In South Africa, George Municipality has been quietly plugging away at an Electricity Wheeling Project to determine the technical challenges and policy, legal and regulatory reforms required to make wheeling happen.

While George Municipality Council approved the Electricity Wheeling Project in 2019, it took until 2021 to sign their first Use of System Agreement (UoSA) with a participant because it turns out wheeling is more challenging than the word suggests.

The pilot allowed electricity supply from various generators to various off-takers and started with one generator. The UoSA is a standard wheeling arrangement aggregating excess capacity from different generators connected to the medium voltage network. The pilot is ongoing, and at the time of going to print, George Municipality is still taking applications from parties who wish to participate.

Daniel Greeff, Electrotechnical Services: Deputy Director – Planning & Design at George Municipality, explained that a fee is involved in using the municipal network. “At the moment, we have only one plant up and running, which is internal to our network. I believe they supply four off-takers,” said Greeff.

He explained that wheeling is simply a metering exercise. While keeping track of the electricity was a manual process at the start of the problem, a software company has since got involved in developing a metering software interface to automate the system. Greeff said the hope is to scale up the project to do multiple wheeling projects on the same platform to test the response and iron out any issues.

Phillip van Niekerk, at that time an intern in electrotechnical services at the municipality, pointed out that George Municipality had received several requests from the private sector to supply electricity directly to them. These requests were prior to the 2019 amendment to regulations that allowed municipalities to procure electricity from a private entity.

“When I got involved, our director asked me to support by vetting the requests. One of the proposals suggested wheeling and asked if we’d be interested in providing this service to the public?’

“The bid was, therefore, a recommendation to the municipality to provide the service. The appeal of wheeling was that it provided the municipality with desirable outcomes linked to their ambition, including getting capacity online,” explained van Niekerk, who now works for Enpower Energy.

Spreading the risk

After signing a Memorandum of Understanding with the interested company – with the understanding that neither was under obligation to do anything other than discuss the opportunity – the proposal of a model was put forward. The model looked at how the municipality could prepare itself to enter into the ‘wire business’ instead of being an entity that sold energy.

The concept of a wheeling pilot was approved by the Municipality Council – initially with a capacity limited to 1MW per applicant. This limitation has since changed to “at the discretion of the director”, as capacity does not influence the agreement. “The limitation was [initially] set up so as not to hand the market over to just one player; we wanted to ensure fair competition,” explained van Niekerk.

The pilot was also set up to use short-term contracts. “The contract is not to procure energy but rather to enable a wheeling/trading capability” for a fixed timeframe. What makes it a pilot is the limitation of the service, not the scale of the service,” said van Niekerk.

Before the pilot got off the ground, some of the comments received from a public consultation process were that the project would not be economically feasible for the private sector. Nonetheless, this wheeling pilot was set up in as low-risk manner as possible to test what systems the municipality needed to put into place to handle wheeling.

Smart meters are key to wheeling

Two main aspects already identified as needing attention are contracting and billing. On the contractual side, legal expertise is necessary because there are no standardised wheeling contracts for municipalities to draw on. On the billing side, wheeling may be a financial transaction, but reconciling the numbers is a limiting factor.

Manually checking figures is too onerous, especially when more than one end-user and electricity generator become involved. Smart billing would also require smart meters to ensure reliability and accuracy.

“Currently, the billing is done manually, and the George Municipality’s position is that we are not going to scale this up until it is automated, or at least until we have figured out the billing side,” said van Niekerk.

A company has indicated they are willing to build and provide software licensed at no fee to the municipality to manage the process. They are also keen to create a system that all municipalities could use. While any data used would remain the municipality’s property, the company’s billing software will run on a municipality’s computer systems. Therefore, in terms of data privacy, the data remains the municipality’s property.

Wheeling going forward

The next step to take wheeling forward would be for all municipalities to settle on a standardised contract. “Not all municipalities see wheeling in the same way. In future, wheeling will probably be facilitated from Eskom into a municipality, which George Municipality has not yet tested,” explained van Niekerk.

However, Greeff pointed out that Eskom requires an amendment to the electricity supply agreement to make wheeling possible through their power lines. Still, parameters for how this will play out have yet to be discussed. “The agreements can date back decades, so that would need updating,” said Greeff.

Greeff also pointed out that the George Municipality pilot “is opening a competitive supply market, where we will have multiple suppliers in the future. This is why wheeling from Eskom will be important”.

A 2019 cost-of-supply study by George Municipality is taking on greater significance as it becomes a baseline from which they can work out network infrastructure and operational costs.

“The important part to consider is that the tariff has been split into various components, with energy being separate. We, as the municipality, can encourage the customer to buy from an independent company because our tariffs are correctly structured. So we can be sustainable.

“If you still only have the one component kilowatt hour charge for energy, then if they buy it from someone else, you have a big sustainability problem,” mused Greeff.

Van Niekerk pointed out that it all comes down to the wheeling model. Currently, the model of surplus neutral means it doesn’t matter where the energy comes from because Eskom’s charges are fixed.

Introducing various suppliers with different expenses and charges into the mix will complicate things, emphasising the need for smart metering and billing for transparency and accuracy.