1. SSEG Financial Implications for Municipalities
South African - German Energy Programme (SAGEN)
SSEG Financial Implications for Municipalities
Christopher Gross
South African German Energy Programme (SAGEN)
Tshwane Sustainability Week 2017

2. Background information on GIZ
As a government-owned corporation, GIZ carries out sustainable development projects worldwide for the German government and other public and private-sector clients
The organisation supports political, economic, ecological and social developments worldwide
GIZ operates in more than 130 countries and employs more than 17,000 staff members (with a 70 – 30% split between national and international personnel)
GIZ initiated activities in South Africa in 1994 and has allocated more than EUR 550 million to the bilateral cooperation with South Africa (2014)
The main focus of our work in South Africa is Governance and Administration, HIV/AIDS, Energy and Climate

3. Customer Protection: Database of approved PV installers
Compliance with industry and international best practice
Safe installation and municipal grid connection
Training and skills development opportunities

4. Opportunities for industry players all along the value chain: Installers, Financiers, Insurance, Training Institutions + Access to key resources

5. Best practice Solar PV installation guidelines

6. Technical Solar PV Training for Municipalities
Nov/Dec 2016: Development of training material tailored to municipalities
Jan/March 2017: Training sessions at North West University / Suncybernetics
Administration through South African Local Government Associaction (SALGA)
Participants from more than 25 different municipalities
Password: STCpotch
Training content building blocks

7. AMEU SSEG Resource Pack
Requirements for Embedded Generation
SSEG Supply Contract
SSEG Application Form
SSEG Commissioning Form
SSEG Decommissioning Form

8. Training on Solar PV economics
Training content:
How to set adequate tariffs for solar PV customers
How to quantify the job creation potential of solar PV policies
How to cost-efficiently procure PV assets
Next municipality training: July 19-20

9. Source: http://msolarpower.co.za/5kw-hybrid-solar-rondebosch/

10. Describe load profile:
5-6: Light, Water Heating, Cooking
10: Water Heating
12-14: Cooking, Pool Pump
18-21: Water heating, cooking, general appliances
Based on SEA household audits – representative, but no averaging!

11. Source: http://msolarpower.co.za/5kw-hybrid-solar-rondebosch/

12. (Sunny Day)
PV size 50% of peak demand
Potential export

16. First: Registration & Approval Process (Number one for revenue protection)
Second: Bidirectional Meter = Crucial for Revenue Protection.
Source: City of Cape Town

17. 2 1 1
Solution: Compensate PV customer at an lower than retail, but fair rate (e.g. avoided ESKOM avoided costs or ‘‘cost of supply“) 2
Solution: Introduce other (fixed) charges to recover parts of the induced loss

19. Potential measures to reform the charging basis
Source: International Review of Cost Recovery Issues, Ofgem 2017

21. SALGA-GIZ SSEG tariff model

22. SALGA-GIZ SSEG tariff model
Brief:
A tool to assist municipalities in cross-checking their SSEG tariffs with regards to impact on revenue and attractiveness to Solar PV customers
Model features:
Generic i.e. usable by all types of municipalities
Simple and easy to use
Data requirements not too onerous
What the model can do:
Generate impact on municipal revenue and VOS (avoided costs) for a given set of SSEG tariffs
Determine if a business case exists for a set of tariffs for the PV customer
SSEG tariffs can be changed and the results analysed to assist in tariff design
What the model can’t do:
Automatically generate the (best) set of SSEG tariffs

23. Municipality Perspective
PV Customer Perspective

24. … Coming back to the case study
Source:

25. … What is the overall impact on municipal revenue with more and more people installing Solar PV?
Source:

26. Example Case Study continued

27. Example Case Study continued
Payback times per tariff – Business Case for the customer
Investment Costs PV System: 22,000 R/kWp
Size of PV System: 2 kWp
Assumption: Export tariff (FIT) stays constant over project lifetime

28. Penetration rates
Payback
Residential revenue impact 1% 5%
10%
20%
Fixed R150/m; Energy 150c/kWh; Feed-in 65c/kWh
0,00%
-0,01%
-0,02% 19
Fixed R150/m; Energy 150c/kWh; Feed-in 85c/kWh
-0,12%
-0,24%
-0,48% 18
Fixed R220/m; Energy 130c/kWh; Feed-in 65c/kWh
-0,07%
-0,13%
-0,26%
Fixed R350/m; Energy 200c/kWh; Feed-in 65c/kWh
0,45%
2,24%
4,47%
8,95% 26
Fixed R60/m; TOU Energy 175;170;125c/kWh; TOU Feed-in 175;170;125c/kWh
-0,18%
-0,92%
-1,85%
-3,70% 10
Fixed R100/m; Energy 150c/kWh; Feed-in 150c/kWh
-0,17%
-0,83%
-1,66%
-3,33% 11
Fixed R0/m; Energy 150c/kWh; Feed-in 150c/kWh
-0,28%
-1,39%
-2,78%
-5,55% 8
Assumption: Export tariff (FIT) stays constant over project lifetime

29. Observations
Analysis is indicative of what will happen to municipal finances and the business case under different tariff scenarios
Analysis uses a generic customer that consumes electricity according to a particular load profile, and generates electricity from Solar PV according to historical irradiation patterns
BUT every customer behaves differently, so results need to be treated as such
Results from the analysis can guide a municipality's tariff setting process
BUT additional work and analysis are required to determine tariffs that fulfil each individual municipality’s requirements. Continuous tweaking and in-depth sensitivity analysis of various tariff types is essential.

30. Residential versus Commercial & Industrial Customers

31. Conclusions
First and most important for municipal revenue protection are
Establishing a sound application and registration process for PV rooftop systems
Installing adequate metering to capture PV-feed-in (especially for residential customers)
Revisiting of current tariff structures for different customer groups might become necessary
Cost of Supply studies will help to determine the value of PV electricity and will help to identify potential feed-in-tariff levels
When designing SSEG tariffs it is important to think of the PV customer business case and of the customers´ investment expectation
Different measures exist to reform the charging basis (as presented before)

32. Thank you very much for your attention.
Christopher Gross
South African German Energy Programme (SAGEN)
Credits for the content of this presentation go to:

33. Backup

34. Residential tariff elements – Standard consumption tariff
Source: Adapted from GreenCape, Basic Tariff Guiding Principles: Small-scale Embedded Generation (SSEG) tariffs

35. Tariff elements – SSEG residential tariff
Source: Adapted from GreenCape, Basic Tariff Guiding Principles: Small-scale Embedded Generation (SSEG) tariffs

37. + Sol Plaatje

39. Tariff elements – standard consumption tariff cont.
Network cost
Service charge
Energy charge
Costs associated with maintaining and operating the network
Costs associated with providing a retail service network i.e. metering, billing, call centres etc
This covers the total cost of electricity purchased from Eskom, which includes a margin
Should be charged to all consumers and be the same for SSEG and non-SSEG customers
Service charge normally a daily rate and charged monthly
Cost varies with the amount of electricity consumed per month
If higher for SSEG customers could disincentivise Solar PV installations
All customers should pay a service charge
TOU might be the most cost-effective option
Source: Adapted from GreenCape, Basic Tariff Guiding Principles: Small-scale Embedded Generation (SSEG) tariffs

40. Potential measures to reform the charging basis
Source: Owen Zinaman (8 Dec 2016) Module 1: Power Sector Regulation and Distributed Generation, NREL