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Independent power company celebrates 100MW limit

Earth & Wire is adamant that the electricity market is opening up, and will continue to do so, and is prepared to put its money where its mouth is. (Photo: Waldo Swiegers / Bloomberg via Getty Images)

Despite the private electricity market being dogged by regulation, uncertainty and a reluctance on the part of the government to welcome private participation, one company has jumped in boots and all.

Demetri Pappadopoulos, the founder of Earth & Wire power company, simply nods his head at the news that the threshold for companies to produce their own electricity without a licence will be raised from 1MW to 100MW.

“We knew that at some stage the dam wall would break. To allow self-generation of 1MW or even the Minister’s proposed 10MW, was an arbitrary ceiling and eventually, the pressure from business was going to become overwhelming,” he says. “Government cannot have businesses disinvesting because they cannot access the power they need.”

Recently dairy company Clover announced it was closing its cheese factory in Lichtenburg, the largest in the country,  due to “ongoing poor service delivery” by the local municipality.

The challenges faced by Eskom need little elaboration and include a high debt burden and ageing power plants. As a result, the utility is unable to keep the lights on, making the delivery of alternative energy solutions a priority.

Earth & Wire has recently stepped into this gap, even though the legislation was not fully accommodative. It has positioned itself to become a trusted energy brand that will supply reliable and sustainable energy to customers.

“We believe consumers should have a choice of who they buy electricity from,” adds Tommy Garner, E&W’s business development manager and chairman of the Independent Power Producers Association. “Companies — large mining and manufacturing operations — and ultimately all consumers — need to stay relevant and need to show that they are producing their products using green or clean power.” If they don’t, he adds, it will come at a cost as markets such as the EU add carbon taxes or surcharges to their products.

Garner knows the environment well, having been the founding CEO of Cennergi, an independent power producer that, at the time, was a 50/50 joint venture between Exxaro Resources and Tata Power. Cennergi developed, constructed, commissioned and is operating two large wind farms totalling 229MW of installed capacity in the Eastern Cape.

Earth & Wire has negotiated access to more than 300,000ha across the country and plans to build at least 15GW worth of large-scale power plants over the next 10 to 15 years and to sell this power to its customers. It is in the process of reaching financial close on a 10MW solar project in the Western Cape and has secured environmental authorisation on another 2,000MW of wind and solar projects

Garner and Pappadopoulos believe that the private utility model is accommodated within South Africa’s energy policy, specifically the Integrated Resource Plan of 2019. 

The difficulty, says Garner, is that the energy minister, whoever he or she may be, has a massive amount of power to influence the outcome. “We would apply for a section 34 determination or ministerial deviation, but these processes can take two to three years to complete.” This is not ideal, he adds, as capital does not flow when there is uncertainty.

The company has already engaged with Eskom, with whom it must partner to distribute the power it produces. 

The way that power projects are funded is changing, allowing for ordinary project finance to play a role. “We believe that the capital markets are looking for ways to participate and invest in these types of long-term projects. The advantage is that we require no sovereign guarantees, which means less pressure on the fiscus.”

In this way, he believes, a private market will open up, to the point that you can “buy electricity as you buy data”.

Not only will the government increase the cap on what can be generated by private companies, but it has relaxed the rules on who they can provide to. According to President Cyril Ramaphosa, companies looking to generate 100MW are free to sell to third parties, but in doing so they still have to abide by the regulations set out by the sector regulator, Nersa. It remains to be seen how efficiently this process will be handled by Nersa.

However, the Earth & Wire team is adamant that the electricity market is opening up, and will continue to do so, and is prepared to put its money where its mouth is.

“The future is a combination of Eskom, the IPPs and companies like ourselves who are offering affordable high-quality electricity from clean sources,” says Pappadopoulos.

“This country needs new, local, organisations that have a positive attitude towards investment in the country. If we do not do this in a sector as important as energy… then we are doomed.” BM/DM

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All Comments 7

  • Step 1: Mantashe and his team must be moved to a seaside retirement resort, preferably right next to one of his Karpwerships.
    Step 2: Ebrahim Patel must be moved to Stalingrad or Minsk.

    • Re step 1 : Robben Island is a seaside resort … but not next to a Karpowership … I think.
      Re step 2 : He would be declared an ‘extremist’ … and possibly join Navalny ? If that does not work … Novichok does !

  • The gentleman is massively mistaken if he imagines for a moment that sommer-anybody will be able to sommer-export-and-sell energy to anybody without licenses.

    That would grant embedded a free market compared to the IPP with PPA. That would also be exceedingly dangerous.

    You will still face EIA.
    You will still be subject to NRS97.
    You will be subject to your council’s bylaws in regard selling energy.
    You will need to license with NERSA and the ERA will apply to protect you, your customers and the community.
    The economics of grid supply access fees and wheeling charges will make reselling exceedingly difficult unless you have a shoo-wa image client that must have green energy and will pay R5/kWh for the bragging rights. That would be an exceedingly stupid client by the way.

    • Thanks Johan, a helluva lot still has to change, simplified to make so called SSEG, small scale embedded generation feasible, economical and sustainable. Until then mini/ micro grids will really not take off.
      This whole RMIPPPP must be scrapped, for the solid and simple reason that it does not make any economical or ecological sense. R 1.48-1.88/kWh wholesale is just 2-2.5 times what they could be with 100% renewables combined with appropriate storage, with LARGE scale projects of 300-3000 MW.
      Eskom should introduce TOU time of use tariffs ASAP, to sort out the dreaded 17-21h30 evening peak. Power should be 2 x as expensive, and no FBE, Free Basic Electricity should be available over that period. To implement that, we need a smart grid and smart meters at the end user.
      Jirre, jirre man, SA is so behind in the energy sector, in this so called transition.
      And to really get this moving, we must vote out this clueless, corrupt dinosaur of an energy minister and his party. His B com, and MBA degrees have not helped to get us good deals in affordable, reliable, clean electricity generation. But his BBBEE pals are set to prosper.