Electricity generation by farmers? ‘No,’ says state

The failure of energy regulator Nersa to register small-scale solar photovoltaic installations in Eskom electricity distribution areas is costing farmers dearly, says Ig du Plessis, director of power consultancy Sonfin.

It is also stifling the development of an industry that could provide economic growth and employment, he says.

Du Plessis says Nersa stopped such registrations in February to develop a registration process and has just published a consultation paper about a once-off R200 fee that would be required from each applicant.

These installations are exempted from the extensive process involved in obtaining generation licences from Nersa, but are required to register in terms of regulations published in November 2017. More than a year later, Nersa is still not geared to do such registrations.

The registration process is merely administrative, and Nersa has in fact acknowledged that the applications it has received are fully compliant. It nevertheless refused to do provisional registrations pending the finalisation of the registration regime.

In the meantime, the applicants, mostly irrigation farmers, are foregoing monthly savings in energy charges of up to R100 000 (on a 1MW system), while paying interest on multimillion-rand loans for the development cost of their photovoltaic systems.

Timeline might change

Members of the public have until 16 January to comment on the method Nersa used to calculate the R200 registration fee, or to propose a different method. Nersa estimated at the November meeting of its electricity sub-committee that the process would be finalised by March next year but acknowledged that the timeline might change if it receives many public submissions.

Wary of the risk of further delays Sonfin’s attorneys have written to Nersa to tender the R200 registration fee on behalf of the company’s clients and requesting preliminary registration.

In the meantime, similar installations are increasingly being registered in municipal electricity distribution areas such as Cape Town, which means farmers are being discriminated against, says Du Plessis. These registration processes are managed by the municipalities themselves as holders of the distribution licences.

In November, AgriSA wrote to energy minister Jeff Radebe to request his intervention to speed things up. AgriSA cites the example of a specific “fully BBBEE farm” that has already invested R9-million in its 300kW solar photovoltaic plant, without gaining any benefit from its investment. “This investment is now going to waste every day they are not able to generate electricity.”

According to AgriSA, the farm borrowed the R9-million from the bank at an interest rate of 10%. Throughout the delay of eight months and counting, the farm must continue repaying the loan as well as an estimated R400 000 to Eskom in electricity charges, which the system was meant to save it over the period.

“This all adds up to an astronomical amount which in the end will result in the loss of job opportunities on the farm,” AgriSA told Radebe.

It attached a letter from Nersa to Eskom dated 28 August stating that its application complies with all Nersa’s registration requirements.

Du Plessis explains that Eskom will not connect any photovoltaic system to its grid unless it is registered with Nersa.

Once registered, the electricity consumer can enter into a new agreement with Eskom to do “net-metering” and banking on the Eskom network. This means it will be credited for the electricity it generates and feeds into the Eskom system, with this credit offset against the cost of the electricity it later extracts from the system.

Du Plessis says the systems are designed to save customers up to 90% of their energy charges (the units they use) and they are left with the obligation to pay the balance as well as the fixed charges.

Farmers who irrigate their land, using a lot of electricity during seasonal operations, would in particular benefit from these systems, he says.

Eskom requirements

Nersa requires applicants to show that the proposed photovoltaic system complies with Eskom’s requirements and that Eskom is prepared to connect it to the grid. To get to that point, applicants must fork out substantial amounts of money, including around R1-million for the connection point, which will connect their PV system to the network. Du Plessis says it could take up to two years before an applicant will reach the point that the connection work can begin; they must first receive a cost estimate letter, followed by a budget quote (cost estimate).

If the process runs smoothly, the owner should be able to recover their investment through savings on their electricity bill in less than seven years.

The current delays are, however, impacting negatively on the business case, Du Plessis says.

Sonfin currently has four clients who have collectively invested almost R50-million, where the construction of the PV systems is complete but Eskom refuses to connect them without proof of Nersa registration.

It has another five clients who have committed at least R1-million to ensure Eskom compliance, but cannot proceed without certainty from Nersa.

Once Nersa gets its process sorted out, the industry will grow exponentially, says Du Plessis. He says Sonfin is aware of more than 100 applications that have already been submitted to Eskom and are at different stages of processing.

• This article was originally published on Moneyweb and is used here with permission