Joburg’s City Power gets the green light on long-term IPP deal

The MMC for Environment Infrastructure Services Departments (EISD), Clr Jack Sekwaila, announced that the Johannesburg Council had approved the plan to enter into a 20-year deal with independent power producers (IPP) for new generation capacity.

He said City Power, as an entity of the City of Johannesburg, has the mandate to provide electricity and energy supply in a sustainable way that promotes economic and social development.

“Over the years, however, it has become increasingly difficult to continue providing electricity in a sustainable way to our residents, given the country’s energy challenges. City Power relies heavily on Eskom for the bulk supply of electricity.

“The entity currently receives 87% of its energy from the national power utility, Eskom, while the remaining balance is sourced from Kelvin Power Station.

“When the government of local unity took over the city, we decried the state of power supply and the impact of load-shedding on our residents and vowed to resolve this once and for all.

“Through this long-term agreement of procuring energy through IPPs, the city, through its entity City Power, will be on the right track to achieve the goal of energy equality, energy independence, energy security, and energy supply. These fundamental objectives will be realised at a lower price and little interruption, as is currently the case with Eskom,” said Sekwaila.

While this is a significant step in the right direction to start the onboarding process of the IPPs, there is another process before the city’s power utility can enter into any agreement with IPPs in the long term.

The next step will be to seek approvals from the Department of Co-operative Governance, the National Treasury, the Department of Mineral Resources and Energy (DMRE), and the National Energy Regulator.

These approvals will finally allow City Power to enter a 20-year procurement deal with IPPs.

The nation’s energy crisis, coupled with the ever-growing demand for electricity supply, has hit City Power hard and has hindered its ability to effectively generate adequate revenue, which is essential in delivering the mandate of economic and social development within Joburg.

The two-decade-long deal with IPPs will help cut costs and lower reliance on Eskom. It also speaks to the city’s Climate Action Plan adopted in 2021.

According to the report tabled in the council this week, the local utility plans to reduce the amount of energy it procures from Eskom by 5% in 2025. In 2030, it plans to drop its Eskom reliance from 87% to 66%.

In 2035, City Power will only source 59% of electricity from Eskom, and the rest will come from IPPs. This will lower carbon emissions in the process.

The chairperson of the City Power board, Bonolo Ramokhele, said, “This groundbreaking development comes after we secured 92MW of power from four IPPS through a short-term power purchase agreement (STPPP) late last year.

“All this forms part of City Power’s 10-point plan to lessen the impact of load-shedding on our customers, especially businesses which are the cornerstone of economic activity within the city. We have been consistent in our bias towards baseload dispatchable power through our efforts to enable sustainable development of the economy.

“The green light on the short-term power purchase agreement was a major milestone which paved the way for the approval of the long-term deal.

“Part of City Power’s alternatives as contained in its 10-point plan, include solar farms, gas, battery storage, and waste-to-energy, among others. The City of Joburg has also noted the draft Integrated Resource Plan (IRP) 2023 gazetted on January 4, 2023, and we will submit our comments and position in due course.

“Once the IRP 2023 has completed the public participation process and is signed off by the minister of the DMRE, the necessary adjustments will be made to the current CoJ Energy Plan.”