The Western Cape Government (WCG) is looking to establish a new entity with the aim of procuring electricity at more affordable rates.
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Alwie Lester, the special advisor to Western Cape Premier Alan Winde, says the objective is to secure cheaper electricity rather than mitigating loadshedding. He points out that the supply remains susceptible to loadshedding even if renewable energy sources, coupled with batteries, could provide continuous power when transmitted through the Eskom network.
The proposed entity would act as an intermediary, purchasing electricity from independent power producers (IPPs) on behalf of participating municipalities. The hope is that these municipalities, by pooling their buying power, can negotiate lower tariffs.
To assess the feasibility of the project, the WCG has enlisted the services of the consulting group PWC. Various models are under consideration, including those of an electricity trader or a municipal special-purpose vehicle, as reported by Moneyweb.
Under the trading model, the trader would engage in long-term power-purchase agreements (PPAs) with IPPs at tariffs lower than those offered by Eskom. The margin needs to be significant enough to provide a discount to end-users while covering operational costs and ensuring a profit.
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While the National Energy Regulator of South Africa (Nersa) has licensed four traders across the country, not all are currently operational. PWC holds the view that a public sector trader may not require a licence, although preliminary discussions with Nersa did not reach an agreement.
Lester notes that the business model will be developed following the completion of the feasibility study and once municipal interest has been established. The study is also exploring whether participating municipalities should form a geographical unit, with Cape Town, Stellenbosch, and Saldanha Bay among those currently undergoing consultations.
During these consultation workshops, municipalities raised concerns about tariffs and whether non-participating municipalities could join the project later on. Additionally, there are questions about the ability of municipalities to withdraw from the initiative.
Moneyweb reports that representatives from some municipalities, speaking anonymously, expressed scepticism about the project, while the City of Cape Town stated that it was too early to discuss the matter publicly.
Concerns have been voiced that Cape Town might dominate the process, particularly if one proposed model involves a company with participating municipalities as shareholders and their shares based on the minimum electricity purchase commitment.
Another noted concern is the potential impact on financially stable municipalities if one of the shareholders faces financial difficulties.
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