Municipal procurement of IPPs critical to energy-led economic recovery
We welcome the announcement today (16 October 2020), that Minister of Mineral Resources and Energy, Gwede Mantashe, has gazetted amendments to the Electricity Regulations on New Generation Capacity which will enable municipalities in good financial standing to develop their own power generation projects and also procure power from Independent Power Producers (IPPs).
This is another positive step that we have been calling for as it moves us closer to a more energy secure future in the Western Cape and South Africa.
Our Municipal Energy Resilience (MER) Project, currently being implemented by the Green Economy team at the Department of Economic Development and Tourism, is aimed at strengthening the energy resilience of municipalities in the Western Cape. The MER Project will work with municipalities to understand the conditions and requirements under which municipalities will be able to procure power from IPPs and develop alternative energy projects.
Importantly, in providing this support, the MER Project will assist municipalities to contribute to mitigating the energy crisis and support economic recovery in the Western Cape. This preparatory work is crucial as there are several conditions to be met before energy can be purchased independently.
The Western Cape is well placed to benefit from these new regulations as only municipalities in good financial standing are eligible to participate. One indication of good governance and good financial standing are audit results and in the Western Cape, 13 of our 30 municipalities (Metropolitan, District and Local municipalities) were recently awarded clean audits, while 14 received unqualified audits.
In addition to good financial standing, the amended regulations also require the following conditions to be met:
municipalities need to apply to the Minister for Section 34 determination of the Electricity Amendment Act to ensure that it is in-line with the Integrated Resource Plan (IRP)
a feasibility study must be undertaken
there must be alignment with municipal Integrated Development Plan (IDP)
if a public-private partnership is sought, there must be compliance with the Municipal Finance Management Act (MFMA).
all Power Purchase Agreements will be subject to the approvals required in the relevant legislation.
We note that the Department of Mineral Resources and Energy (DMRE) has put in place an internal standard operating procedure to ensure that the requests for Section 34 Determinations are attended to in the shortest possible time.
We request full transparency of this procedure as soon as possible, and will work with the DMRE to obtain clarity on requirements on each of the conditions listed above, including most importantly, what qualifies as "good financial standing" which is not defined in the regulations.
These efforts by our Green Economy team are just another example of how we are working hard to become more energy resilient in the Western Cape.