Can electricity wheeling solve South Africa’s energy crisis?

Electricity wheeling is being promoted as a potential solution to South Africa’s ongoing power crisis, particularly benefiting businesses. But how effective would wheeling actually be for the country and its industries?

Electricity wheeling is the process of delivering energy from a power generator in one location to a user in a different location, using an existing distribution or transmission network (like the one provided by Eskom).

Technically, in South Africa, all electricity customers receive energy that has been “wheeled” from power stations (like Majuba, Medupi, and Koeberg) through the Eskom network to their homes or businesses.

In 2008, Eskom approved third-party wheeling, allowing Independent Power Producers (IPPs) to export energy to the national grid. IPPs are power suppliers that generate electricity to sell to utilities, governments or end-users.

electricity wheeling south africa
To date, these mostly include wind, solar farms, and industrial facilities that generate power for their own use and can supply excess energy to the grid. Despite its approval, independent power wheeling has seldom been used. Recently, the increasing power generation issues and changes in South Africa’s Electricity Regulation Act have brought wheeling back into the spotlight as a scalable solution to meet the growing demand for alternative power sources and renewable energy.

It is important to note that wheeling does not mean that the energy from the IPP’s generation site travels exclusively along the grid to the end user. Rather, it involves balancing the energy generated by the IPP with the consumption of the end-user. When we look at wheeling this way, it becomes more of a financial transaction between the IPP and the end user rather than a direct energy transfer. In South Africa, all types of power sources in the country’s energy mix can be used for wheeling.

It is not hard to see the benefits of wheeling: it helps reduce corporate carbon footprints by utilizing green energy, and contributing to carbon credits; it eases the strain on Eskom’s transmission sites, reducing demand on the grid; and it can provide cost savings for end-users, as IPP electricity tariffs can be up to 50% cheaper than Eskom’s prices.

But can wheeling solve the issue of load shedding?

Right now, there is still a way to go.

The wheeling industry in South Africa is still in its early stages. Although the per overall unit cost of wheeled power is cheaper than grid rates, the cost of wheeling is quite high as there are fees charged for each kilowatt-hour (kWh) wheeled through the grid, which reduces potential savings. At the moment, all the necessary infrastructure for wheeling is controlled by Eskom and only a few municipalities have implemented wheeling frameworks (which are still in pilot phases and lack finalized compensation models).

Despite these challenges, wheeling still has future potential. Best practices are emerging in other African countries like Namibia, where NamPower has introduced a wheeling framework in the Modified Single Buyer (MSB) program.

One of the major obstacles for players in Sub-Saharan Africa especially in large-scale wheeling projects, is accessing funding. However, organizations like Sustainable Power Solutions (SPS) are offering flexible funding terms and engineering services to assist developers who are implementing wheeling projects in the region. This not only makes such projects feasible but also more sustainable in the long run.

So while it might not hold the key to ending load-shedding in the foreseeable future, electricity wheeling holds promise as a solution to South Africa’s power crisis, offering benefits such as reduced carbon emissions, reduced strain on the grid, and cost savings. While the industry is still in its early stages and faces challenges such as infrastructure control and limited implementation, there is future potential for wheeling to become a scalable alternative to Eskom. It also supports South Africa’s transition to a green economy.

Since 2008, SPS has revolutionized energy in Sub-Saharan Africa by bringing affordable, clean energy solutions to businesses. Its solutions help clients cut electricity costs and carbon emissions, delivering a sustainable approach to power. Its fully-integrated approach allows the company to create value for both its clients and its partners.

By Charles Neethling & Anja Visagie