Taking a Deeper Dive Into Johannesburg’s Energy Payouts

In the center of South Africa’s eco-energy news was the City of Johannesburg’s recent plan to apply a feed-in tariff, a calculated compensation plan for their solar photovoltaic (PV) technology customers contributing their spare electricity to the power grid. However, it’s worth noting that this rate falls short of what their Cape Town counterparts have on offer. The tariff details were presented by City Power, who boast a series of newly approved power tariffs courtesy of the National Energy Regulator of South Africa (Nersa) taking effect this month.

The Solar Photovoltaic Exchange: A Win-Win?

Imagine a system where individual citizens with surplus electricity from their private solar PV systems could sell the excess back to the city, reducing their monthly electricity costs in the process. Well, this is exactly what City Power aims to achieve. The proposed rates are set as 85.50c/kWh for residents and 70.85c/kWh for businesses generating less than 1MW.

Matthew Cruise, a respected energy maestro and head of PR at Hohm Energy, lauds this initiative but highlights a key shortcoming – the low rate under discussion. His lamentation is echoed in his statement: “While it is encouraging to see City Power now also implementing feed-in tariffs, similar to the City of Cape Town, it is disheartening to see the low amount that is being offered per kWh in Joburg.”

An Area of Comparison: Cape Town’s Beneficial Deal

Cape Town’s feed-in tariff rate trumps Joburg’s, sitting at an Nersa-approved 78.98c/kWh. Not one to rest on its laurels, the city recently earmarked a 10.15% increase on this tariff, offering customers a generous 25c/kWh incentive. The final cost, inclusive of VAT, amounts to R1.24c/kWh.

Cruise brought attention to a BizNews report showcasing the contrasting cost per unit of electricity in these metropolitan cities. Shockingly, Johannesburg increases its tariffs at a lower margin (14.97%) when juxtaposed with Cape Town (17.6%).

Unpacking the Revenue-Generation Dilemma

The revenue discussion becomes an important clue in understanding why Johannesburg’s proposed tariff sits lower than Cape Town’s. This speculation aligns with former Joburg mayor Mpho Phalatse’s sentiments in a Presidential Climate Commission (PCC) meeting, where the revenue generation struggles of municipalities selling power were addressed. Cruise infers that Johannesburg’s solar conversion incentive is less than a third of what has shown results in other up and coming nations.

“Feed-in tariffs have been used to great effect in other developing countries to incentivise rapid adoption of solar by citizens,” Cruise pointed out, highlighting Vietnam as an impressive case study. Vietnam instigated a feed-in tariff successfully, leading to the installation of 9,000MW of Solar PV within just half a year. “In South Africa, 9,000MW equates to nine stages of load shedding being removed…” Cruise proclaims.

What should be noted is that the tariff in Vietnam was set beyond the current market price for electricity. The inverse is found in Johannesburg, revealing significant implications for the city’s potential solar adoption rates.

The Municipalities’ Bread and Butter at Stake

Echoing Phalatse’s sentiment during the June PCC meeting, Valli Moosa emphasized that if the economic models for revenue generation through power sales fail, municipalities would find it challenging to adopt feed-in tariffs.

City of Cape Town Mayor Geordin Hill-Lewis, concurring with this concern during the PCC session, elaborated that numbers of residents opting for solar PV are manageable for now. “At the moment, we are able to cope with that risk… and the reason is because we are still dealing with relatively small numbers… We are getting about 1 000 applications a month for feed-in [tariffs],” Hill-Lewis explained. The question remains, however; what happens when those numbers jump to 20,000?

A Tumultuous Energy Future

As municipalities grapple with the dual challenges of sustainable energy coverage and financial viability, it’s clear that the pathway forward will require informed strategy and public buy-in. Whether Joburg’s proposed solar tariff will spark the desired adoption rates remains to be seen. However, lessons can surely be gleaned from Cape Town’s successful venture. Only time will tell what these market dynamics will yield for South Africa’s evolving energy landscape.