Raise the cap on self-generated energy, says the Energy Intensive Users Group’s Fanele Mondi
EIUG says 10MW limit is totally inadequate for SA’s energy crisis
● Fanele Mondi, CEO of the Energy Intensive Users Group (EIUG), says lifting the cap for self-generation of electricity to 10MW is a wholly inadequate response to the energy crisis the country is facing.
The EIUG, which represents the biggest industrial, mining and manufacturing companies in the country, including Anglo American, Sasol and Transnet, has been calling for 50MW.
“The quickest way to bring additional megawatts onto the grid is to unlock selfgeneration,” says Mondi.
He says energy minister Gwede Mantashe seems to be “leaning very heavily on power ships, which tends to largely exclude alternatives such as embedded generation projects”.
The big winners in the risk-mitigation independent power producer procurement programme announced by Mantashe two weeks ago are power ship projects owned by Turkish company Karpowership.
Of the 1,845MW in the programme, 1,200MW will come from four power ships which will be moored off the South African coast for the next 20 years in terms of their power purchase agreement.
Mondi says signals from President Cyril Ramaphosa provide hope that Mantashe’s 10MW cap will be shortlived, although in his announcement Mantashe said that 10MW represented the view of the president in his February state of the nation address.
Mondi disputes this.
“Looking at the president’s Sona there is nowhere that he spoke about 10MW. He only spoke about an increase of the threshold and he was quite clear that there should be a consultation process,” he says.
This is required in terms of schedule 2 of the electricity regulation act, he says.
“We are looking forward to that consultation process, where we will be calling for 50MW. Our view is that Mantashe’s announcement is not the final position they’re putting on the table.”
In spite of its “worrying” track record, he hopes the energy department won’t drag out the consultation process.
“Our view is that the president has indicated he expects all of this to be wrapped up in three months. We expect all of us to work towards achieving that,” he says.
Stakeholders can’t afford to wait much longer, he says.
He says Eskom CEO André de Ruyter has made it clear that more and bigger self generation projects are needed to assist Eskom “because they're not coping. The government also agrees that the utility is not coping.”
This makes it hard to understand Mantashe’s reluctance to move beyond 10MW, he says.
“We’re hoping that we will have thorough consultation, and certainly this is a question we will need to ask. If Eskom, which manages the grid, and industry are comfortable with 50MW, what is the risk the department is trying to mitigate?”
Mondi, who became CEO of the energy lobby group in August 2020, is a mechanical engineer who worked at Eskom for more than 23 years and held senior management positions in its generation and distribution divisions.
“There is no technical reason why you can’t register projects of 50MW. So it’s certainly a question we’d like to put to the minister. To ask him, what are his big concerns.
“Perhaps they think from a technical point of view there might be problems, but if Eskom is comfortable with 50MW then clearly as far as they’re concerned there are no technical problems with this level.
“They’ve said we can go to 50MW, so what are the risks the department and the minister are worried about?”
What about speculation there may be vested interests involved?
“This is why we need to ask exactly what is the risk the minister is mitigating. We’d rather pose that question to the department instead of speculating about why they are taking this position.”
He agrees with a 2020 estimate by the Council for Scientific and Industrial Research that by lifting the cap to 50MW the government could unlock 3,400MW of small to medium-scale grid-connected electricity by 2022, creating more than 30,000 construction jobs and reducing load-shedding.
De Ruyter says self-generation in Vietnam has unlocked 7,200MW of generation capacity from the private sector in just over 12 months.
“We certainly believe that is possible. Hence we are calling for the limit to be lifted without further delay so we can attract as much new investment as possible,” says Mondi.
There have been calls for Mantashe to be removed from the energy portfolio and replaced by someone more seized with a sense of urgency, but Mondi says the EIUG has “not taken a view” on that.
“The speed at which things are happening is a big concern. This is a national emergency and there certainly needs to be more speed.
“But we have not moved to the level of saying it is time for him to go.”
On March 15 De Ruyter warned there would be a shortfall of 4,000MW over the next five years and that Eskom, which was recently granted a 15.6% tariff increase, would pursue further multi-year, doubledigit tariff increases.
The impact of this on industry and any hope of economic recovery will be “quite devastating”, says Mondi.
Combined with frequent load-shedding, it will play havoc with their members’ production planning and investment plans.
“You have to say, ‘can I invest in this economy if I cannot rely on the power supply?’
“Obviously, if we’re not growing then we’re not employing people. If production has to be curtailed then we’re talking job losses.”
He says that as a sector which consumes more than 40% of Eskom’s power and contributes more than 20% to the country’s GDP, “we believe our views should be taken far more seriously when decisions are made”.
“We have skin in the game. We are not just sitting on the side. Our consumption directly affects Eskom’s revenues.”
He wants the EIUG to leverage its clout more effectively. “There’s a need for us to raise our views more openly and robustly so that the government understands the matters that affect us. The companies we represent have a vested interest in seeing this country grow. Leaving or curtailing their operations are not options they would consider unless things were absolutely desperate.
“We’re not using this as a threat. It is a reality. We’re saying we urgently need to find solutions.”
There is no technical reason why you can’t register projects of 50MW ... if Eskom is comfortable then clearly there are no technical problems Fanele Mondi
CEO of the Energy Intensive Users Group