Green light for Eskom to purchase renewable energy

Public Enterprises Minister Lynne Brown’s approval of Eskom’s application to purchase additional renewable energy from independent power producers may signal the start of a turnaround in the beleaguered utility’s fortunes.

Investment analyst Chris Gilmour said South Africa probably had the best renewable system in the world, which also didn’t allow a lot of latitude for corruption.

“This is very good news indeed. If we bear in mind when Kusile and Medupi come fully on line in the next few years, we will be producing power at about R1.40 to R1.50 per kilowatt hour (KWh),” he said. “They’re going to be producing incredibly expensive electricity and at the end of the day, Eskom is hoping the [National Energy Regulator of SA] will allow it to have huge tariffs to recoup these costs.

With renewables, which are dirt cheap, Eskom’s 70c per KWh is becoming cheaper all the time.” Renewable energy could become Eskom’s saving grace, Gilmour added.

The South African Wind Energy Association said the three-year delay had halted the associated R58 billion investment and the creation of 15 000 jobs at a time when the country desperately needed economic stimulus.

Energy analyst Chris Yelland said yesterday cash-strapped Eskom would, of itself, not be paying anything. “In terms of Nersa’s determinations, the price Eskom pays for renewable energy is 100% pass through. Eskom recovers all of its costs from the tariff, it doesn’t have to put out any capital at all in procuring this power.

“In fact, up to now, Eskom has been slightly over-recovering on the cost of renewable energy,” Yelland explained. “The customer pays for it.”

In a statement on Friday, Brown said: “On January 11, 2018, Eskom submitted an application to the minister under Section 54 of the Public Finances Management Act to purchase the additional energy. The minister approved the application today.

“I have requested Eskom to work expediently to implement the decision and avoid further delays. I have also written to the ministers of energy and finance, requesting that we discuss how to address Eskom’s genuine concerns through expediting a revision of the Government Support Framework Agreement.”

Yelland has broken down Eskom’s interim results and his 10 key takeaways can be found on EE Publishers.

Critically, Yelland found Eskom’s interim financials “revealed a decline in all financial metrics compared to those of the same period for the previous financial year, with sales revenue declining by 2% to R95.5 billion, operating costs remaining flat at R66.7 billion, net cash generated from operations declining by 30% to R22 billion, net finance costs increasing by 53% to R10 billion, and net profit after tax declining by 34% to R6.3 billion.”

Brown’s acceptance of the proposal meant an added contribution to Eskom’s ability to export power, Yelland said.

Engineering News reported on Friday wind costs had fallen from 151c/KWh in the first bid window to below 70c/KWh in the fourth bid window, while solar PV costs fell from 365c/KWh to below 90c/ KWh.

– amandaw@citizen.co.za

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