SA’s variable renewable energy (VRE) sector is growing at an incredible pace, with more than 133GW of projects now under development — almost double the capacity from just two years ago.
But as we race towards a more sustainable energy future a serious and often overlooked threat is emerging: curtailment. This practice, where VRE plants are forced to reduce their output due to grid limitations, is quietly undermining the very viability of independent power producers (IPPs) in SA.
As I learnt after a conversation with De Wet Taljaard, technical specialist at the SA Photovoltaic Industry Association (Sapvia), in a recent interview on Classic Business, curtailment isn’t a new concept. But now, as the country leans more heavily on VRE, the consequences of not having agreement on how curtailment is implemented are becoming too significant to ignore.
It’s like slamming on the brakes while driving at full speed. The system operator instructs generators to dial back their power output, not because we don’t need the energy but because our grid simply can’t handle it. This isn’t just an inconvenience, it’s a financial calamity for the IPPs, which are being forced to operate below capacity, directly hitting their bottom line.
The latest SA Renewable Energy Grid Survey, a joint effort by the SA Wind Energy Association, Sapvia and Eskom, makes it clear: curtailment is a critical problem, especially for solar PV and battery storage projects, which are supposed to be the backbone of our sustainable energy future. Even with the recent introduction of a 10% cap on curtailment in the latest bid windows (bid window 7), developers remain deeply concerned about the financial hit they’ll take. This cap, while intended as a safety net, still leaves IPPs vulnerable to substantial revenue losses.
In previous bid windows curtailment was uncapped, and IPPs had the right to claim payments for the energy they would have produced if not for curtailment. The 10% cap in bid window 7 was supposed to provide some relief, but it doesn’t go far enough. IPPs are still on the hook for losses up to that 10% threshold, and without the previous safety net — known as the allowable grid unavailability period — they’re more exposed than ever.
The implications are severe. As noted by law firm Cliffe Dekker Hofmeyr, the broad and vague definition of curtailment exclusions could lead to disputes over what qualifies for compensation, putting IPPs in an even more precarious financial position. Eskom’s optimistic spin on the benefits of curtailment is just that — spin. The reality is that unless we address this issue head-on, we risk scaring off investors who are crucial to our sustainable energy goals.
Globally we see similar challenges as countries increase their reliance on wind and solar power. According to the International Energy Agency (IEA), the potential for curtailment grows with the expansion of wind and solar PV. Crucially, the IEA suggests curtailment is not an inevitable outcome of increased VRE capacity. It can be mitigated through strategic investments in grid flexibility, energy storage and smart grid technologies. SA must learn from these international experiences by prioritising grid enhancements and adopting solutions such as energy storage and demand-side management to minimise curtailment rates.
Let’s not kid ourselves — SA is at a make-or-break moment in its energy transition. We’ve managed to stave off load-shedding for more than 150 days, a scarcely believable feat considering where we were a year ago. But this progress could quickly unravel if curtailment continues to choke the life out of our renewable energy sector. Taljaard warned that the momentum we’ve built could grind to a halt if IPPs are constantly forced to operate under the threat of curtailment.
Dynamic Energy Consultants director Darryl Hunt hit the nail on the head in a public energy WhatsApp group discussion. He pointed out that our obsession with energy-based tariffs, instead of power-based tariffs, is only making things worse. The current system encourages gaming the market, rather than dealing with the real issue: our grid can’t handle the load. A shift to power-based tariffs, along with time-of-use tariffs for residential customers, could ease the strain on the grid and reduce the need for curtailment.
And let’s not forget the potential of demand-side management measures, which remain largely untapped. City Power chief engineer for renewable energy Paul Vermeulen argues that well-designed tariffs could incentivise consumers to shift their energy usage during peak times, significantly reducing grid strain. This in turn would minimise curtailment and allow renewable energy projects to reach their full potential.
Taljaard also pointed out that IPPs could mitigate the impact of curtailment by offering ancillary services — essentially, additional grid support functions such as frequency regulation. These services could provide an alternative revenue stream, helping to offset the losses caused by curtailment. But while this idea is gaining traction it is not yet a solution, and the clock is ticking.
This isn’t just an abstract concern for technocrats; it’s a clear and present danger to our energy future. The industry cannot afford to be complacent. We need regulatory reforms, innovative tariff structures and movement towards better grid infrastructure — now. Failure to do so could see SA’s energy transition lose momentum just as it begins to take off.
• Avery, a financial journalist and broadcaster, produces BDTV’s ‘Business Watch’. Contact him at Badger@businesslive.co.za.
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