Alternative energy pressures Eskom
SOLAR POWER: ALTERNATIVE POWER AFFECTS COSTS, EFFICIENCIES, REVENUE Its incline block tariff structure is ‘very unpopular’.
Eskom hopes its proposed retail tariffs for 2021 will help solve a looming problem triggered by increased solar generation across the country. It cites a research study that projects between R3.5 billion and R4 billion in revenue will be lost to photovoltaic (PV) solar generation by the end of this year. Many would argue these numbers are on the low side.
The shift to solar by business and households has resulted in two major problems for Eskom.
First, it says “customers using PV systems during the day results in a drop in the demand for electricity – with the highest drop in the middle of the day. This “duck curve” affects the power system negatively as it means that the generators have to ramp up at an even faster rate than before to meet the evening peak demand”.
As solar usage increases, so demand during the day will continue to decline, including a flattening of the morning peak. This causes an ever-increasing ramp up to the evening peak.
Second, because existing tariffs are largely variable-usage based (charged per kilowatt-hour), Eskom argues that they do not adequately “reflect the fixed costs and also the demand a customer imposes on the network”.
As customers move to solar, Eskom contends they could become a “zero net or very low net” consumer as they feed excess power back into the grid during the day. Because they still use the network, this resultant “loss of revenue” will not be commensurate with a reduction in costs.
Eskom says “it also results in customers with PV being subsidised by customers without PV”.
The utility argues its current tariff structure has caused this.
It is adamant its proposed “changes must not be viewed as ‘anti-renewable’, but rather as an attempt to support the connection of alternative energy resources in a responsible way and to avoid unwarranted and non-economic cross-subsidies”.
Aside from the rationalisation and simplification of its tariff plans, there are three major adjustments proposed by Eskom:
Changes to peak pricing
Eskom wants to change the peak vs standard vs off-peak periods, as well as prices in its time-of-use (TOU) tariffs.
It argues that “the current TOU charges last changed in 2005 and no longer reflect the current system and customer requirements”.
Because 80% of its sales are on these tariffs, any distinctions between peak/off-peak and seasonality are critical.
It wants to increase the evening peak to three hours (from two) and decrease the morning peak to two hours (from three), introduce a “standard period” on a Sunday evening, and – importantly – change the ratios between summer (low demand) and winter pricing (higher demand).
The proposed structure will see the gap between peak as well as weekday daytime pricing narrow when comparing winter versus summer.
Removing the incline block tariff structure
It proposes the removal of the incline block tariff (IBT) structure for residential customers it supplies directly (like greater Sandton and Soweto). Consumers, particularly those on prepaid, are mostly confused by the incline block structure, where the more you use, the more you pay per unit of electricity.
Eskom says it is “very unpopular in community discussions” and that some “customers buy legally at the low block and then illegally once they reach the higher block consumption”.
At the higher end (Homepower), it says “the use of inclining block tariffs greatly incentivises higher-consumption customers to use alternative energy sources and energy efficiency, resulting in a real revenue loss not commensurate with a real cost reduction”.
It stresses the overall subsidy received by Homelight (for low-consumption households) does not change.
However, within the tariffs (Homelight and Homepower), there are obvious impacts: “lower-consumption customers will pay slightly more and higher-consumption customers less”.
New way of charging households vs selling back to the grid
Eskom wants to introduce a new tariff, Homeflex, for urban residential customers (wealthier households). It will be mandatory for those who want to sell power back to the grid (and voluntary for any other residential customer).
“Customers would need to pay for the required smart time-ofuse meter.”
No further details on the meter are provided. Homeflex unbundles charges into energy and network charges (something done by City Power and other metros).
It will pay the same rate for energy sold back to the grid that the tariff charges in its time-ofuse breakdown. But customers will pay fixed network charges regardless of their consumption.
These changes will have ramifications, even if users are not directly supplied by Eskom.
The National Energy Regulator is expected to pronounce on the tariffs by March, to be implemented from 1 April for Eskom customers and 1 July for municipalities that bulk-buy power.
Changes must not be viewed as ‘antirenewable’