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Your article in the Business Day is incredibly timeous as this past week I have reinvigorated my campaign regarding Net Metering.

South Africa is in a recession largely because of lack of electricity supply. This can easily and cost effectively be resolved by allowing Net Metering. By July this year, private citizens in Cape Town will be able to make their own electricity cheaper than we can buy it. And I have financial numbers which show that larger companies can already make their own electricity cheaper than they can buy it.

With Net Metering, users of electricity can buy and sell electricity at the same price. For example, if I produce 1 KW and need 2 KW, then I buy 1 KW from the Grid. Effectively, my meter is going slower than normal. And if I produce 2 KW and need 1 KW then I export electricity to the grid and my meter goes backwards at the same speed it goes forwards. This only happens with people who pay for their electricity in arrears and who have the old fashioned disk meters which look like small metal CDs. Prepaid meters either stop working, stop turning, or go forwards when one is exporting to the grid!

The South African Bureau of Standards created a document called NRS 097-2-1:2010 which was adopted by NERSA, the National Energy Regulator of South Africa, in 2011. The technical term for this Grid Integration, Reverse Feed and Net Metering is “Grid Interconnection of Embedded Generation.”

It allows for Grid Tie systems up to 100 KW, an artificial limit. I have two clients who are considering buying large roof top net metering systems: one at 700 KW and one at 500 KW. I also have numerous smaller potential clients who want to use Net Metering and know of a number of people who are already reverse feeding the grid. The grid doesn’t see them and they are having very little effect. Their excess electricity is simply used by the neighbour.

Eskom and The Cities, including the so called advanced city of Cape Town and the Western Cape’s Provincial Administration (PAWC), have not adopted the “Embedded Generation” policies. The three main reasons given are:

1. The Grid Tie inverter might reverse feed the grid when the grid is switched off, eg for maintenance, and an electrician working on the line might get electrocuted;
2. Eskom and the Cities will lose revenue;
3. The grid might become destabilised.

1 was resolved in 1999 with the American UL 1741 standard which was harmonized with IEEE 1547. Any inverter which is listed to the UL 1741 standard may be connected to a utility grid without the need for additional anti-islanding equipment, anywhere in the United States or other countries where UL standards are accepted. A similar acceptance of the IEEE 1547 is happening in Europe. An island is a grid which can run internally, for example inside a building, without exporting electricity to the main grid. Many companies in South Africa already have Generators and when there is Load Shedding, ie enforced power failures because the demand is either too high or the supply too low, these systems “Island” the Generator and its “clients” until the Grid is restored and then there is a process of disconnecting the Island and reconnecting the Grid. These processes happen seamlessly and are installed by Electrical Engineers.

2 would be solved if government would see out of their silos. The opportunities are great if Citizens of the City of Cape Town and other cities could get the government, which owns Eskom, and the Cities to see out of their silos. I believe that the City of Cape Town gets 60% of its Revenue from Electricity Sales and the 150% increase in electricity over the past 5 years has increased this percentage from 40%. The fastest way to get renewable energy adopted is to allow private people and business owners with the required roof space to cover their roofs in Photovoltaic Systems. This will create jobs, reduce unemployment, reduce crime, increase lighting and electricity in Africa, give security of supply, fewer power failures, less chance of load shedding, and help move us away from polluting power stations. In places like Germany, California and China, the more renewable energy that is installed, the faster the economy grows. This is because the bigger base load power would then be available for the organisations needing the bigger loads, for example shopping centres, new housing developments, miners, smelters and other large users of electricity. And more importantly businesses know their electricity price for decades and can plan accordingly; and businesses get security of supply and fewer disruptions caused by electrical systems failure.

3 is a red herring. I understand that Turkey has found that wind farms up to 500 KW actually stabilise the grid. And in South Africa the two new 4.8 GW power stations will massively destabilise the grid when they are switched on and switched off. Switching on or off 1 KW or 500 KW is tiny compared with 4.8 GW, ie 4,800,000 KW. And if South Africa loses the main power lines from Mpumalanga to the Cape, for example in a storm or terrorist activity, then Cape Town could quickly be without 60% of its electricity supply as only 40% of Cape Town’s electricity supply comes from our local Koeberg Nuclear Power Station.

I should say that large users of Renewable Energy such as Germany and Belgium notice problems on their grids when the Renewable Energy component reaches 20% of electricity supply, but it has taken these countries 20 years to get to this point, and with Feed In Tariffs. I think South Africa can do it in 10 years, and by then Germany and Belgium will have solved their problems and South Africa will be able to follow their lead. Breaking news: Germany is solving this grid destabilisation problem!!

I would very much like to help you in any way I can. In November 2008, the South African government announced that Feed In Tariffs (FITs) would be in place by March 2009. My company and hundreds of others decided to get ready for this momentous day. Unfortunately this didn’t happen. There were FITs but no Power Purchase Agreement. Since approximately 2009, there has been a 2 cent levy (see what it was meant to be for!) on all electricity sold in place to pay for the FITs and my understanding is that there is R15 billion in this fund already. Be that as it may, we don’t need FITs in South Africa anymore. We just need the implementation of Net Metering. Interestingly the Standard allows for Time Of Use Tariffs which would incentivise people to install battery systems to supply electricity at peak time whilst producing or buying electricity at off peak time.

And the R15 billion could be used on a first come first served basis to allow private people to install renewable energy systems before VAT and before tax. Businesses can already do this. See http://mypowerstation.co.za/2011/11/26/my-power-station-press-release-26th-november-2011-david-lipschitzs-renewable-energy-jobs-plan/  for more ideas along this theme.

Hence there would be zero drain on the fiscus and massive job and GDP creation on a Continent that will have the biggest consumer base in the world in the next 20 years. We can either supply our own needs or export our electricity requirements to China and the other Asian Tigers who are massively ramping up electricity production and who will end up making everything we need, but who will then end up owning Africa, as large creditors usually end up owning their customers when the customer cannot pay the bill.

The positive possibilities of Net Metering in Africa’s biggest economy and in the rest of Africa are mind blowing. Let’s work together to make a difference.

I look forward to your reply and to helping make Renewable Energy a reality in South Africa and on the African Continent.

David Lipschitz, Energy Expert at My Power Station, with over 4,000 hours of R&D invested since November 2008, says:

What South Africa needs is very simple:

1. “Reverse Feed” to be legalised, ie electricity producers besides Eskom should be allowed to supply the grid with electricity. Currently Eskom has a monopoly on selling its electricity to the grid which is uncompetitive and unfair.
2. “Net Metering” to be legalised. Electricity producers should be able to buy and sell electricity at the same price, ie if a user buys electricity at R1.29 per kwh, then that user should be allowed to sell electricity at R1.29 per kwh. An alternative to this is for a user to be able to buy energy at R1.29 but to be able to sell it at 90 cents (30% off) during off peak time and sell it at R2.58 (100% more) at peak time. There are lots of possibilities.
3. “Time of Use Tariffs” to be legalised for anyone with no service charges. This will incentivise electricity service providers to buy or produce energy in cheap periods (23 cents per kwh) and sell it at peak or expensive periods (R2.30 or R4.00) per kwh. Note that as the market frees up, electricity prices will change by the minute, just like the spot markets where prices change constantly. Independent electricity producers will be able to buy or produce electricity in cheap periods and sell it in expensive periods.

Note that private investors would need to buy special electricity meters or have two meters, one for importing/buying electricity and one for exporting/selling electricity. This would be at no cost to government and would create yet another industry in special meters. These meters can be manufactured in South Africa.

South Africa doesn’t need any special job creation plans. We just need good old fashioned deregulation and leveling the playing fields so that everyone including people in townships can compete on a level playing field.

If government wants to give incentives, then here is a plan:

1. Private homeowners can invest in Renewable Energy system before tax and before VAT, like businesses. This will save homeowners in the 40% tax bracket 52% of their investment cost. eg a business wishing to install a 16 KW roof top system might spend R30 per watt on the installation at a total cost of R480,000. A homeowner would need to earn R912,000 (R57 per watt) to buy this R480,000 (R30 per watt) system! And this assumes that cash is invested. If debt is used the cost is even higher and the potential saving even bigger.
2. Renewable Energy Capex for businesses to be fully tax deductible in the first year.
3. R&D (amortisation) costs in RE to be fully tax deductible in the first year.
4. Government can pay 30% of the capex costs of RE systems as happens in other countries.  This 30% represents the cost that government would have spent in any case on building power stations to satisfy the demand.  In Germany a 50% rebate is given and Feed In Tariffs. A 30% rebate would mean that the R480,000 system previously mentioned would cost R336,000 and would bring the price per watt down from a potential R57 per watt to R21 per watt! Private homeowners would save 63% of their investment cost and would be incentivised firstly to install systems and secondly to install bigger systems.
5. R57 – R21 is R36 per watt.  The fiscus currently has about R30 billion in Green Funding available with more being added all the time.  830 MW of Roof Top Photovoltaic (PV) systems can be installed before the fiscus runs out of money. First come first served! At an average roof size of 3 KW, 276,000 houses could have roof top PV installed and there could be a combination of private roof top and business roof top where businesses sometimes have 500 KW of roof top space available. If half is given to business and half to homeowners, we still 90 businesses and 138,000 houses getting before tax and rebated systems. Assuming a ratio of 500 watts per person installed per day, over a 10 year period at 200 working days per year, to install 830 MW, 830 installers would be employed. Plus sales people, designers, manufacturers, maintainers, inspectors, marketers, etc. Perhaps making over 10,000 people employed very quickly using money that has already been collected as green taxation. The average monthly salary of these people would be R39,200 per month and government would recoup Corporate Tax, PAYE, VAT, etc, when these people spend, so the cost to the fiscus will actually be less than R30 billion. My R39,200 per month is based on 830 MW * R57 per watt. Makes R47 billion. Divided by 10 years is R4.7 billion per annum divided by 10,000 people is R470,000 per annum is R39,200 per month.

If government does all this, jobs will be created automatically by private investors.

Note that China will create 11 million jobs in the Green Industry in the next 5 years.

South Africa can only compete with this if it is clever, ie by doing things to allow non-Eskom IPPs (including homeowners and businesses) access to the electrical grid which will help to dramatically grow the country and automatically create jobs at low cost.

Thomas Schelling, from the forward to Pearl Harbour: Warning and Decision by Roberta Wohlstetter, published 1962!

See Engineering News Article.

For more on Net Metering see my Engineering News Article.

Also see my Net Metering detailed submission re the Integrated Resource Plan 2010 here.

Also shopping at My Power Station Technology

Buying prepaid meters might be short sighted as once the people of Ghana decide to install electrical renewable energy, they may find that their meters go forwards (instead of backwards) when they are reverse feeding (ie supplying) the grid with electricity. The ECG should check if their prepaid meters allow tamper proof bidirectional electricity and that they measure both consumption and production. In South Africa, almost all people with prepaid meters are prevented from supplying the grid with electricity and in this writer’s opinion, this is short sighted.