The South African Photovoltaic Industry Association (SAPVIA) has welcomed a new fast-tracked payment mechanism that will see independent power producers (IPPs) paid the full estimated value of their curtailment compensation claims upfront.

In a statement, SAPVIA said the new approach would ease a cash-flow squeeze that had been particularly difficult for broad-based black economic empowerment (B-BBEE) equity partners to absorb.

The mechanism was set out by the National Transmission Company South Africa (NTCSA) and its Central Purchasing Agency during a bilateral engagement with SAPVIA on July 22.

The meeting was convened after curtailment instructions to IPPs rose from roughly 100 a month earlier this year to more than 1 000 a month, generating a substantial backlog of deemed energy claims and invoices and stretching the administrative processes used to verify and settle them.

In a July 24 statement, the NTCSA said the value of curtailment claims under verification and settlement had been reduced from about R2-billion in mid-June to R1.5-billion, and that it is targeting completion of remaining assessments and payment of approved claims by the end of August.

NTCSA said it administered power purchase agreements (PPAs) covering 117 projects with a combined capacity of 10 083 MW, and processes payments of roughly R45-billion to IPPs annually. Approximately 300 claims have already been approved under the new mechanism.

“Delayed curtailment compensation has placed significant financial strain on IPPs, and B-BBEE equity partners have been disproportionately affected because they carry the least headroom to absorb a payment delay,” says Dr Rethabile Melamu, CEO of SAPVIA. 

“Resolving these cash-flow bottlenecks is not an administrative detail. It is fundamental to protecting broad-based transformation in this sector and to maintaining investor confidence in South Africa’s energy transition.”

The NTCSA’s new provisional payment process will draw operational data directly from the System Operator’s SCADA systems rather than from regional distribution teams. Under the mechanism, 100% of the estimated claim value will be paid upfront, with full technical verification following after payment.

In most cases, minimal or no financial adjustment is expected after verification, and NTCSA believes payment flows will normalise immediately as a result.

The NTCSA attributes the increase in curtailment to operational constraints on the System Operator during daylight hours when solar generation peaks but coal-fired plants remain operating to guarantee capacity for the morning and evening demand peaks.

While flexible sources, such as hydro and pumped storage, are adjusted first, curtailment of self-dispatching renewable IPPs becomes the final balancing tool available to the System Operator.

Curtailment is a standard global mechanism of power systems with high renewables penetration, and the issue for the sector is not curtailment itself but the speed and predictability of the compensation that follows it.

“Faster payment addresses the symptom. The structural answer is to build a system that can absorb midday solar rather than waste it,” says Melamu.

“That means storage at scale, market signals that reward daytime consumption, and a grid that is planned around the generation mix we actually have. Those are the conversations we are now having with NTCSA on a standing basis.”

SAPVIA and NTCSA have also agreed to hold regular monthly bilateral meetings to monitor claims processing and operational grid dynamics.

Beyond the immediate administrative fix, the two organisations are collaborating on longer-term systemic solutions to absorb excess renewables generation, including accelerating battery energy storage systems by addressing the regulatory and implementation hurdles facing IPPs that want to integrate storage into existing facilities.

Also to be assessed is demand-side day shaping, including wholesale market mechanisms and price signals that stimulate daytime electricity demand, as well as an international knowledge exchange, drawing on the experience of global solar bodies including SolarPower Europe and the German Solar Association.