South Africa’s endeavours to increase its power generation capacity will be boosted by the emergence of Enpower Trading, an energy trader which plans to help unlock an estimated 5 GW of renewable energy over five years – the equivalent of the energy consumption of about three million households or 12 million people.
Enpower Trading is the first energy trader to secure a licence from the National Energy Regulator (NERSA) in over a decade and is one of only three licenced energy traders in the country. It will play a critical role in accelerating private investment in new generation capacity.
The energy sector in SA is transitioning from a vertically integrated single buyer model – in which Eskom purchases power from independent power producers (IPPs) and sells to municipalities and businesses – to an unbundled, competitive market where the private sector will operate and compete in South Africa’s electricity value chain.
There have been significant policy changes to support this transition and increase the number of IPPs, including some of the announcements made recently by President Cyril Ramaphosa in the ‘energy action plan’. Of particular importance is that IPPs will no longer need to apply for an electricity generation licence from NERSA. However, IPPs are still not coming online fast enough to meet SA’s demand.
Enpower CEO, James Beatty says, “There are too many, primarily renewable energy projects which are shovel-ready but remain unfinanced owing to the expectation of a 20-year PPA as a basis for building projects, even though, on aggregate, merchant demand now far outstrips supply. Enpower Trading is collaborating with the development finance community and the private sector to unlock the merchant market segment where demand is met through dynamic trade.”
Energy trading plays a critical role in the relationship between IPPs and customers. Enpower will source competitively priced, predominantly renewable energy from multiple IPPs and transport or “wheel” this energy across the national and municipal grid networks to sell on to customers at a discount to the prevailing tariff.
In addition to buying excess power generated by existing IPPs, Enpower will guarantee offtake and thus ensure bankability – independent of government support – for new generation projects. Because energy traders are able to ‘pool’ customers and offset fluctuations in demand, they can enter into the kinds of long-term power purchase agreements which investors want to see.
“We estimate that there is the potential for energy trading to unlock over five gigawatts of generation capacity over the next five to ten years,” says Beatty.
Enpower has significant financial backing and recently closed a further investment round in which funding was secured from highly experienced traders in the global gas and power, and Africa markets. The company has existing customers in several municipalities in the Western Cape and was recently accepted into the wheeling pilot project in the City of Cape Town.
“We are excited about the road ahead,” says Beatty. “We recognise that there are still a lot of regulatory and other challenges which need to be addressed, but the opportunity for energy trading to have an immediate impact is massive.”
For more information visit: www.enpowertrading.co.za
