Anxious wait for Discovery Green after Eskom curveball

Eskom has put a significant hurdle in the way of Discovery Green’s plans to link renewable energy production with business demands by objecting to its trading application.

The state-owned power utility argues that the rules of the National Energy Regulator of SA (Nersa) don’t allow for the issuance of licences to private traders in areas in which Eskom’s distribution entity holds a licence.

Eskom said on Thursday through its distribution division that the application by Discovery Green and other entities should be rejected as their approval would mean there would be two suppliers of power in some areas, a situation it said that was not catered for in the rules.

A Nersa decision in favour of Discovery Green will go a long way in clarifying the rules for independent power producers looking to sell their energy to customers.

“We have noted the update from Eskom and will be evaluating all the information and the most appropriate method of engaging on the way forward,” Discovery Green said on Friday.

JSE-listed financial services group Discovery launched the renewable energy business in September last year with plans to provide enrolled businesses with renewable energy by 2026.

Discovery Green head André Nepgen told Nersa that the company had already procured 1.3GW of renewable energy and that it had made a strong case for why it should be granted a trading licence.

Offtakes secured

“We have spent the past few months engaging with our corporate clients, securing contracts with them so that we are able to deliver on the value chain. We have also been preparing and being involved in the national narrative around the evolving marketplace to ensure that we are able to adapt as the market evolves from Eskom directly to municipal, virtual and more liquid markets,” he said on Thursday.

“We believe we are in a position where we have sizeable offtakes secured, strong assets at the centre and a pipeline of renewable energy that can be unlocked to support the growth of this platform. We have worked on the procurement of large amounts of renewable energy with a particular bias to wind. We have followed a very strict and robust procurement process, and invest enormous amounts to develop actuarial and technology assets to allow us to deliver the benefits we promise clients.”

Nepgen told the regulator that the company had a power purchase agreement with Elu Energy for two solar photovoltaic projects in the Ekurhuleni area and power purchase agreements with customers in the area.

“We have received approval from the municipality to allow us to trade these, and we have ensured that the financial transaction importantly creates an enormous amount of value for all parties involved,” he said.

‘Strong case’

“It has also allowed us to assess whether the marginal cost of trading is viable for this business ... we believe we have shown this committee that we have met Nersa’s requirements and that the case we have made here is strong enough to get a trading licence.”

The other trading licence applicants were Africa GreenCo and CBi Electric Apollo, which is majority owned by JSE-listed Reunert.

The group, valued at about R12.95bn on the JSE, has operations that include the design and manufacturing of electrical conductors, cables and accessories, as well as ICT-related services for businesses.

Eskom’s newly minted National Transmission Company of SA (NTCSA), which officially began trading this month, did not object to the applications. This is as the entity embarks on a process to raise the billions of rand needed to build 14,000km of new transmission lines in the next decade.

NTCSA chair Priscillah Mabelane told Business Day two weeks ago that the company would be connecting about 37GW of renewable energy to the grid and that its priority was to get the substation on board and build new transmission lines.

Peter Venn, CEO of Seriti Green, which was not party to the applications, said avoiding duplication of physical infrastructure was important when using distribution networks for energy transmission.

“It is crucial that we make efficient use of existing infrastructure to minimise unnecessary costs and resources. In line with this principle, if a distribution network is already in place it is logical to leverage these existing wires for energy transmission,” said Venn.

“It is essential to recognise that, like the fibre industry, the contract for energy capacity should be treated separately from the usage of the wires. This separation is the basis for the concept of wheeling in energy distribution. Clients should have the freedom to choose the source of their energy supply without constraints. This becomes even more vital considering the various carbon legislations that have been, or are being, enacted. Customers should be empowered to opt for more affordable and environmentally friendly energy sources.”

Seriti Green said last week that its R4.8bn wind farm in the coal belt of Mpumalanga was on course to be completed by mid-2026. The 155MW project marks the first phase of a 900MW project Seriti Green aims to build over the next three years at an estimated cost of R25bn.

khumalok@businesslive.co.za