Private power producers in South Africa are seeking compensation for lost revenues caused by adhering to Eskom’s requests to limit electricity supply to the national grid.
This move comes as Eskom grapples with a shortage of pylons and high-voltage power lines, leading to choke points in its transmission system.
Eskom has submitted a proposal to the National Energy Regulator of South Africa (NERSA) to introduce a compensation mechanism for independent power producers (IPPs) affected by limitation rates of up to 10%.
This mechanism is part of broader regulatory reforms aimed at opening up Africa’s largest electricity market.
Ian Burger, Technical Director at SOLA Group, a private power developer, expressed hopes for adequate compensation.
SOLA Group’s two solar PV plants in Lichtenburg, each producing just over 100 megawatts (MW), were asked by Eskom to cut output by up to 80% in April and May, leaving them to generate only 20 MW per day.
Eskom’s studies suggest that limiting renewable energy production is more cost-effective than the billions of dollars needed to upgrade the transmission network to accommodate the same amount of renewable power.
By reducing generation from IPPs, Eskom aims to free up approximately 3,470 MW of additional capacity on the constrained grid.
In July, NERSA released a draft limitation congestion policy based on Eskom’s application.
The policy seeks approval to classify the limitation as a “constrained ancillary generation service,” allowing Eskom to reimburse renewable energy plants using specific formulas for power curtailed due to grid congestion.
Kilian Hagemann, CEO of G7 Renewable Energies, highlighted that while the details are still being worked out, this approach could potentially minimize costs borne by consumers by limiting IPPs with the lowest tariffs first, rather than applying curtailment equally across the board.
Despite these challenges, Eskom has managed to provide continuous electricity for the past five months, a milestone last achieved in 2020.
However, Eskom anticipates that limitation levels will increase as more renewable projects come online, with routine implementation expected from 2026 onwards.
