American Chamber of Commerce Embedded Generation The City Power Perspective September 2016
Contents 1 City Power at a glance Evolution of distributed generation 2 City power approach 3 How to engage? 4
CITY POWER AT A GLANCE
City Power at a glance We are in the business of buying electricity, making it accessible to, and selling it on to customers National Energy Regulator of South IPP: Kelvin Africa (NERSA) Generation Eskom and/or Independent City Power Distribution Power Producers (IPP)
City Power at a glance… 6 major intake points from Eskom, 32 mixed MV intakes Current peak demand of 3,5 GW Predicted future peak demand to reach 6 GW by 2030 R8.5b invested in infrastructure in the past 10 years R40b required in the next 20 years
EVOLUTION OF DISTRIBUTED GENERATION
Traditional electricity distribution business Revenue generated by transporting electricity from Central Power Station to Customers Has been good for 100 years….
Evolving distribution business Using the grid to support distributed generation REIPPP program New revenues need to be generated through integration of various distributed energy sources and flows
Drivers of grid evolution Alternate Technologies (Rooftop PV, Energy Storage) New Generation Distributed, constraints & dispatchable Eskom’s ageing Generation fleet and co- Future generation Electricity Networks Smart Grid to Evolving DoE access flexible NERSA Loads and regulation and manage peak policy . demand
Distributed Generation Power Opportunity? New, greener energy can be a generation at the hedge against Eskom’s power supply constraints point of and price increases consumption Surplus energy dilemma? No transmission loss generating power component and distributed RE without storage on-site, rather does not reduce peak demand issues than centrally Is this a threat or an opportunity?
Why must ‘Going Green’ = Off Grid? Eco- Warrior approach; “to be Green means to be Off - From a national Grid” we feel is misguided, emotionally driven thinking systems point of view, the most Grid provides the Green Energy investor a place to sell or trade their surplus energy and optimize investment efficient green energy solution New value proposition from grid operators is to provide includes the grid backup supply, load balancing and wheeling services
CITY POWER APPROACH
City Power Distributed Generation policy overview Aimed at facilitating, permitting and regulating Own and Private Distributed Generation within City Power’s licensed area of supply Different off-take possibilities – whole plant generation, excess only or combination of both; Different dispatch modes - self-dispatched or dispatched City Power’s Distributed Generation Categories Dedicated Municipal Customer Customer Independent City Power Owned Generation Generation Power Own Entity (MOE) Producer Generation < 1MW > 1MW Generation (IPP)
Distributed Generation Policy catering for… Category Description Examples Residential and commercial • PV installations at residential and Customer commercial establishments customer installations of small Generation < 1 MW • Application received for up to 1000kWp scale embedded generation (Self-dispatch) PV at several shopping malls Existing CP large power users Customer • MTN quad generation facility @ 5.8MW installing own generators; Generation > 1 MW • ABSA co-generation facility @ 18MW of which 2MW grid connected (Dispatch / searching for off- taker of • At least 45MW identified within City Limits Self-dispatch) excess power Any independent producer IPP (> 1 MW) • Co/tri/quad gen plants, fuel cells, large interested in selling power to (Dispatch / scale storage, PV farms etc. Self-dispatch) City Power Other City subsidiaries • JW’s hydro conduit MOE generation • PickitUp’s waste to energy exploring utilization of their (Dispatch) • City Theatre’s Utility Scale Storage resources to produce power City Power’s own generating City Power • CP’s gas turbine generating sites Own Generation • resources under the direct PV in unused lands of CoJ and leased (Dispatch / rooftops control of city power • Battery Storage Plant 14 Self-dispatch)
We are not Eskom MFMA and NERSA regulation: Two sources of supply 3 Over a 20 year time frame, RE alternatives may already be a lower cost option to Eskom power
Grid access fee vs. price increase to high volume consumers SAPOA reservations about the additional fixed grid access fee - Fears of a precedent being set, and a price that can be arbitrarily increased - Perception of penalization although they offer a green energy initiative City Power justification for the additional fixed grid access fee - Revenue from grid load balancing and backup services - Partially offsets energy sales revenue losses Offer to explore other options - As alternative to the additional grid access fee, rather increase in the kWh costs for customers consuming >500kWh per month -Would result in a price increase of 1.4 cents / kWh @ penetration of 20% - Network charges are the key issue, identified from the NERSA required Cost of Supply Study. All grid users will in effect contribute.
Cooperation between City of Joburg policy and private sector Utility service offering is Customer generation is to provide grid for viewed as future IPP energy balancing and partners; micro-sized and back-up services (grid distributed within the City Driving access, fixed fee) Policy and Tariff Evolution Net metering cannot be The deeper the distributed supported without losing generation penetration , revenue; however City the higher the revenue Power can offer avoided impact; CP revenue model Eskom cost for the and tariffs need to be surplus that generators transformed to more fixed 17 produce and less variable charges
Are the Metro grids ready? Eskom’s tariffs are increasing while alternate technology costs are decreasing; the cross over is likely to happen within the next decade City Power has an abundance of load and can disperse significant distributed generation as is (owing to its distribution network structure) Eskom Vs Private generation including SSEG - Private distributed generation can be built faster - Private generation pricing can be escalated by CPI - Private generation can position as micro-IPPs; provided long term PPAs are be allowed; - Generally cleaner and can count as greener energy to fulfill the City of Joburg’s environmental commitments
Load profile challenge Jo’burg also has a ‘Duck Curve’ Dispatched vs Self dispatched - Self-dispatched power does not eliminate morning and evening peaks - Most PV installations are self dispatched unless an element of battery storage - Hybrid Photovoltaic Electricity System is the preferred option and meets customer + utility needs - Dispatched generation is mainly gas fired but is restricted by the limited availability of gas City Power is still liable for the morning and evening peak energy costs and any excessive network demand charges
Complimenting self-dispatched generation with flexible load Load Management is enabled by smart metering technology On demand flexible loads are being created through load limiting and demand response programmes Load profiles can be shaped by implementing dynamic pricing or time of use tariffs Flexible load can be sold as an ancillary service in future to enable the emerging electricity trading market Smart Meter investment today is useful to mitigate load shedding. In the future, the same functionality will have ancillary services value as more self- dispatched renewable energy is put onto the grid. (16 GW by 2030 – IRP 2010). There is great potential for a new industry – home automation.
Embedded PV Generator Tariff City Power applied to the Regulator for feed-in tariffs for embedded PV generators that have day time production capacity higher than that required for their own consumption, and who are connected to the grid Regulator has adjusted and approved the tariffs on a pilot/interim basis for 2016/17: In terms of the provisions of the Electricity Regulation Act, (Act 4 of 2006) (ERA) the generation of electricity is a licensed activity, unless exempted by the Minister of Energy. The tariffs are therefore subjected to the provisions of the ERA and are currently interim / pilot City Power will permit connection to the grid subject to the rules and requirements on the following slides, together with a signed undertaking that the future decisions of NERSA and the DoE shall be binding on all parties 21
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