A new South African private electricity trading company is set to transform the country’s power market after recently being awarded a landmark licence that allows it to transport energy from independent power producers (IPPs) to private end-users in any location across the municipal and national electricity grid.
In February 2022, Enpower Trading became the second private electricity trading company in South Africa to be granted a trading licence by the National Energy Regulator of South Africa (Nersa), and the first to be awarded such a licence in over 12 years. The licence enables Enpower Trading to source competitively priced, predominantly renewable power from multiple IPPs and small-scale generators, transport or ‘wheel’ this energy across the national and municipal grid networks, and sell it to customers at a discount to prevailing electricity tariffs.
“Our vision is to enable much needed additional generation and storage capacity, and to help foster an efficient power market by offering offtake solutions to IPPs, competitive tariffs to customers, and sustainability of supply to municipalities and their constituents,” says Enpower Trading Director, Charl Alheit.
Nersa’s awarding of this licence represents a critical step forward in the Department of Minerals and Energy’s roadmap, which plans for the unbundling of Eskom’s generation, transmission and distribution business units to enable the transition from a single-buyer model to a more competitive, domestic, open market model.
“Our licence is an important step, aligned with government’s aim to liberalise the South African energy market. We are proud to be a part of this process and fully support these recent changes in legislation,” adds Alheit.
An August 2021 amendment to the Electricity Regulation Act exempts embedded electricity generation projects of up to 100 MW from the requirement of applying for a generation licence, requiring them only to register with Nersa. This regulatory relaxation is expected to drive an increase in the number of South African IPPs and small-scale embedded generators (SSEGs) and consequently, the availability of independently produced renewable energy.
How it works
Enpower Trading signs an energy offtake agreement with Nersa-registered IPPs, which are connected to either the municipal or Eskom grid. A Use of System Agreement (UoSA) is then entered into between the municipality, as the distributor, and Enpower Trading. The customer signs a Power Purchase Agreement (PPA) with Enpower Trading, which outlines the amount of energy to be supplied, and at which rate. Enpower Trading pays the municipality for the use of the grid, ensuring that the municipality does not lose the income it standardly derives from its mark-up on electricity sales.
Benefits for customers and IPPs
Customers who sign a PPA with Enpower Trading will receive a lower tariff than the prevailing electricity tariffs, and lower annual tariff increases. They will also benefit from more flexible contracting periods and PPAs tailored to meet their business needs.
IPPs will benefit from the arrangement as Enpower Trading acts as a reliable off-taker of excess generation and energy from purpose-built plants, without the need to navigate government procurement processes. Larger independent power producers looking to sell energy and who have been restricted primarily to selling to Eskom, now have another place to sell their energy.
Benefits for municipalities
Municipalities are increasingly looking to future-proof their business models and transition their business focus away from the sale of electricity and towards the sale of distribution network services. Enpower Trading has built its licence application on a cooperation model with SA municipalities wanting to do just this. The company’s trading platform is designed to facilitate and accelerate investment in the sector while protecting the municipality from losing revenues that fund municipal service delivery.
One of the critical benefits of the Enpower Trading solution is that the municipalities do not lose any customers, but rather enable their customers to purchase cheaper electricity ensuring this income is not lost. Without any additional financial commitments, the municipality can continue to service and invoice its customers, reducing its dependency on Eskom. The municipality may also enter into multiple UoSAs with competing traders as the market develops, and no municipal payments or financial commitments are required.
Looking ahead
Having already signed two UoSAs with Western Cape municipalities in George and Overstrand,Enpower Trading now seeks to replicate its business model in other South African municipalities. It is already engaged with numerous other municipal entities, including City Power in Johannesburg, with a view to offering renewable energy at attractive power tariffs to industries and businesses. Enpower Trading is also currently in discussions with South African IPP developers and investors in the power space where it would act as a bankable off-taker for new capacity to be developed.
For more information visit: https://en-power.co.za
