Cape Town is set to take advantage of the recent Department of Energy’s decision to allow major cities to purchase electricity directly from Independent Power Producers (IPPs).

The decision is anticipated to be a major fillip for the renewable energy and IPP sector.

“A lot of hard work still lies ahead to implement this policy, but it is a major step in securing a better energy future for the city,” comments Barto van der Merwe, Buildings Director at AECOM.

Although Cape Town only plans to procure 300 MW of renewable energy in three to five years’ time, the implications of the announcement will immediately have a major positive impact on its economy.

IPPs can also take encouragement from the city’s compiling of a mini Integrated Resource Plan (IRP) as recently announced, indicating that a longer-term plan for greater self-reliance is on the cards, notes van der Merwe.

Independent energy sources contribute to decreased load shedding and increased energy security.

“This is an important consideration for AECOM’s international clients when it comes to investment decisions. As such, companies need to carefully weigh up their options,” notes Werner Schneeberger, Executive at AECOM.

He points to the fact that Cape Town’s Steenbras pumped storage scheme, combined with rooftop solar plants, already play a significant role in reducing the severity of load shedding in the city.

“Areas supplied by the city in this fashion are likely to become business hubs. Another factor to take into consideration is that Eskom tariffs have tripled over the last decade, with future price uncertainty a potential deterrent to investment. Power purchased from IPPs automatically comes with price certainty, while wind and solar power is already cheaper than the cost of Eskom electricity,” elaborates Schneeberger.

“Cape Town will increasingly be able to shape the power curve by setting tariffs for both producers and users,” argues Brian Homann, Renewables Lead at AECOM.

He highlights the example that power could be more expensive when production is low and usage is high, such as during the evening peak. It could be cheaper when production is high and usage is low, such as over a sunny weekend when factories are closed but solar power can still be generated.

“Such a scenario is dependent on future pricing structure decisions. This will drive investment in smart grid control solutions and storage, and gas peaking plants, as well as allowing more renewables in the energy mix,” reveals Homan.

Businesses also need clean energy to meet their sustainability targets in terms of greenhouse gas (GHG) emissions, adds van der Merwe. “As Cape Town’s electricity grid becomes cleaner and increasingly powered by wind and solar energy, forward-looking businesses will want to be supplied by the city.”

This is because transport is a major GHG contributor, with companies increasingly opting for electric vehicles (EVs). A cleaner grid will increase the uptake of EVs in Cape Town, leading to reduced emissions, a cleaner and healthier city and ultimately, a more attractive place for business, he points out.

“Furthermore, any reduction of energy demand on the national grid on the part of major cities theoretically has the potential for Eskom to focus on economic development or rekindling the country’s industrial capacity, thus stimulating much-needed growth. AECOM is pleased to see that Cape Town is taking a lead in actively implementing its energy and sustainability strategies. We welcome and support this positive development of greater self-sufficiency in terms of energy supply,” concludes van der Merwe.