Eskom get your house in order

The power utility’s scandals and poor governance are derailing the implementation of much-needed alternative energy

Eskom, the state-owned enterprise which supplies the bulk of electricity in SA, has recently been rocked by allegations of dubious coal supply contracts as well as governance issues. Of particular concern to the energy industry, is Eskom’s role in potentially derailing the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

The latter had until recently been one of SA,S most successful public-private sector partnerships.

“Corporate governance at Eskom has been systematically undermined through poor board and management appointments,” says Prof Anton Eberhard of the Graduate School of Business at the University of Cape Town (UCT).

“While there may be short-term benefits for a select few in corrupt deals, the broader consequences for the utility and the economy are potentially catastrophic.”

Eberhard says Eskom is not just any other state-owned enterprise; it is by far the largest, with revenues of around R200bn and assets of more than R600bn and is by far the largest producer on the continent with an estimated installed capacity of 42 GW.

That compares to a total capacity of about 90 GW for sub-saharan Africa.

“Eskom is also an enterprise facing severe stress. Electricity demand is lower than it was a decade ago. Electricity sales are stagnant. Prices have trebled and any further tariff increases will result in further depressed electricity demand,” says Eberhard.

Referring to the REIPPPP, Eberhard says the programme is bogged down because of delays in Eskom signing the Power Purchase Agreements (PPAS) which are essential for financial closure.

The programme, which has been widely regarded as one of the most successful public-private sector partnerships in the world, was introduced in 2011 by the department of energy (DOE) to ensure that renewable energy sources, particularly wind and solar power, for which SA’S conditions are wellsuited, becomes an important part of the energy mix.

The programme employs a bidding process in which vendors bid for allocated amounts of renewable energy, of various types such as wind, solar photovoltaic (PV) and concentrated solar power (CSP). “Between 2011 and 2015 four such bidding rounds have been completed — referred to as bid windows — with an additional round for CSP only. Competition has been fierce, with 390 submissions resulting in just under a quarter (92) of these being selected for procurement of 6,328 MW amounting to R193bn in investment,” say Eberhard and Raine Naude, also of UCT’S Graduate School of Business, in a recent report. By September last year 53 of these projects were in operation, supplying 2,800 MW to the national grid.

However, in October last year the SA Wind Energy Association declared a dispute requesting the National Energy Regulator of SA (Nersa) to investigate Eskom’s continued unwillingness to honour the Doe’s PPAS. The SA Renewable Energy Council (Sarec), which represents the wind and solar energy sectors, together with a number of IPPS, joined the complaint as interested and affected parties. A Nersa tribunal was set to report on its investigation by the end of last month. According to Sarec, a total of 37 projects are involved. Eberhard says that Eskom’s actions are highly irresponsible and can only be described as malicious compliance.

“They say they adhere to government policy but then raise every possible objection and obstacle to frustrate the entry of IPPS,” he says. Minister of energy Mmamoloko Kubayi, meanwhile, has stated that while IPPS remain a key element of government’s energy strategy, there are problems which need to be addressed.

“We need to acknowledge that there was uncertainty around the