Power to the people: virtual electricity wheeling to further open up South Africa’s energy market

Electricity wheeling – which is becoming an increasingly important part of South Africa’s energy landscape – was the subject of discussion at Premier Alan Winde’s 28th Energy Digicon and will be a focus of a number of the digicons during November.

Wheeling is the delivery of electricity from a generator to a user in another area through existing distribution or transmission networks.
It enables additional power generation through partnerships. “Very importantly it is empowering and enabling the private sector to become part of the solution to the country’s ongoing energy woes,” said Premier Winde.

Chief Director of Electricity Pricing at Eskom, Ms Onicah Rantwane, was the Premier’s special guest this week. Ms Rantwane pointed out, “Wheeling is one of the enablers of additional generation through bilateral trade between private parties.”

The power utility has had a traditional wheeling framework in place since 2008. “The framework is really premised on a win-win situation. The model is based on the understanding that users of the grid, the load customer receiving wheeled energy, as well as the Independent Power Producer (IPP) that is using the grid to wheel energy through to their customer must pay the utility a fair contribution to use the grid. On the other side, the utility needs to provide reliable grid services,” she explained.

However, the traditional wheeling model does have limitations:

• It does not cater for multiple generators to multiple off-takers;
• It is limited to medium voltage and connected supplies;
• It does not cater to small energy buyers of traders/aggregators; and
• It does not adequately deal with customers beyond municipal boundaries.

Virtual wheeling will address these limitations. Eskom is currently in the process of finalising its virtual wheeling framework, which is expected to be rolled out by late 2024. As mentioned in a previous digicon the model is being piloted with the mobile telecommunications company, Vodacom.

Key to further opening up, or in essence democratising the model, will be to develop low voltage wheeling for small power users such as private households. “The current framework really does favour big industry, but obviously we have now realised that that is a barrier to smaller suppliers. That is what the virtual wheeling framework will try to address,” she added.

Ms Rantwane stressed, “Virtual wheeling will not replace traditional wheeling.” Both will operate simultaneously. She also cleared up the misconception that municipalities will lose out on revenue due to wheeling. “The framework should be based on the cost that a municipality will avoid paying Eskom. That should be that. It should not result in revenue loss for the municipality if the tariffs are properly structured to make sure that the credit is only based on avoided costs and not result in network costs being reduced.”

Wheeling is firmly part of the Western Cape Energy Resilience Programme. The Western Cape Government (WCG) has developed the Wheeling Toolkit to assist municipalities with the implementation of third-party electricity wheeling at a municipal level. It includes a high-level guide as to the steps for implementation as well as access to resources such as templates and spreadsheets to calculate accurate tariffs. In next week’s Energy digicon the provincial government will discuss this toolkit in more detail.