Small-scale Embedded Generation (SSEG) tariffs

This briefing by GreenCape provides guiding principles for South African municipalities to design electricity tariffs that accommodate Small-scale Embedded Generation (SSEG), specifically renewable energy fed back into the grid. It emphasizes the need for tariffs to recover network and service costs while providing transparent, risk-reducing incentives for renewable investment without encouraging grid defection.

• Modern electricity tariffs should be composed of three primary elements: a fixed network cost based on connection size, a fixed service charge for retail network operations, and a variable energy charge, preferably using a time-of-use (TOU) structure. To maintain equity and avoid discouraging solar photovoltaic (PV) installations, network costs should be identical for both SSEG and non-SSEG consumers.
• Municipalities should introduce feed-in tariffs (energy export rates) to pay customers for electricity fed back into the grid. These can be 'value-based', paying what the energy is worth to the grid (including avoided costs and externalities like climate change mitigation), or 'cost-based', which covers the customer's generation cost plus a targeted return.
• To reduce investment risk and lower overall system costs, municipalities should provide long-term price security by setting a guaranteed payment duration for feed-in tariffs, ideally for as close to the project's lifetime as possible. Currently, South Africa has no guaranteed period for these payments, which increases financing costs for SSEG customers.
• Tariff design must ensure that remaining connected to the grid remains more attractive than off-grid alternatives to prevent 'grid defection'. This is critical because municipalities rely on electricity sales revenue to cross-subsidize other services and provide electricity to poor customers.
• Before implementing new tariffs, municipalities should conduct a full cost-of-supply study to determine true fixed and variable costs and develop accurate customer load profiles using high-resolution demand data. This allows for the modeling of revenue sufficiency and the testing of tariff fairness across different customer types.

APA

GreenCape (n.d.). Small-scale Embedded Generation (SSEG) tariffs. https://greencape.co.za/assets/Energy-Sector-Desk-Content/Basic-tariff-principles-for-small-scale-embeddd-generation-FINAL-v1-22Sep16.pdf

Chicago

GreenCape. Small-scale Embedded Generation (SSEG) tariffs. n.d. https://greencape.co.za/assets/Energy-Sector-Desk-Content/Basic-tariff-principles-for-small-scale-embeddd-generation-FINAL-v1-22Sep16.pdf.

Wikipedia

{{cite report |author=GreenCape |title=Small-scale Embedded Generation (SSEG) tariffs |url=https://greencape.co.za/assets/Energy-Sector-Desk-Content/Basic-tariff-principles-for-small-scale-embeddd-generation-FINAL-v1-22Sep16.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{greencapendsmallscale, author = {{GreenCape}}, title = {{Small-scale Embedded Generation (SSEG) tariffs}}, institution = {GreenCape}, url = {https://greencape.co.za/assets/Energy-Sector-Desk-Content/Basic-tariff-principles-for-small-scale-embeddd-generation-FINAL-v1-22Sep16.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }