Although embedded power generation is gaining traction nationally, the National Cleaner Production Centre of South Africa (NCPC-SA) Industrial Energy Efficiency (IEE) national project manager Alf Hartzenburg says the benefits of such generation have to be managed.
Embedded generation entails industrial or commercial power plants, or in rare instances, independent power plants, which generate electricity at a specific location either for own use and/or grid feed-in, he explains.
Hartzenburg says the reasons for using embedded power generation could be threefold. Firstly, power is generated for personal use and needs, and is entirely consumed by its own generator. Secondly, power is generated for more than personal use, to feed the surplus into the grid. This instance essentially presents an option of additional power that can be used elsewhere in the grid. Thirdly, power is generated to be stored for periods of either high tariff hours when own-generated power would be preferred over grid electricity, or is used in areas where there is a risk of power outages.
The benefits of embedded power generation are that it compensates for regularly interrupted power supply and outages, it can provide better-quality power required for equipment on site and that it has cost benefits, he elaborates.
He explains that it is generally cheaper for businesses to generate their own power on site, because the distribution costs incurred when taking power off-grid are obviously not applicable in this case. Further, it entails using a renewable power source, with only the cost of infrastructure needing to be covered, which presents a challenge to State-owned power utility Eskom and municipalities in recovering their fixed costs.
While he does concede that, over time, such infrastructure may deteriorate and will have to be upgraded, it is nevertheless a “great return”, citing the figures from two large municipalities, which show that renewable-energy costs varying between 70c and 90c per kWh, compared with the domestic electricity tariff of between R1.20 and R1.70 per kWh.
Hartzenburg claims that there are “very few” negative repercussions regarding the generation of power for company own use, provided that the power quality is maintained.
“However, if the intention is to also feed the power into the grid and sell it to Eskom, there are a broad range of compliance requirements to contend with, such as safety certificates from national, provincial and local government and Eskom,” he says. Grid feed-in by small scale embedded generation is limited to very few municipalities at present and it is capped, in some instances to 1.0 MW.
Therefore, he emphasises that it is an “onerous” process to become a power generator that feeds power to the grid for profit and that there is legal uncertainty and risks are involved. For example, in the Western Cape, the provincial government has to deal with the dangers to maintenance teams working on power lines, as a result of the proliferation of embedded power generators feeding power into the grid (without compensation).
“Maintenance teams may traditionally switch off the known sources of supply, but may be unware of some of the newer sources of renewable energy that are feeding into the grid. This forced the Western Cape to review its maintenance management to safeguard teams,” he explains.
Hartzenburg postulates that domestic, commercial and industrial users are at the tipping point for sourcing its energy, particularly electricity.
“The next series of tariff hikes that will be approved by the National Energy Regulator of South Africa (Nersa) for Eskom may mean that we will see that tipping point reached by a very large portion of the industrial and commercial sector.”
He predicts that reaching this point could see a rapid acceleration of embedded generation or grid defection.
Grid defection will contribute to the growing and continuing revenue shortfalls that municipalities have and are experiencing. Hartzenburg points out that this defection will most likely be led by top-tier users, the richer consumers, which have essentially been subsidising bottom-tier users, the poorer consumers.
Therefore, a large-scale defection in top-tier users will pose a dilemma because the majority of users needs to fund a large baseload such as distribution lines and power station maintenance. “A defection will mean that this will have to be borne by a diminishing customer base, who are too poor to support it. This will impact on Nersa, Eskom, government and the country as a whole,” he notes.
Hartzenburg says a manifestation of this dilemma has surfaced recently, with indications from top metros of a decline in their revenues from electricity sales over the past seven to ten years; Nersa, government and municipalities have had to find a solution through innovative tariff restructuring. He notes that some of the early responses to this dilemma is the consideration to weight tariffs more strongly on the access charge and less on consumption to augment the loss from lower electricity demand to some degree.
He clarifies that such demand can be attributed to many reasons, not only embedded generation. Hartzenburg adds that one key reason for lower demand is energy performance improvement through projects and programmes that have supported and taught industry to improve its energy efficiency performance.
A generally weak economic climate in South Africa, related to the country having missed the previous two global upturns in the past seven years, makes it even more susceptible to the precarious climate that embedded generation creates.
While Hartzenburg commends tariff innovation, he says this is not the only solution and neither is copying solutions from developed countries who encountered similar problems many years ago.
A South African solution best suited to South Africa’s needs would have to be found, which may require a reassessment of the entire generating structure in the country.