Brown sides with Eskom in IPP spat

The Star Early Edition - - BUSINESS REPORT - Siseko Njobeni

AS THE stand-off be­tween Eskom and the re­new­able en­ergy in­dus­try drags on, Pub­lic En­ter­prises Min­is­ter Lynne Brown yes­ter­day sided with the power util­ity, re­it­er­at­ing Eskom’s con­cerns about the cost of re­new­able power and ex­cess ca­pac­ity.

Speak­ing at Eskom’s quar­terly brief­ing on the state of the elec­tric­ity sys­tem yes­ter­day, Brown brought up the al­le­ga­tions of Eskom’s re­luc­tance to con­nect in­de­pen­dent power pro­duc­ers (IPPs) while deal­ing with what she said were “a few things” that threat­ened Eskom’s sus­tain­abil­ity.

“The first key is­sue is ca­pac­ity. The in­te­grated re­source plan (IRP) was based on the eco­nomic growth of 5 per­cent. But the re­al­ity, as you know, is that the econ­omy has growth at be­low 2 per­cent. As a con­se­quence, there has been no growth in de­mand for elec­tric­ity which was pro­jected at over 2 per­cent.”

She said the eco­nomic growth as­sump­tions were among fac­tors that in­formed the IRP 2010, which was the ba­sis of cur­rent choices, in­clud­ing re­new­able IPPs.

“When South Africa was ex­pe­ri­enc­ing ca­pac­ity con­straints, IPPs played a crit­i­cal role in the en­ergy mix… but at a pre­mium price,” she said

She coun­tered claims – of­ten ad­vanced by the re­new­able en­ergy in­dus­try – that prices of re­new­able en­ergy had fallen since 2011, when the re­new­able en­ergy in­de­pen­dent power pro­ducer pro­cure­ment (Reippp) pro­gramme. She said while the prices of the dif­fer­ent re­new­able en­ergy tech­nolo­gies had in­deed fallen, “we still have to pay the ini­tial pre­mium price”.

“(The re­new­able en­ergy prices were) more ex­pen­sive than coal power or nu­clear. But it was a price that the coun­try was will­ing to pay at the time. It is there­fore crit­i­cal that we al­low the gov­ern­ment to fi­nalise the in­te­grated re­sources plan which will in­form South Africans on en­ergy choices go­ing for­ward.”

Eskom cur­rently had ex­cess ca­pac­ity, even with­out tak­ing into con­sid­er­a­tion ad­di­tional ca­pac­ity from Medupi and Kusile power sta­tions. While Eskom could in­crease elec­tric­ity ex­ports, such a move had its own lim­i­ta­tions. These in­clude trans­mis­sion ca­pac­ity.

“The chal­lenge then be­comes that Eskom would still need to col­lect to cover the in­curred cost. The ad­di­tion of more ca­pac­ity at a time of ex­cess ca­pac­ity would re­sult in ad­di­tional cost… and con­se­quently in­crease the tar­iffs.

“In my opin­ion, the Eskom board would (have) failed in its duty if it did not con­sider the bur­den on con­sumers. She said the gov­ern­ment re­mained com­mit­ted to a di­verse and af­ford­able en­ergy mix.”

Brown also weighed in on the con­tro­versy around coal con­tracts, a mat­ter that fea­tured promi­nently in the pub­lic pro­tec­tor’s re­port, as well as the ten­sions be­tween Eskom and Exxaro. “Eskom will con­tinue to rad­i­cally but fairly trans­form coal pro­cure­ment. It is a non-ne­go­tiable.

“Eskom will con­tinue to source coal, as with re­new­able en­ergy, at the right qual­ity and the right price,” she said.

Brown said she was pleased Eskom was at the cen­tre of key de­bates about nu­clear and the af­ford­abil­ity of new IPPs.

Mean­while, Eskom in­terim chief ex­ec­u­tive Mat­shela Koko said the util­ity was still in ne­go­ti­a­tions with Tegeta Ex­plo­ration and Re­sources, in re­la­tion to the com­pany’s re­quest last year to be re­leased from its con­tracts. This was in the af­ter­math of the pub­lic pro­tec­tor’s re­port on so-called state cap­ture. Koko said the talks were “very dif­fi­cult”.

He said that Eskom’s stance was that Tegeta had a con­tract and an obli­ga­tion to de­liver coal to Eskom.


Eskom in­terim group chief ex­ec­u­tive Mat­shela Koko presents the quar­terly state of the sys­tem ad­dress at the Eskom of­fices in Megawatt Park, north of Jo­han­nes­burg. The util­ity is still in talks with Tegeta Ex­plo­ration and Re­sources.

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