Makana Municipality has its challenges when it comes to subsidising Eskom. Warnings of electricity cuts have been received. Makana Municipality is in arrears due to expenditure being more than the Municipality’s revenue. Grahamstown residents and business owners add to the strain by not paying their electricity invoices. PowerX could be a solution to many challenges faced and be beneficial to Makana Municipality and residents.
PowerX stimulates the production and consumption of renewable and clean power in South Africa by acting as a channel between willing electricity buyers and sellers. PowerX buys power from independent power producers (IPPs) and sells the clean power it purchases directly to end users.
Electricity generated from renewable resources is commonly called Green Power. The generation of Green Power reduces the amount of carbon emissions associated with traditional electricity generation which has a host of benefits, environmentally as well as financially.
PowerX is the only company with a renewable energy trading licence issued by NERSA. In terms of the Municipal Finance and Management Act and the current procurement regulations, this qualifies PowerX as a sole source supplier.
PowerX and the Municipality came to a system agreement which allows independent power trading on the municipal network. They operate on a revenue sharing model for the kWh traded, while the Municipality retain the maximum demand and basic charges billed to customers. PowerX compensates the Municipality for their Internal Cost of Supply to distribute the power over the municipal networks. The power generated by IPPs injected onto the municipal network creates a cost avoidance for the Municipality.
Some of the constrictions and challenges facing municipalities with regard to community energy provision include national generation and transmission grid constraints and supply increase from Eskom. Overloaded and aging municipal infrastructure compels further network extensions, while net margins on electricity sales are down from 42% in 2008 to around 20% in 2015. The cost of municipal supply increases as the channel between megaflex and municipal tariffs decreases.
The Municipality benefits from the PowerX model as it reduces the power requirements that are imported from Eskom, which means reduction on municipal expenditure. The model also allows extension to municipal networks which increases supply areas and service delivery. PowerX energy trading allows the Municipality to import energy from IPP’s without the burden of administrative procurement and affords IPPs a bankable Power Purchase Agreement, making the Municipality an ideal investment destination.
Integrated value chain with all sectors enhances the provision of energy through collaboration with municipal structures in implementing reasonable and sustainable energy services to all citizens. According to the constitutional mandate of the Municipality, energy supplied through Grid Tied or Micro Grids will supply each household a value added service, opportunities for local economic development, skills development, and job creation.