A new South African private electricity trading company is set to transform the country’s power market after recently being awarded a landmark licence that allows it to transport energy from independent power producers (IPPs) to private end-users in any location across the municipal and national electricity grid.
Awarded in February 2022, Enpower Trading is the second private electricity trading company in South Africa to be granted a trading license by the National Energy Regulator of South Africa (Nersa), and the first to be awarded such a licence in over 12 years.
The license enables Enpower Trading to source competitively-priced, predominantly renewable power from multiple IPPs and small-scale generators, transport or ‘wheel’ this energy across the national and municipal grid networks, and sell it to customers at a discount to prevailing electricity tariffs.
“Our vision is to enable much-needed additional generation and storage capacity, and to help foster an efficient power market by offering offtake solutions to IPPs, competitive tariffs to customers, and the sustainability of supply to municipalities and their constituents,” says Enpower Trading Director, Charl Alheit.
Nersa’s awarding of this licence represents a critical step forward in the Department of Energy’s roadmap, which plans for the unbundling of Eskom’s generation, transmission and distribution business units to enable the transition from a single-buyer model to a more competitive domestic open market model.
“Our licence is a very important step that is aligned with the government’s aim to liberalise the South African energy market. We are proud to be a part of this process and fully support these recent changes in legislation,” adds Alheit.
An August 2021 amendment to the Electricity Regulation Act exempts embedded electricity generation projects between 1 MW and 100 MW from the previous requirement of applying for a generation licence, requiring them only to register with Nersa.
This regulatory relaxation is expected to drive an increase in the number of South African IPPs and small-scale embedded generators (SSEGs) and consequently, the availability of independently-produced renewable energy.
How it works
Enpower Trading signs an energy offtake agreement with Nersa-registered IPPs, which are connected to either the municipal or Eskom grid.
A Use of System Agreement (UoSA) is then entered into between the municipality, as the distributor, and Enpower Trading. The customers sign a Power Purchase Agreement (PPA) with Enpower Trading, which outlines the amount of energy to be supplied at which rate.
Enpower Trading pays the municipality for the use of the grid, ensuring that the municipality does not lose the income derived from its mark-up on electricity sales.
Benefits for commercial customers and IPPs
Customers who sign a PPA agreement with Enpower Trading will receive a lower tariff than the prevailing electricity tariffs and are also subject to lower annual tariff increases.
Commercial and industrial power users considering their own energy generation installations will no longer need to invest in costly self-generation and can rather use that capital in their business processes or invest in energy storage solutions to counter load shedding. The added benefit of purchasing power from a trader is the increased flexibility of the contracting period which will allow customers to move away from long tenors, providing a more tailored PPA solution suited to their individual business needs.
Customers poised to benefit most from the arrangement are large industrial and commercial customers, particularly those with a significant national or regional property footprint.
“Owing to our multisource capabilities, we will be able to provide baseload along with the intermittent renewable solutions. Customers are accessing energy that is not produced by Eskom, which generally means it’s greener and it’s cheaper,” says Enpower Trading Managing Director, Nikolai Germann.
IPPs will also benefit from the arrangement, as Enpower Trading acts as a reliable offtaker of excess generation and purpose-built plants without needing to navigate government procurement processes.
“The larger independent producers looking to sell energy are particularly restricted, as, to date, they have only really been able to sell to Eskom. Enpower Trading is effectively providing them with another place to sell their energy,” comments Germann.
Benefits for municipalities
Municipalities are increasingly looking to future-proof their business model and transition their business focus away from the sale of electricity and towards the sale of distribution network services.
Enpower Trading has built its license application on a cooperation model with SA municipalities wishing to do just this. The company’s trading platform is designed to facilitate and accelerate investment into the sector while protecting the municipality from losing revenues that fund municipal service delivery.
One of the critical benefits of the Enpower Trading solution is that the municipalities do not result in the loss of any customers, but rather enables its customers to purchase cheaper electricity ensuring this income is not lost.
Without any additional financial commitments, the municipality can continue to service and invoice its customers, reducing its dependency on Eskom.
The municipality may also enter into multiple UoSAs with competing traders as the market develops, and no municipal payments or financial commitments are required.
The benefits for the municipality in terms of local economic development and investment in the municipality include investment in local power generation, attractive power tariffs and the provision of green energy. Municipalities are thus able to boost local economic development with no public capital outlay.
“We’re essentially unlocking additional capacity in the market without government or municipalities having to add additional liabilities to their balance sheets, and further making sure the municipality remains whole from an income perspective in the process ” says Alheit.
Having already inked two UoSAs with Western Cape municipalities in George and Overstrand,
Enpower Trading now seeks to replicate its business model in other South African municipalities.
It is already engaged numerous other municipalities, including City Power in Johannesburg, with a view to offering renewable energy at attractive power tariffs to industries and businesses.
Enpower Trading is currently also in discussions with South African IPP developers and investors in the power space where Enpower Trading would act as a bankable offtaker for new capacity to be developed.
About Enpower Trading
Enpower Trading is a Cape Town-based company that was formed by solar finance and development company SolarAfrica Energy and pan-African power development and trading firm Enterprise Power in 2020.
It is the second private electricity trading company to be granted a national electricity trading license in South Africa. The trading license, granted in February 2022, enables Enpower Trading to purchase power from multiple sources, transport this energy across the national and municipal networks, and sell it to multiple customers.
Enpower Trading has signed Use of System Agreements with two Western Cape Municipalities and seeks to replicate its business model in other South African municipalities.
The directors have strong experience and a proven track record in solar PV and IPP development; from financing, deployment, construction, commissioning to operation; as well as energy trading in sub-Saharan Africa.