- South African independent power producers are seeking compensation for revenues lost.
- By reducing generation from independent producers, Eskom hopes to immediately free up an estimated 3,470 MW of additional capacity on the constrained grid.
South African independent power producers are seeking compensation for revenues lost when adhering to state utility Eskom’s requests to limit electricity supply to the national grid.
Eskom has submitted a proposal to the country’s energy regulator to introduce a mechanism to compensate independent power producers (IPPs) for lost revenue resulting from curtailment rates of up to 10 per cent.
The curtailment requests are due to a shortage of pylons and high-voltage power lines that have caused choke points in Eskom’s transmission system. The compensation mechanism is one of several proposed regulatory reforms as efforts to open Africa’s largest electricity market intensify.
“We are hoping that there will be adequate compensation for generation that is curtailed,” Ian Burger, a technical director at private power developer SOLA Group, noted.
Burger said SOLA Group’s two Lichtenburg solar PV plants, which each produce just over 100 megawatts (MW), were in April and May asked by Eskom to cut output by up to 80 per cent and produce only 20 MW per day.
Eskom studies indicate that the costs of curtailing renewable energy are significantly lower than the billions of dollars required for upgrading the network to connect the same amount of renewable power to the grid.
By reducing generation from independent producers, Eskom hopes to immediately free up an estimated 3,470 MW of additional capacity on the constrained grid.
In July, energy regulator Nersa released a draft curtailment congestion policy based on Eskom’s application seeking approval to classify it as a “constrained ancillary generation service”. This would enable Eskom to use specific formulae to reimburse renewable energy plants for the power they lose due to grid congestion.
“The devil still is in the detail, but this raises the possibility of further minimising the cost borne by consumers by curtailing those IPPs with the lowest tariffs first, as opposed to everyone equally,” said Kilian Hagemann, CEO of G7 Renewable Energies. Eskom expects the implementation of congestion curtailment routinely from 2026 onwards, with curtailment levels increasing as more renewable projects come online.