Amatola Green Power- South Africa’s only existing private renewable energy trader

Submitted by: Amanda Botes, Tuesday, August 13, 2013

Amatola Green Power is the first private sector energy trader authorised to buy and sell renewable energy in South Africa. Amatola Green Power is independent from Eskom and from local municipalities and trades in clean energy by connecting willing buyers to willing sellers.

At a recent KwaZulu-Natal Sustainable Energy Forum meeting, founder member and shareholder of Amatola Green Power, Elvin Fredericks, explained that they purchase green energy from generators and then sell the energy to industrial and commercial customers in the form of Renewable Energy certificates (RECS).

Fredericks explains, “We buy physical energy and the physical energy goes with green certificates.  We buy from existing generators and we also are in the process of establishing new generation projects. We sell the energy to industrial and commercial customers.”

Customers pay between R0.80 and R1.40 per kWh of electricity purchased and generators are paid between R0.62 and R1.05 per kWh supplied.

Fredericks says that they have concluded agreements with three generators at this stage: Two Rangers Solar 100KW capacity solar projects for 20 year terms; and an Electrawinds Wind Turbine project with a capacity of 1,8 MW for a 17 year term.

Regarding the customers that Amatola has contracted Fredericks says “We have contracted customers to purchase 50, 000, 000 kWh. We are currently oversubscribed in terms of demand [as] there are lead times from 8 to 18 months before new generation projects start generating electricity.” Some of the customers include Bridgestone, Spar and various customers in the NMBM municipality.  Mercedes Benz bought energy during the Pilot Project phase from 2006-2008. The companies mentioned are on the NERSA Schedule 1 list with whom Amatola may trade. Fredericks adds “Various Customers have signed 10 year contracts to purchase the energy generated from the existing generation stations as well as have signed long term agreements to make new generation possible.”

Fredericks adds that the generator and customer do not have to be in close proximity to each other in order to trade electricity.  “A generator doesn’t have to be in close proximity to a customer. A generator like TSB sits out at Malelane and our customers are sitting out in Nelson Mandela Bay”, says Fredericks.

Fredericks also explained that Amatola Green Power uses the existing electricity grids as energy that is purchased is placed on the existing grid by the generators “The infrastructure and wires are owned by Eskom and the municipalities so we rent the wires and pay them a wheeling fee.”

Fredericks says that in order for the model to work a number of different stakeholders need to be involved, “This whole model is an offset of energy, so we have to ensure that we get the buy in from municipalities to agree to be part of the system, we have to get buy in from customers to agree to contract and we have to get the buy in from generators.” So far Amatola Green Power has signed a wheeling agreement with one municipality Nelson Mandela Bay Municipality.

Power Purchase Agreements

Power Purchase Agreements are signed by the generator and the customer through Amatola Green Power.  The customer contract specifies the name of the generator and the amount of green energy that they are willing to purchase from the generator. Fredericks explains that they operate on a “take or pay basis” which means that if a customer says they will purchase a certain amount of green energy and actually use less, then they will be required to pay for the energy that they did not use. Fredericks however says that this is not really a risk for customers as in his experience they always use the power. Fredericks adds that agreements between parties that are signed for more than ten years makes it “bankable for the generator” and that they encourage customers to sign ten year agreements. On the generator side, Fredericks adds that “the technology has to be audited and the generator has to guarantee minimum production and are penalised if they don’t deliver.”

Fredericks emphasises that “the customer PPA is the key to the entire deal” as this agreement confirms that the generator’s renewable energy project is viable and therefore the generator is better equipped to access bank loans and a generation license from NERSA.  “We use the customer to guarantee the bankability of project … and the customer PPA provides a guarantee to the generator that revenue will be coming in.”

Fredericks adds “Amatola Green Power is in the process of completing various power purchase agreements with project developers for new generation with whom we are contracted and which will mainly be located in the Nelson Mandela Bay Municipality as well as the Eastern Cape smaller towns of Grahamstown, Cradock as well as Mpumalanga and Ekurhuleni.” The following technologies and generation capacities are expected: Bagasse: 10 MW, Hydro: 10 MW, Biomass: 20 MW, Wind: 80 MW, Solar: 100 MW.

Fredericks says that Amatola Green Power helped to establish a green power trading market in South Africa but that “there is a need for more traders in the market to get rural development going.”

Amanda Botes