Sarec un­packs Eskom IPP de­lay

Pa­per looks at mar­ket share

The Star Early Edition - - BUSINESS REPORT - Siseko Njobeni

LARGE-scale de­ploy­ment of re­new­able en­ergy and gas could dis­place Eskom by 2050, hence the power util­ity’s al­leged cool re­cep­tion to re­new­able en­ergy tech­nolo­gies, ac­cord­ing to a brief­ing pa­per of the South African Re­new­able En­ergy Coun­cil (Sarec).

The re­new­able en­ergy in­dus­try is push­ing Eskom to sign out­stand­ing power pur­chase agree­ments with 37 in­de­pen­dent power pro­duc­ers (IPPs).

On the other hand, Eskom is con­cerned about the pru­dence of sign­ing 20-year con­tracts with the IPPs, cit­ing costs and elec­tric­ity over­ca­pac­ity in the coun­try. Ac­cord­ing to Sarec, de­lay­ing the projects puts on the line a R58.5 bil­lion in­vest­ment.

“The projects are ready to go and con­struc­tion will typ­i­cally take less than two years to com­plete, de­pend­ing on when Eskom can make grid con­nec­tion avail­able,” said Sarec.

“Eskom has so far re­sisted pres­sure to sign the con­tracts, even months af­ter Pres­i­dent Ja­cob Zuma said, in his State of the Na­tion ad­dress in Fe­bru­ary, that Eskom would sign the power pur­chase agree­ments.

In the brief­ing pa­per, Sarec said the gov­ern­ment’s pol­icy choices on fu­ture gen­er­a­tion ca­pac­ity, through the in­te­grated re­source plan process, had far reach­ing im­pli­ca­tions for Eskom.

“De­pend­ing on the choices made, Eskom’s share of the gen­er­a­tion mar­ket in 2050 could de­cline from the present near mo­nop­oly (of) 94 per­cent to a still dom­i­nant 70 per­cent in a big coal and big nu­clear sce­nario or as low as 7 per­cent in the least-cost re­new­ables and gas sce­nario.

“These are dra­mat­i­cally dif­fer­ent out­comes for the util­ity. It is not far-fetched to pre­sume that Eskom – which has al­ways re­garded gen­er­a­tion as its core busi­ness – is fight­ing for its life,” said Sarec.

It said large-scale de­ploy­ment of re­new­able en­ergy would make it harder for Eskom to jus­tify what it said were the util­ity’s pre­ferred gen­er­a­tion tech­nolo­gies, coal and nu­clear.

In her bud­get vote speech last month, En­ergy Min­is­ter Mmamoloko Kubayi said that there was un­cer­tainty around the IPP pro­gramme. “We will need to eval­u­ate whether or not the pro­gramme is as­sist­ing us to achieve our ob­jec­tive as ini­tially out­lined. We need to re­flect what are the lessons learned so far and what needs to be im­proved,” said Kubayi.

Sarec also re­vived the call for an in­de­pen­dent sys­tem op­er­a­tor, which is widely re­garded as a nec­es­sary con­di­tion for “lev­el­ling the play­ing field” in the elec­tric­ity in­dus­try. The body said that there was an in­her­ent con­flict of in­ter­est given Eskom’s mul­ti­ple roles. The util­ity is a gen­er­a­tor, owner and op­er­a­tor of the na­tional elec­tric­ity grid as well as the des­ig­nated sin­gle buyer of power.

“The fail­ure to re­form the elec­tric­ity sec­tor gov­er­nance has al­lowed Eskom’s con­flict of in­ter­est to con­tinue and to re­sult in a sit­u­a­tion where the na­tional util­ity is de­lay­ing sig­na­ture of Re­new­able En­ergy In­de­pen­dent Power Pro­ducer Pro­cure­ment projects for no clear rea­son.

“This is a sig­nif­i­cant prob­lem for the in­dus­try and the coun­try as a whole. The util­ity can­not be trusted to put the na­tional agenda ahead of its own nar­row in­ter­ests. Re­forms to the in­dus­try and mar­ket struc­ture are a nec­es­sary con­di­tion if we are to ben­e­fit fully from the in­evitable tran­si­tion to a mod­ern, re­new­able-led en­ergy sys­tem. Eskom can­not be al­lowed to hold hostage our col­lec­tive fu­ture,” said Sarec.

PHOTO: SUP­PLIED

Aveng Group and Ac­ciona de­velop Sishen So­lar Fa­cil­ity. Sarec says large-scale de­ploy­ment of re­new­able en­ergy will make it harder for Eskom to jus­tify what it says is the util­ity’s pre­ferred gen­er­a­tion tech­nolo­gies, coal and nu­clear.

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