Concern over Eskom’s position on IPPs

Concern over Eskom’s position on IPPs

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Johannesburg – The South African photovoltaic industry wants the government to resuscitate the establishment of a state-owned independent system and market operator (Ismo).

This comes in the wake of reports that Eskom chairman Baldwin Ngubane had written to the Minister of Energy, Tina Joemat-Pettersson, reportedly telling her of the power utility’s decision not to purchase power from independent power producers (IPPs) beyond the current bid window 4 without discussing the matter with the department.

Renewable energy is reportedly much cheaper than Eskom’s coal-powered plants. File picture: Nic Bothma. Credit: EPA

The creation of Ismo was seen as a necessary step to level the playing field between Eskom and IPPs, who rely on Eskom to connect to the national grid. This arrangement has fuelled accusations that Eskom was a “referee and a player” in the local energy sector. At the moment, Eskom has significant presence in electricity generation, transmission and distribution.

Eskom spokesman Khulu Phasiwe said yesterday that Ngubane’s letter to Joemat-Pettersson was a proposal. “We want to discuss the matter (and) understand their future plans,” he said.

Reports about the letter have reinvigorated the renewable industry’s deep-seated concerns about Eskom’s position as the owner of the country’s transmission system. The South African Photovoltaic Industry Association (Sapvia) said yesterday that the creation of Ismo was necessary given the trend towards the increased role of renewable energy in South Africa.

“In the interim, the transmission function within Eskom should be managed and regulated in a more transparent manner, specifically to provide confidence that the utility’s priorities in relation to the expansion of its own generation fleet do not come at the cost of the grid investments that are required for the integration of (renewable energy) IPP power plants,” Sapvia chief executive Moeketsi Thobela said .

Not sustainable

Sapvia said it had become clear that a vibrant IPP sector was not sustainable without an adequately resourced independent transmission company. The body, whose members have invested in renewable energy projects in South Africa, has warned against overreliance on Eskom.

It said Eskom’s decision to derail progress of the renewable energy IPP programme made “a mockery” of the utility’s commitment to renewable energy. “Clearly, the frequently repeated lamentations about the hobbling effects of a private sector investment strike on economic growth do not apply in this instance. But could it be said that we are seeing a public sector lock-out of private sector investment?” Thobela said.

South African Wind Energy Association chief executive Johan van den Berg said yesterday that Eskom’s action would merely delay the “inevitable victory” of renewable energy over unsustainable energy sources.

“Wind power is now cheaper by 40 percent than new Eskom coal power and cheaper even than the average price Eskom is selling power at from its predominantly old and amortised fleet of coal plant,” Van der Berg said.

He said vertically integrated utilities, such as Eskom, were generally slow to embrace renewable energy and private power generation.

Corneleo Keevy, a portfolio manager at Ashburton Investments, yesterday highlighted some of the trends in the local renewable energy industry.

Some projects were experiencing delays in reaching financial close and delays in the announcement of preferred bidders. “(These) are likely to have an impact on returns offered to investors,” Keevy said.

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