Batting away Eskom objections, Nersa approves four new electricity traders and first private import/export licence

The National Energy Regulator of South Africa (Nersa) has approved four new electricity trading licences, the issuance of which had been opposed by Eskom, along with the country’s first-ever private import/export licence.

The Energy Regulator, which is Nersa’s highest decision-making body made the approvals during their meeting on October 29, agreeing with the approval recommendation agreed to by the Electricity Subcommittee on October 1.

Trading licences were issued to CBI Electric Apollo, Discovery Green, Green Electron Market and GreenCo Power Services, while the import/export licence was issued to GreenCo Power Services.

Nersa fulltime regulator member for electricity Nhlanhla Gumede noted Eskom’s objections, which were made by its distribution division during public hearings held on July 18.

Eskom argued that Nersa was prohibited from allowing two or more licensees in a single distribution supply area and accused the traders of “cherry picking customers”.

The objection was lodged despite the fact that Nersa had already issued six trading licences since 2014 to PowerX, EnPower Trading, Neura Trading, Energy Exchange of Southern Africa, Envusa Trading and to Eskom Holdings’ National Transmission Company South Africa (NTCSA).

Gumede said a distinction had to be made between a distributor, the number of which needed to be restricted to ensure the efficient and safe operation of the physical distribution network, and traders, which facilitated the buying and selling of electricity over those networks but did not operate them.

He indicated that there was no legislative or regulatory restriction on the number of traders and noted that the Electricity Regulation Act encouraged competition; a principle that had been reinforced and amplified in the Electricity Regulation Amendment Act to which President Cyril Ramaphosa had recently assented.

Nevertheless, he did highlight the urgent need for Nersa to finalise a framework and rules for electricity traders as well as for wheeling given the prospects of many more trading applications in the coming years.

The Energy Regulator also agreed that additional work was required to firm up the framework for import/export licences, when approving GreenCo’s ground-breaking application.

Africa GreenCo CEO Ana Hajduka described Nersa’s decision to grant the company the two licences as a “powerful endorsement of the potential for private sector collaboration to drive South Africa’s energy transformation in collaboration with key players like Eskom and NTCSA”.

GreenCo commercial manager for South Africa Precious Mpepele added that the import/export licence would drive a transparent, interconnected energy market in Southern Africa to deliver renewable electricity.

The company had signed long-term power purchase agreements (PPAs) with independent power producers in South Africa and Botswana and the trading and import/export licences respectively would enable GreenCo to sell electricity bought from those suppliers to Sibanye-Stillwater operations in South Africa.

Apollo Africa CEO Jenna Harris also welcomed Nersa’s decision, which she said reaffirmed the regulator’s commitment to uphold the Energy Regulation Act and promote broader participation in the electricity market.

“We firmly believe, as demonstrated in mature electricity markets, that competition is the most efficient way to reduce the cost of power to the market.

“This is in the best interest of our economy where electricity forms the foundation input costs for all primary and secondary industries in South Africa,” Harris added, indicating that Apollo looked forward to working with Eskom to assist in jointly shaping a new and sustainable market structure.

Sturdee Energy executive director Andrew Johnson said the award of a trading licence to Sturdee Energy’s Green Electron Markets (GEM) had secured a route to market for electrons that it would buy and sell from its own fleet and from third-party generators.

“We are one of the few IPPs with a trading licence which allows us to diversify our market offering beyond bilateral PPAs into the aggregation market, which enhances the value we deliver to both buyers and sellers of green electricity,” Johnson said.

Sturdee Energy executive director James White added that GEM would initially be supplied by the group’s own solar and wind projects, which had secured grid-connection budget quotes and which were expected to start construction shortly.     

“We would like to commend Nersa on its collaborative process and we are grateful to now be in a position to offer a new product offering that will decrease electricity prices, while decreasing carbon emissions for South African electricity users,” White added. 

Discovery Green head Andre Nepgen also praised the decision to grant the company an electricity trading licence to operate in South Africa.

“This is a positive step towards the development of an orderly and competitive electricity market in South Africa.

“We will continue to support a thriving, fair and sustainable environment for all stakeholders,” Nepgen said.