City Power, the city’s power utility, is making strides towards a more sustainable and inclusive power landscape. With the introduction of feed-in tariffs, customers with photovoltaic (PV) systems can now feed their excess electricity back to the grid, leading to reduced monthly electricity bills and a cleaner environment.

Residential customers with embedded generators are approved for a rate of 85.50c/kWh, while businesses and larger power users (<=1MW) are approved for 70.85c/kWh.

This article will explore the different sides to this new initiative to fully see how residents with solar will benefit from it, what regulations will be put in place and everything in between so that you have a clear understanding of what this new change will mean.

So what is this new initiative exactly?

This decision to compensate solar users for surplus electricity follows a similar approach to feed-in system introduced in the City of Cape Town in June. Feed-in tariffs for residential generation in Cape Town are expected to be introduced in 2024.

Although City Power has not specified the exact date when feed-in tariffs will take effect, this move aligns with a broader strategy to open the grid to third parties, fostering a more inclusive and sustainable energy landscape.

Recently, Dada Morero, the councillor for the Johannesburg Mayoral Committee for Finance, announced that the City of Joburg is transitioning from solely being an electricity distribution entity to an energy service provider.

The city council approved generator-use-of-system tariffs to facilitate this transition, enabling independent power producers to utilise the existing grid infrastructure to supply customers.

The city clarified, “The tariff will be applicable to electricity generators who wish to serve customers embedded within the City Power area of supply and will be charged to their respective end customers. Additionally, it will apply to customers who self-generate electricity for use at a different location within the City Power electricity distribution network.”

Isaac Mangena, the Senior Media Relations Manager at City Power, explained to BusinessTech that City Power would still bill customers for all supplied electricity. However, customers will be credited for the electricity they provide at Eskom’s Wholesale Electricity Pricing System (WEPS) tariff.

Mangena stated, “Enabling customers to source electricity from third parties will impact the current revenue margin on electricity (kWhs) sold, while the demand charge is not fully cost-reflective. Therefore, the network access charges should be proportional to the opportunity cost, considering any potential discounts, associated with providing third-party access to the City Power network.”

What about prepaid?

If you’re considering feeding surplus solar energy into the grid, weighing the potential benefits against additional costs is essential. This calculation is straightforward for households nationwide, except those on prepaid meters, as this functionality is not available directly in any metro or through Eskom. Consequently, households on prepaid must convert to post-paid meters to participate.

In Cape Town, the process is relatively straightforward, households need to invest in a special bidirectional meter, which currently costs around R12,000. However, the city aims to reduce this expense by 50% in the near future. Once a bidirectional meter is installed, households can feed their excess electricity back into the grid at the published tariff.

In Johannesburg, the approach is different. While it initially seemed that customers had to bear the cost of installing a smart meter, Thami Mathiso, the General Manager of Revenue Management at City Power, clarified in a recent interview with RSG Geldsake’s Ryk van Niekerk that customers will not be charged for this installation. This policy change is expected to take effect from September 1st, coinciding with the launch of the city’s feed-in scheme.

However, there is an additional consideration for customers transitioning from prepaid to post-paid meters. They will now face a monthly service charge of approximately R209 (excluding VAT) and a monthly network charge of R844 (excluding VAT), regardless of their electricity consumption. Consequently, customers switching from prepaid meters will incur a total cost of R1,053 before even using a single watt.

It was also revealed that these high fixed monthly charges result in Johannesburg’s post-paid electricity customers paying the highest prices for power in the country. Moreover, this effectively subsidises prepaid households, who benefit from among the lowest electricity costs.

Considering these factors, it is crucial for households to carefully evaluate the financial implications before deciding to feed back their excess solar energy. While the opportunity to contribute to renewable energy generation is appealing, the costs associated with converting to post-paid meters and the fixed monthly charges must be weighed against the potential benefits. Households should consider all the costs and factors involved before signing up for any initiative.

As the energy landscape evolves, municipalities must consider making feed-in schemes more accessible and cost-effective for customers. Finding a balance that promotes renewable energy while ensuring fairness and affordability for all electricity users remains a key challenge. By addressing these concerns, we can foster a sustainable and equitable energy future for South Africa.

But how will City Power’s feed-in tariff work?

The approved tariff document highlights that “all residential customers who would be willing to invest in embedded generation with the purpose of supplementing their electricity supply from City Power, will have to be on a time-of-use conventional tariff structure.” 

This tariff structure is currently only available to residential customers on three-phase connections, which means a higher fixed charge than single-phase customers pay. Looking past this factor, time-of-use tariffs mean cheap (as low as R1.52/kWh in off-peak times in summer) but also expensive electricity in winter when it is peak rates (R5.62/kWh), which is double the rate you would pay on a typical consumption based tariff.

* Standard rates are used as these are ‘daytime’ rates for weekdays (9 am to 5 pm in winter and 10 am to 6 pm in summer). On Saturdays, standard rates run from 7 am to 12 pm.

For a post-paid household on City Power, feeding back excess solar electricity is an opportunity for them to offset their monthly charges.

Eskom has a similar approach in their new Homeflex tariff, a feed-in system where residential customers are on peak charges in winter and off-peak during summer. This excludes an R1.12/kWh network damage charge, ancillary service charge and retail charge, which can boost peak and off-peak rates.

To conclude, this is a big step by City Power to try and combat our power crisis, but it still needs improvement. Work is required to ensure that this initiative runs smoothly and benefits both the residential customers with solar who will be providing the excess electricity and the customers of City Power and City Power itself.