Cape Town’s wheeling project can help power big business, but when will regular residential users benefit?

10 Oct 2023

The City of Cape Town says its wheeling project (getting additional non-Eskom electricity on to the grid) is working – but while the city is making what older people used to call ‘a big hoo-ha’ about their wheeling project, it is not clear how soon residential users will reap any benefits.

The city’s wheeling project involves buying electricity from private parties – using the existing grid and “wheeling” this electricity via the existing grid to other private parties. In this instance, the private parties selling the electricity are businesses, selling to other businesses.

As Eskom explains it: “Wheeling essentially allows privately generated power to be transmitted across the national grid to customers who want it, in a willing buyer/willing seller model.”

The city explains that this phase of its wheeling project is not available to residential users. Another point that might also make more businesses eager to be either sellers or buyers is that:

“The price of the energy is set between the parties and not by the city, Eskom or the National Energy Regulator of South Africa (Nersa)”, as stated by the Mayoral Committee Member for Energy, Councillor Beverley van Reenen, earlier this year.

The City of Cape Town has made several announcements in the past few weeks about its state of readiness to put more electricity into the grid. Even if it is managing to direct electricity only to large businesses and malls – and not residential users – the cumulative effect of this should in theory result in a lightening of the load for Eskom.

As Eskom then would be providing for only residential users and not businesses – theoretically giving it the ability to ensure less load shedding for CoCT residential electricity consumers, and possibly even no load shedding at all. Theoretically – however these are still huge numbers to contend with in terms of household usage.

On 14 September, the city announced the successful wheeling of electricity generated at the Constantia Village Shopping Mall in Constantia. The electricity that was successfully “added to the grid”, which it provided to one of its buildings, is generated by international company Growthpoint.

The Growthpoint website (www.growthpoint.co.za) states that the company “own[s] and manage[s] properties in the retail, office and industrial sectors… Growthpoint owns a 50% stake in the V&A Waterfront and a majority stake in the country’s first healthcare property fund.”

Using the city’s project, Growthpoint is supplying electricity (solar energy) “for use at Growthpoint’s 36 Hans Strijdom office building in the Foreshore, the home of Investec and Ninety One.” This is good news for Growthpoint and for Growthpoint’s clients – they have an uninterrupted electricity supply and presumably Growthpoint is selling it at a price that suits both parties and is possibly cheaper than buying it from Eskom.

Cape Town mayor Geordin Hill-Lewis said when the announcement was made that Cape Town was “planning to add up to one gigawatt of independent power to end load shedding in the city over time… we expect wheeling to contribute up to 350MW to the grid in time” (italics added).

SA CEO of Growthpoint properties, Estienne de Klerk, was happy to announce not only that it was getting electricity via wheeling, but he also pointed to his company’s internal timelines for its own electricity generation when he said:

“This project brings Growthpoint closer to our climate commitment of being carbon neutral by 2050,” while the city is not putting any datelines on rolling out non-Eskom energy to residential users.

What about residential users?

Besides the city’s use of soft phrases like “over time” and “in time”, they do not seem to have committed to any set time frames and while businesses are set to profit and succeed off wheeling – facilitated by the City of Cape Town – it is still unclear when the average residential user will be able to do the same. And, residential customers who generate surplus through solar and batteries are still waiting for better city tariffs when they tip back power into the city grid.

Daily Maverick approached the City of Cape Town in September, shortly after the announcement of the successful wheeling of electricity from Growthpoint’s Constantia Village shopping mall to its building in Cape Town. The response from the city’s Mayco member for energy Van Reenen:

“Wheeling is geared towards large commercial and industrial customers that take their supply at 11,000 volts and above. The customers are connected within the city’s distribution network and are located throughout the city.”

Van Reenen also confirmed that the city’s pilot project had been extended as “none of the participants had wheeled at the end of the one-year period … 1 September was the first wheeling agreement concluded and the first electron was wheeled on 10 September.”

Van Reenen confirmed to Daily Maverick that residential users would not benefit from wheeling – or at least not in the way the city is currently planning to use the method:

“It will not benefit them in any way as they are not city supplied customers.”

Asked if it is meant to take businesses off the grid and thereby make it easier for Eskom to supply others/residential users, she said:

“The idea is to give customers a choice of whom actually supplies them with electricity, while ultimately diversifying our electricity supply and opening up an energy market.”

But while Van Reenen is very clear that the city’s wheeling project does not benefit residential users at all, when Hill-Lewis announced in June that the project would start selling electricity, he also clearly implied:

“Electricity wheeling, that allows people to buy electricity from each other, is one way to help address the country’s electricity shortages.”

However, “people” are not “large commercial and industrial customers”.

While only Growthpoint, with the help of electricity trader Etana Energy, was able to wheel electricity or produce enough to wheel almost within the one-year trial period, it is clear that big business is, however, set to boom with the help of the City of Cape Town and wheeling – as Growthpoint states:

“This initial transaction sets the foundation for Growthpoint to wheel clean energy to all its buildings in Cape Town in the future, including Ninety One’s office for the long term at 36 Hans Strijdom.”

That participants struggled with the one-year time frame, and of “15 participants” in the study, which van Reenen said “represented 25 Generators and 40 customers/off-takers”, only one “set” of “willing buyer/willing seller” emerged at the end, seems to imply the city has its work cut out for it.

Asked to comment on the city plan, Energy economist Lungile Mashele explained that wheeling on its own would not eliminate load shedding:

“Green energy trading or wheeling is limited to when there is renewable energy – when the sun is shining or the wind is blowing … so the problem with wheeling is that it does not protect you from load shedding,” which Van Reenen confirms.

Van Reenen also says while the city makes no money off wheeling it will spend money to make sure its infrastructure can be used for the practice – even though there is no short-term plan which would allow for less load shedding for residential users.

Alwie Lester is the special adviser on energy to the Western Cape premier and worked for Eskom for 25 years. He says the city probably defines the pilot project as a success because:

“I assume they were able to wheel energy across the network, manage any potential losses… without any supply disruption to existing customers.”

But Lester also indicates that at the point that the residential user is benefiting from non-Eskom electricity, it will in all likelihood have nothing to do with city – whether that is “in time”, “over time” or next Wednesday (as a possibility):

“As residential and commercial and industrial customers start putting up their own solar/PV installations, they will start to take less from the traditional Eskom/municipality grid, thereby freeing up energy on the national grid.” DM

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What about residential users?