kWh for energy fed back into the grid (businesses and large users will get 73.22c/kWh).

This isn’t a million miles away from the City of Cape Town’s rates or Tshwane’s. For the next two years, Cape Town’s rates look far better because of a feed-in incentive put in place by the city (an additional 25c/kWh).

Read/listen: Cape Town to pay cash for residents’ excess power

Overall, the rates may appear low when compared to the price we pay for electricity – closer to R3/kWh (sometimes higher).

This is not a uniquely South African phenomenon. Feed-in tariffs in many other markets, including Australia, are also significantly lower than retail tariffs.

For any household considering feeding back surplus energy from solar (anywhere in the country), the calculation ought to be simple: Will the credit from the excess power being fed back into the grid offset any potential increase in charges?

None of this is possible on prepaid (in any metro/city or via Eskom directly), so any household on prepaid has to convert to a post-paid meter.

Read: How much Eskom wants to charge normal households, and those with solar

In Cape Town, the calculation is relatively simple. Households must install a special bidirectional meter at their expense. Currently, these cost around R12 000. The city hopes to halve this cost in the coming months. Once this is in place, households feed back excess power at the published tariff plus the temporary incentive.

* Standard rates are used as these are ‘daytime’ rates for weekdays (9am to 5pm in winter and 10am to 6pm in summer). On Saturdays, standard rates run from 7am to 12pm.

In Joburg, the calculation is very different. First, while it appears that customers currently need to pay for the installation of a smart meter, Thami Mathiso – GM of revenue management at City Power – told RSG Geldsake’s Ryk van Niekerk last week that customers do not have to pay. It is likely this policy will come into effect from September 1, once the city’s feed-in scheme goes live.

As with most things involving the city, it is seldom clear-cut.

Second, moving from prepaid to post-paid means a further consideration comes into play. This means a monthly service charge of around R209 (excluding Vat) and a monthly network charge of R844 (excluding Vat) will automatically be levied, regardless of consumption. So any customer who is moving from prepaid will now have to pay R1 053 before they use a single watt.

Moneyweb has previously shown that these high fixed monthly charges mean the city’s post-paid electricity customers pay the most for power in the country and effectively subsidise prepaid households (who pay among the lowest for electricity).

Finally, the city’s approved tariff document highlights that “all residential customers who would be willing to invest in embedded generation with the purpose of supplementing their electricity supply from City Power, will have to be on a time-of-use conventional tariff structure”.

The time-of-use tariff structure is only available to residential customers on three-phase connections, which means a higher fixed charge than the R800-odd in total that single-phase customers pay.

Beyond this factor, time-of-use tariffs mean cheap (as low as R1.52/kWh in off-peak times in summer), but also very expensive electricity – peak rates in winter are R5.62/kWh. That’s around double the rate you would pay, on average, on a typical consumption-based tariff.

Effectively, this means that any household will have a strong economic incentive to shift their grid consumption completely away from peak periods.

This is actually desirable (and is where tariffs are heading, whether we like it or not): Charge batteries using solar and off-peak grid power and run off batteries during peak times.

If the City Power household is already on post-paid, then feeding back excess solar electricity is an opportunity for them to offset their monthly charges. Because of the asymmetrical nature of the rates (feeding back at 88c versus consuming in peak at >R5), these households will need to do an analysis to ensure that they can avoid using grid power during peak times.

Eskom’s approach is somewhat similar in that its new Homeflex tariff – which ‘feed-in’ residential customers will be required to be on – has steep peak charges (R5.42/kWh in winter) and low off-peak ones (78c in summer). This excludes a R1.12/kWh “network demand charge, ancillary service charge and retail charge”, so those tariffs look a bit more like R6.54/kWh and R2!). It also excludes a fixed per-day network capacity charge, which equates to between R200 and R1 000 a month, depending on the number of phases and ‘size’ (maximum demand) of connection. Eskom smart meters are installed at no charge to customers.

For excess electricity fed in (or ‘exported’) to the grid, it will credit customers the exact same rate as the applicable active energy charge (in other words, the consumption charge, not the network and service charges). Customers will be able to export excess solar at between R1.22 and R1.65 on weekdays. This is a far better scenario for households in greater Sandton that are serviced directly by Eskom, than their neighbours in Randburg who rely on City Power.

In summary: shifting from a prepaid connection with solar that doesn’t feed back (the grid plays the role of ‘backup’ power) to a grid-tied post-paid time-of-use scenario where you will be ‘credited’ for excess power means you are very likely to be paying more for electricity, not less!

It is improbable that you will be generating sufficient excess solar power to offset the additional monthly charges and punitive peak tariffs.

A final question is what the regulatory landscape will look like in a year … or three … or five from now. Will Joburg, like Cape Town, mandate that households need to register their solar installations with the city? Will Eskom? This is rather likely.

What will the consequences be for not registering? And will registering automatically require feeding-in? Will households be able supplement their generation with solar and still remain on prepaid?

Listen to Mathiso’s interview on RSG Geldsake (or read the transcript):

You can also listen to this podcast on iono.fm here.