Power pilot needs testing

ELECTRICITY: HOW VIABLE IS IT FOR MUNICIPALITIES TO BUY ENERGY FROM IPPS AND STORE IT?

- Deon Conradie

The core idea of municipalities buying electricity from prosumers/independent power producers (IPPs) at a lower cost than Eskom and using batteries to store cheaper off-peak electricity for resale at peak rates is sound in principle.

The key issue is the viability of the business model. Its success depends on several important factors, including sufficient participation from prosumers/IPPs, cost-effectiveness, regulatory approvals and the financial sustainability of municipalities managing these systems. Even if investors fund the infrastructure, implementation still carries significant costs.

The question remains: who will pay for it and will municipalities generate enough revenue to recover these costs? The claim that the programme requires "no upfront payment" is misleading, as municipalities still need infrastructure, operational readiness and technical capacity, all of which involve hidden costs.

For this model to work, municipalities must ensure reliable battery performance, secure Nersa tariff approvals and demonstrate financial and operational discipline. However, the feasibility of large-scale implementation requires significant resources, expertise and buy-in from multiple stakeholders. It is overly optimistic to assume that municipalities will generate enough additional revenue to offer tariff discounts and pay off outstanding debts.