Cape Town cautiously optimistic about opening of energy markets

Mayor Dan Plato says this paves the way for municipalities to source power independently

City cautiously optimistic about opening of energy markets after its decade-long fight to achieve this

19 October 2020  

Last month, Energy Minister Gwede Mantashe confirmed National Government’s intention to buy 6 800 MW of solar and wind power through Eskom. On Friday, 16 October 2020, amendments to the electricity regulations were gazetted. Although much work is required, this long-awaited legislative amendment paves the way for municipalities to source power independently from Independent Power Producers (IPPs) for the benefit of their residents and the South African and local economies.

We are thus cautiously optimistic about the new regulations potentially fast tracking the development of new generation capacity at a local level in the future.

The City has been preparing for a future where more affordable and cleaner energy can be procured by municipalities. We have been an advocate of this much-needed change to the energy regime for more than a decade. Importantly, we have been a strong proponent of enabling more security of energy supply and being able to determine what is required in terms of its own energy requirements and development goals.

The gazetting of the regulations marks another step closer towards recognising the role municipalities can play in the diversification of energy supply.

However, there are a number of matters that the Department would need to clarify with regard to the practical implementation of the new amended regulations. Including:

- The status of own generation (municipal generation) projects is unclear, with the new regulations referring only to buying and procurement of electricity and not to own generation. Thus, as a City, we are still requiring the same clarity and Ministerial Determination we have been seeking as it pertains to own-generation.

- Municipalities need to understand how the new regulations will be implemented within the context of the current Integrated Resource Plan for Electricity, which does not include an allocation for municipal procurement, and which will require amendment to render practical implementation possible.

- It is not clear what timelines will apply to the processing of municipal applications by the Department, especially the time for review of feasibility studies, and this needs to be clarified to ensure implementation without lengthy delays.

- While financial standing is not covered explicitly in the regulations, it is referred to in the Minister’s statement and therefore must be clarified too.

In August, the North Gauteng High Court chose not to rule on the merits of our application challenging that a ministerial determination is necessary before power may be procured from IPPs, as originally stated in Section 34 of the Electricity Regulation Act over its applicability and constitutionality.

The Court ruled the City and the National Department should follow intergovernmental channels to clarify the roles and responsibilities. The City has been trying to gain clarity via the intergovernmental channels. I have written to the Minister and we are still very keen to meet to gain the clarity required on the regulations just gazetted but also to adhere to the Court’s wishes. We remain committed to the renewed engagement process we started in September and hope to receive the necessary clarification from the Minister as soon as possible.

The City has always maintained that local governments have the constitutional power and obligation to procure renewable energy and this is necessary to move away from the sole reliance on Eskom for energy supply.

The City has been engaging National Treasury on the development of a national municipal renewable energy procurement programme. Much work is under way as the City continues to proactively work towards the implementation of a new energy regime that is cleaner, more affordable and secure and where people have a greater say in the energy resources that their local government deploys.

I want to thank the City’s Mayoral Committee Member for Energy and Climate Change, Councillor Phindile Maxiti; Executive Director for Energy and Climate Change, Kadri Nassiep and all City staff who have worked tirelessly in making our case to purchase power from IPPs.

We will keep standing up for residents and businesses whose livelihoods depend on a reliable energy supply and we hope to get the chance to engage and to get more clarity.

Issued by Greg Wagner, Spokesperson to the Executive Mayor, 19 October 2020