"Short Circuit" Letter in Cape Times on 2012-03-21 Human Rights Day

Two weeks ago, amongst great fanfare government announced that the electricity price increase would be "only" 16% instead of 25%.

However, this isn't the full story.

In the Budget, the electricity levy, which is meant to pay for renewable energy was increased from 2c/kWH to 3c/kWH. And, in a few months time, companies will be slapped with a R120/ton carbon tax. This equates to an additional levy of 12c/kWH - and it will increase by 10 percent annually.

A company paying R1.02/kWH will be paying R1.31/kWH - a 28 percent increase. This wouldn't be so bad if government and the City of Cape Town deregulated our electricity supply and allowed private people to supply the grid with electricity. However, central and local government are doing their utmost to prevent this.

Electricity is seen as a cash cow.

First prize would be to allow private people and businesses to produce as much electricity as possible, as this would allow SA's GDP to increase to the same extent as the other Brics (Brazil, Russia, India, China and SA) countries. Their GDP's are increasing at around 10 percent annually.

A R300 billion real increase in GDP each year in SA would be much more than the few billion government gets from electricity sales, and it would be spread among all South Africans.

Not only this, but as the country's GDP increases, the need for more base load power will increase, as will the actual amount of electricity sold.

City of Cape Town Electricity profit 220%? 2012-03-10

NERSA lowers 2012 power price increase to 16%. City of Cape Town electricity profit in July 2012 for private houses using 1200 kwh per month = 220%!! R1.29 * 1.16 = R1.50; R1.50 (price in 2012) / 0.68 (price in 2008) = 220%. Prices include VAT.

Solar Energy Cheaper than Fossil Fuels! 2012-03-06

'Like solar and the energy industry, the transport industry was driven not just by better and cheaper technology, but by environmental factors too. "In New York in the 1890s, there were 160,000 horses dropping 1.5-2 million tons of manure each day," he noted. "It had reached its saturation point .... pollution hastened the transition," Chu said.'

See US Department of Energy Secretary, Steven Chu, discussing Solar Energy and its costs.

Electricity Questions 2012-03-04

What would the cost of Coal, Hydro, Nuclear, energy be if all subsidies were removed? Would Nuclear be viable, considering that governments underwrite nuclear accidents?

What if the 3.5 cent electricity levy was used for Renewable Energy (RE) rebates?  As far as I know there is already over R15 billion in this fund. R5 billion per year being collected. What if R1 billion per annum was awarded to Universities for Renewable Energy research? The government spent R1 billion per annum on the Nuclear Energy Pebble Bed Modular Reactor (PBMR) for 10 years!

The government wants to slap a R120 per ton tax on CO2 emissions. At 1 kg of CO2 per kwh in South Africa, that equates to .12 cents per kwh!! And this will increase by 10% per annum. It makes the total levy / tax on electricity 15.5c per kwh. What do people think of this additional tax on Electricity, especially in light of no private home owner renewable energy electricity support?

What if private people could make investments before VAT and before tax, in a similar way to companies? What would this cost the fiscus? How many jobs would be created?

What if climate and carbon taxes were used to support RE investments, especially those that supply energy at peak time?

What if everyone was given the opportunity for Time of Use (TOU) tariffs without the service fee? Assuming that people pay to install their own meters.

What if "reverse feed" was legal?

What if Net Metering was introduced with sell back at 30% less than buy at off peak times and sell back is 100% more than buy at peak times, thus incentivising people to create systems that allow them to sell at peak times? At the moment the household tariff for someone using 1,200 kwh per month is R1.29 per kwh incl VAT. This makes R1,548 per month. Sell Back during off peak time could be 90.3c per kwh. Sell Back at peak time could be R2.58. Sound like a lot? Far fetched? Eskom currently spends somewhere between R4.00 and R45.00 per kwh at peak time for energy depending on who you speak to. I calculated that the Ankerlig power station costs R12 per kwh to run using 25,000 litres of diesel per minute to make 1,338 MW.

What if Retail Wheeling was introduced? e.g. people with large roof tops selling into the grid to buyers who want to buy green energy? Solar Farms is another model that would benefit from Retail Wheeling.

What if the National Grid was given to an organisation outside government to run?

Installers have been tasked by government to ensure that 35% is local content, but since November 2008 when the government "introduced" Feed in Tariffs, a number of local and international companies have invested heavily in South Africa and wanted to build factories.  However, with the constant changes the government has made and with it now declaring Feed in Tariffs illegal (although they are widely used elsewhere), many of these companies have left.  Even local Solar Water Heater companies are closing as government changed its 1 million solar water heater program to 100,000 solar water heaters.  I don't believe that investors will come back into the market until legislation allows reverse feed and until councils and Eskom allow Net Metering in some form or other.  Investors will also want to see projects being commissioned before building factories.  What does the conference think about this?

Net Metering Buzz Words 2012-03-03

In order to understand what is possible, one needs to understand some buzz words. If one wants to learn to sail, one needs to learn words like Port, Starboard, Stern, Forward, Hatch, Spinnacker, etc. If one learns to run, one learns about Pronate, Shoes, Roads, Tracks, etc.

For electricity one needs to learn terms such as kwh, AC, DC, Grid Tie, Reverse Feed, Net Metering, Retail Wheeling, Utility, IPP, Embedded Generator, Renewable Energy, Photovoltaic Panel, PV, Inverter, etc. I pray that the following summary gives a good overview of these terms.

The bottom line is that in July the City of Cape Town will charge R1.60 per kwh for electricity for private homeowners who use 1200 kwh per month. And in July this year, it will be possible to install your own Photovoltaic PV system to produce electricity at the same price. And as you know the electricity price is going up every year. And the price of Renewable Energy is coming down every year.

What is Net Metering?

Net Metering refers to the ability to buy and sell electricity at the same price.

Utilities, such as Eskom, produce electricity. Customers buy that electricity. Some customers also produce electricity. Those customers should be allowed to sell their electricity to the Electricity Distribution Grid.

If one buys electricity at R1 per kwh (kilowatt hour) then one should be able to sell electricity at this price as well.

The process of feeding back into the grid is called "Reverse Feed."

Retail Wheeling

The process of a supplier or IPP (Independent Power Producer) selling electricity to another via the national grid is called "Retail Wheeling." The customer and supplier agree a per kwh rate and an additional charge (or tariff) per kwh is paid to the national grid to maintain the grid.

In South Africa, electricity producers besides Eskom are not allowed to sell electricity into the grid. Eskom and the Cities, such as the City of Cape Town, blame the government for this state of affairs. But the Government owns Eskom and Eskom is a monopoly and monopolies usually get their way. It didn't really matter during the time that the Government (Eskom) could supply electricity cheaper than customers could make it, but now customers can make electricity at similar or cheaper prices to Eskom and it makes sense to use a process called "Grid Tie" to allow one to buy and sell electricity to and from the grid. Net Metering refers to the way one is paid or the way one pays for this electricity.

Zero bill at the end of the year

With Grid Tie, a customer who wants to have a zero bill at the end of a year produces excess electricity during the day when the sun shines and banks this electricity. At night the customer buys back the electricity. In summer the customer sells more electricity than in the winter, so the customer buys more electricity in winter.

If a customer uses an overage of 1200 kwh per month, then that customer uses 39.5 kwh per day (1200 kwh * 12 months / 365 days).

In Cape Town, the average sun hours is 5.9, but one has to allow for efficiency losses in the system from the Photovoltaic Panels DC (Direct Current) Power to the Utility's AC (Alternating Power), so in Cape Town we use 5 sun hours as an average. So 39.5 kwh / 5 = 8 kw. The efficiency losses are called the "Derate Factor."

Thus the customer needs an 8 kw system to supply all their needs all year around.

Net Metering South Afria are working towards a small scale Grid Tie installation price is R24 per watt including VAT, so the system price is R192,000.

Looking at this another way an 8 KW system would cost the homeowner R1.60 per kwh including VAT. In the City of Cape Town, the price a person who uses 1200 kwh per month is paying is R1.29 per kwh. In July we expect this price to go up 25% to R1.60 per kwh. At this point, the homeowner will be able to produce electricity at the same price as she is paying for it.

If 12 homeowners got together, or if a business has a lot of roof space and we can supply 100 KW or more, then we think we can reduce this price to R1.36 per kwh inc VAT.

The R1.60 per kwh is calculated as follows: R192,000 borrowed at 10% over 20 years is a monthly repayment of R1879. R1879 / 1200 kwh equals approximately R1.60.

By David Lipschitz on March 3, 2012.

Electricity and Net Metering

I am moving my NetMetering.co.za web site to my My Power Station BLOG.

An alternative introduction to electricity.

What is Net Metering.

David Lipschitz Comments on President Jacob Zuma's 2013 South African State of the Nation Address

A number of people have been asking me to write, so here is my comment on the President Jacob Zuma's 2013 South African State of the Nation address.

Note that for those who don't know I am now back to doing IT programming work 99% of the time and the other 1% I am doing RE consulting, training and speaking at conferences. My next conference is the Power and Electricity World Conferencein April in Joburg where I am presenting a one day workshop on Virtual Power Stations.

I've read the whole 2013 State of the Nation Speech and the message that comes through is that government is better at providing services than the private sector. Considering that the private sector contributes all the tax that allows the public sector to operate, I find this a very strange message.

 

Government should be allowing the economy to grow fast, thus generating huge tax revenues which will allow it to pursue its policies without borrowing. Extensive Infrastructure Borrowing is the best way to burden the poor and middle class of a country, and prevent the opportunity for massive growth as people are burdened with debt and can't think straight. But the South African government currently gets its revenues from things that allow a normal economy to grow, for example water, electricity, petrol, transport, visas, etc. Overtaxing these resources is what Spain's Iberdrola Energy Company's CEOsays has led to his company doing more and more of its business outside Spain where it can actually make a profit. Spain loses out. This type of thing is happening in South Africa. We see it with our top 40 companies. The top 40 index is growing rapidly, whilst South Africa stagnates. The reason for this is because South Africa's top companies do more and more of their business outside South Africa.

 

Our Government is intent on borrowing R2.3 Trillion just for increasing our electricity supply. And then there are more Trillions for other infrastructure projects. And more money to come from somewhere to pay for the new National Health Insurance Service (called the NHI), to be rolled out in 2014.

 

Repayments at 10% per annum over 20 years on R2.3 Trillion (R2,300,000,000,000) are R23 Billion (R23,000,000,000) per Month. South Africa's 7 million tax payers would be forced to pay R3,285 per tax payer per month just on repayments for the build program, never mind actually paying for any electricity from these plants. And government has shown that it cannot manage the build of its own coal fired plants, Medupi andKusile which should have started coming on stream in 2012! How can we trust them with R2.3 trillion when they have shown they can't manage R250 billion. And then they blame the bigconstruction companies for their waste, lack of oversite, and mismanagement.

 

At the same time as this, government makes it more and more difficult for business, and especially small business, to do business. Big business can afford to have full time people interacting with government. Small business can't afford this.

 

We are moving on a dangerous course towards a Communistic system where the state does everything and where the entire population works for the state. I believe that the only way that South Africa will be able to pay for this kind of system is with mass exploitation of its mineral resources, which includesFracking in the Karoo and Coal mining in sensitive water scarce areas along the Orange and Vaal Rivers.

 

This course of action will create much worse poverty and much higher unemployment. This is called the "Resource Curse", which refers to the paradox that countries with massive natural resources are worse off than countries without natural resources. 

 

There are alternatives which are much cheaper for South Africa and for the environment. I agree with President Zuma that South Africa should be growing at 5% plus per annum as this is the only way jobs can be created. According to David Murrin in his book "Breaking the code of history" a modern economy needs three things for dramatic growth: resources, population growth and electricity. South Africa has the first two, but our government has made it impossible to share out the electricity load amongst its State Company Eskom and the rest of us. Until this particular problem is resolved, we can look forward to more of the same, ie an unnecessary recession where South Africa remains the 37th fastest growing economy in Africa!

 

It should be noted that government's own policy (strategy) "white papers", the Energy White Paper of 1998 and theRenewable Energy White Paper of 2003 allow for competition "30% by 2010", but this has never been implemented. Government has continued to confuse the market with announcements which it has no intention of implementing, for example Feed In Tariffs in 2009, which it said were illegal in 2011! And more recently the IPP process has been delayednumerous times, costing the investors millions.

 

And for those of us who want to sell electricity into the grid, which is "allowed", we need to follow 15 laws, obey 10 standards and fill in 10 documents. In the USA there are 2 laws, 3 standards and 1 document. In Germany, one can install a system and then have an inspector inspect it. Once the inspector gives his "ok", one gets the Feed In Tariff 8 working days later.

 

If President Zuma and his National Planning Commission (NPC) are intent on making South Africa the gem of the world, then it must allow the private sector to grow. The fastest was to allow this to happen would be to implement the Independent Grid System Operator Model as soon as possible and allow private people to feed energy into the grid and to allow private companies to buy and sell electricity from each other. At the same time as this the administrative burden on small business must be reduced, for example go back to one PAYE reconciliation a year instead of the current two reconciliations. And government wants us to do four reconciliations a year!

 

Grids like the rail network in Europe, the International Telephone Network, the International Air Traffic Control Network, and other grids are examples of where central independent grid operators can allow private companies to use their grids. South Africa doesn't have to invent anything. It just needs to follow international best practice, without doing massive 10 year research projects to work out what is best practice!

 

The NPC called for Active Citizens. I spent 35 hours writing a40 page response to the NPC's 444 page draft document and I didn't get any kind of response. Greenwashing is rife in South Africa. Distrust is rife. And all because government wants to do everything itself.

 

Come on ANC, DA and all the other representatives of South Africa's citizens. Let's work together to make South Africa great.

 

Amandla Awethu.