George municipality pushes ahead with IPP power plan to cut costs

The short-term PPA tender is currently with the Municipality’s Supply Chain Management unit and is expected to be advertised during September 2025

George Municipality is pressing ahead with plans to purchase electricity from Independent Power Producers (IPPs) as part of its strategy to secure more cost-effective power for the city. 

The municipality said while the arrangement will not shield residents from loadshedding it does open the door to competitive pricing that could help keep municipal finances more sustainable in the long run. 

Thus, electricity will be sourced from alternative producers rather than solely from Eskom. The municipality said this decision comes as the power utility continues with tariff increases “that have risen faster than inflation.”

By diversifying electricity supply and working with multiple producers – particularly those using renewable sources, the municipality aims to reduce the risks of depending on a single supplier and to improve long-term cost stability.

Michael Rhode, Director of Electrical Engineering Services said this is a key step in ensuring George has a resilient energy future. “Partnering with IPPs will support renewable energy targets and limit the operational and maintenance burden on the Municipality, as the private sector will manage its own electricity generation plants,” he explained.

George municipality IPP shift aims to build cost-effective power for long-term benefit

The Municipality is pursuing two types of Power Purchase Agreements (PPAs) at the same time:

• Short-term PPA (three years) – Expected to deliver in the order of 10 megawatts (MW) of capacity, likely from a solar PV facility. A typical 10MW plant could produce more than 10 million kilowatt-hours each year. These agreements have fewer legislative requirements and can be implemented in a shorter timeframe than longer term PPA’s.
• Long-term PPA (20 years) – Larger scale PPA in the order of 20MW as a first phase. Additional contracts may follow in future. This process involves more legislative steps and is expected to take about two years from procurement to signing of the PPA.

The municipality said it is assisted by a Transactional advisory team, which was appointed by the Western Cape Government to achieve its goals.

The short-term PPA tender is currently with the Municipality’s Supply Chain Management unit and is expected to be advertised during September 2025. 

The long-term PPA’s Supply chain process is scheduled to begin in October 2025, with the contracts and PPA expected to be finalised before June 2027 if timelines are met. Once the PPA is signed, the IPP will be responsible for the supply of energy as per the contract.

“All environmental approvals, construction and ongoing plant management, which include all operations and maintenance will be the responsibility of the IPP. The Municipality will pay only for the electricity supplied, with risks such as financing, construction and performance carried by the IPP.”

The municipality added that although final pricing will only be confirmed after the tender process, they expect competitive and more predictable tariffs compared with current Eskom rates. Any major IPP agreement will be followed by a cost-of-supply study, which may lead to a review of George Municipality’s electricity tariffs.

“This approach is not just about today’s costs. It’s about creating a cost-effective electricity supply that benefits residents and businesses for decades to come,” said Rhode.

The municipality is one of the metros in the province that has been quietly piloting a wheeling project for the past few years. While the municipality launched its Electricity Wheeling Project in 2019,it took until 2021 to sign their first Use of System Agreement (UoSA) with a participant. 

In March last year, the South African Local Government Association (SALGA) released a case study on George municipality’s exploring alternative and innovative energies to shape a brighter and more resilient future for its community.

The case study showed that the municipality has evolved its journey of electrification from that of a town to one of a thriving city. “With a steadfast commitment to innovative strategies and sustainable energy solutions, the municipality is not only addressing challenges like loadshedding but is also charting a course towards a greener and more energy-resilient future” said SALGA.

Cover photo:  wingwings©123rf