According to a statement from the City of Cape Town, reported by the Cape Argus, the municipality has signed its first agreements to buy electricity directly from independent solar producers, in a move it says will reduce its reliance on Eskom. The City expects the power to cost 19% to 21% less than current Eskom rates.
The City has signed two 20-year power purchase agreements (PPAs), contracts where a buyer agrees to purchase electricity from a generator at a pre-agreed price for a set period. Together they cover 70MW: 30MW from a JEMPEC solar plant in Atlantis and 40MW from Make A Difference LLC in Philippi. The City expects to spend about R8 billion on the power over the two decades, and annual price increases will be linked to the Consumer Price Index rather than to future Eskom tariff increases.
The City says these are the first deals in a larger independent power programme. It is procuring up to 200MW, and plans to eventually buy up to 700MW from private producers. Mayor Geordin Hill-Lewis said the deals are a step toward cheaper, more reliable power and less dependence on Eskom, adding that “Families cannot be expected to absorb endless Eskom price increases forever.”
Energy MMC Xanthea Limberg said the agreements would avoid nearly two million tonnes of carbon emissions. The City says it could earn carbon credits from the avoided emissions and trade them to fund infrastructure. It has already earned R36 million in carbon credits from municipal waste-to-energy projects at landfill sites.
What it could mean for businesses in the city
For businesses in Cape Town, the potential impact could be twofold. First, if the City passes lower power costs through in municipal tariffs, firms that buy electricity from the City’s distribution network may see lower operating costs. Second, a more reliable supply could reduce downtime from outages. The extent of any pass-through to end users, however, will depend on how the City structures the contracts and its tariffs, and the figures above are the City’s own estimates of the saving against current Eskom rates.
Businesses should also note that any tariff benefit is likely to phase in gradually rather than arrive as an immediate bill reduction. The agreements cover 70MW of the City’s supply, so they add to its existing power sources rather than replacing them overnight. The near-term benefit for most local firms is therefore more likely to be about supply reliability and the direction of future tariffs than an immediate drop in the electricity line of a municipal bill, with savings building as more independent power is procured.
In summary, Cape Town has moved from announcing an intention to a signed first step: two 20-year contracts, 70MW, a stated discount of 19% to 21% against current Eskom rates, and a plan for much more. The precise benefit to ratepayers will become clearer as tariffs are set and as the next tranche of the procurement is concluded.
