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Critics have cast doubt on President Cyril Ramaphosa’s plan to supplement state utility Eskom’s capacity needs with privately sourced power, questioning whether even this would yield the required capacity to solve the country’s energy woes.
According to his recent State of the Nation Address, renewable energy and Independent Power Producers (IPPS) were to form an integral part of the patchwork Ramaphosa sought to employ to mend the country’s broken energy system, which has plunged the country into load-shedding since late last year and is apparently set to continue for most of the next two years.
Two analysts in the energy sector have, however, cited uncertainty and a lack of capacity as probable stumbling blocks in Ramaphosa’s attempt to avoid load-shedding over the next 18 months and beyond.
Energy analyst and industry insider Ted Blom argued that South Africa’s potential for renewable energy production under the current IPP legislation could barely contribute a notable proportion of the country’s energy needs.
“Under the current scenario, IPPs are contracted for a minimal number of hours per year and one can’t say if the wind will blow longer or the sun will shine longer, and so the IPPS in the renewables provide a small amount of extra power. It is really nothing to write home about. You really cannot say that from IPPs alone you can salvage the grid.”
According to Blom, IPPS under the current dispensation could only provide a maximum of 3 Gigawatts out of a total 46 Gigawatts needed by Eskom.
Ramaphosa announced that a Section 34 Ministerial Determination would be issued to the Integrated Resource Plan 2019, enabling the development of additional grid capacity from renewable energy, natural gas, hydro power, battery storage and coal. Municipalities ‘in good financial standing’ would soon be able to buy power directly from IPPS.
Ramaphosa said government would also initiate the procurement of emergency power from projects that can deliver electricity into the grid within 3 to 12 months from approval.
Energy analyst Tshepho Kgadima argued that finding external sources of electricity would simply put Eskom under more pressure, by eating away at its share of the market.
Municipalities were Eskom’s biggest customers, argued Kgadima, accounting for 41.9% of Eskom’s total sales of 208,319 Gigawatt Hours (gwh) of electricity for the year ended March 2019.
“In his SONA, the President failed to show appreciation and understanding of the catastrophic impact his proposals mean for Eskom. Effectively, the end result would be that financially sound and well run municipalities would be the ones in a position to procure from IPPs, whilst leaving Eskom with those municipalities that are already in default to the tune of R19.9 billion and rising, as customers. This proposal is an absurdity to say the least.”
Kgadima added that Eskom management’s decision to seek approval from the government to procure the so-called emergency power from IPPs was untenable and amounted to delinquent conduct.
This, he believed was because such “emergency power purchases” would cost 6.35 times more than Eskom’s primary energy costs.
“It is therefore an astonishing mystery that Eskom management would seek to procure so-called emergency power at an average of R4.38/kilowatt hour, whilst selling the same kilowatt hour at the NERSA regulated tariff of R1.10,” sad Kgadima.
“What Eskom needs is competent and astute management that can achieve a minimum energy availability factor of 80% out of its proprietary fleet of power stations with a total installed capacity of 44,172 megawatts, particularly as Eskom has been spending an average of R46 million per day on plant maintenance over the past two years.”
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