According to industry executives, private power producers in South Africa are requesting compensation for lost revenue as a result of complying with state utility Eskom’s requests to restrict the amount of electricity supplied to the national grid.
South Africa’s energy regulator has received a proposal from Eskom to implement a system that would reimburse independent power producers (IPPs) for lost income as a result of up to 10% curtailment rates.
The high voltage power lines and lack of pylons, which have resulted in choke points in Eskom’s transmission system, are the cause of the curtailment requests, as per the reports.
With efforts to open up Africa’s largest electricity market gaining momentum, several regulatory reforms, including the compensation mechanism, are being proposed.
“We are hoping that there will be adequate compensation for generation that is curtailed,” Ian Burger, a technical director at private power developer SOLA Group said, as reported by Zawya.
Burger stated that Eskom asked SOLA Group’s two Lichtenburg solar PV plants, which together generate slightly more than 100 megawatts (MW), to reduce output by as much as 80% and produce only 20 MW daily in April and May 2024.
Tronox, the miner, receives power from SOLA Group. According to Eskom studies, cutting back on renewable energy will come at a much smaller cost than upgrading the network to add the same amount of renewable power to the grid, which could cost billions of dollars.
Eskom intends to immediately release an estimated 3,470 MW of extra capacity on the constrained grid by lowering generation from independent producers.
The draft curtailment congestion policy that Nersa, the energy regulator, released in July 2024 was based on Eskom’s request for permission to be classified as a “constrained ancillary generation service.”
This would allow Eskom to compensate renewable energy plants for power curtailment due to grid congestion using certain formulas.
“The devil still is in the detail, but this raises the possibility of further minimising the cost borne by consumers by curtailing those IPPs with the lowest tariffs first, as opposed to everyone equally,” Kilian Hagemann, CEO of G7 Renewable Energies said.