Brown sides with Eskom in IPP spat
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.