Power producers look to JSE for energy trade
Independent power producers are hoping to trade on the JSE in the next three years so that consumers are not forced to use Eskom any more.
Promethium Carbon, consultants in the green energy industry who recently compiled guidelines for independent power producers (IPPs), has even had exploratory talks with the JSE to ascertain whether such a trading process would be possible, according to Robbie Louw, founder and director of Promethium.
IPPs are now in a race to profitably sell enough power to big consumers.
Big electricity users such as Sasol and Tongaat Hulett are already selling some of the power they generate themselves to Eskom, but not to other power consumers.
There are, however, no regulations preventing anyone from generating electricity in South Africa and selling it to someone else.
“Many of the building blocks for a free electricity market in southern Africa already exist,” says Louw.
A JSE representative said that the exchange didn’t have the ability to trade electricity and that it was in the very early stages of investigating the possibility of having financial instruments that did so.
The Financial Services Board would also have to give the JSE the go-ahead for energy financial instruments, and the legal requirements for such instruments would have to be clear.
Once the financial instruments were in place, the market participants would have to be educated about them, or else there wouldn’t be trade in power on the JSE.
Professor Anton Eberhard, energy expert at the University of Cape Town’s postgraduate business school, agreed that a statutory principle of free and fair access to the national power grid was already in place.
“It would, however, help if the Electricity Amendment Act made explicit provision for that,” said Eberhard.
“I don’t believe full competition will happen anytime soon, but there is nothing preventing big power users from choosing their power producer,” he said.
The access fees Eskom imposes for selling power on its national network is a big stumbling block to free trade of power on the network.
Shaun Nel, spokesperson for the Energy Intensive User Group, said these access fees made it uneconomical for IPPs to sell power to other consumers in this way.
According to Louw, the problem is that national energy regulator Nersa doesn’t regulate Eskom’s access fees.
However, Nersa is busy reviewing the possibility of regulating the access fees. Louw said that thanks to the electricity crisis, prices had risen and made it more attractive for IPPs to also sell power.
Eberhard said some IPPs were already supplying electricity at a cost lower than Eskom’s average cost, but he said Eskom wouldn’t welcome any big competitors in the power market. Although electricity prices were high, Nel said the cost of generating large quantities of electricity was also still very high.
“Consumers who are already generating their own electricity will sell it if they have the capacity for generating additional power,” said Nel.
He said it would be uneconomical, generally, to borrow the amounts of money needed to generate power in large quantities. According to Louw, a further challenge to the free trade in electricity is the establishment of an electronic platform on which the electricity can be traded.
It’s in this regard that they see the JSE as the perfect opportunity.
– Additional reporting by Justin Brown