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Eskom defies Zuma's renewable energy directive

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 21 Feb 2017
President Jacob Zuma said government is committed to the independent power producers programme.
President Jacob Zuma said government is committed to the independent power producers programme.

Renewable energy industry body the South African Renewable Energy Council (SAREC) has accused Eskom of defying president Jacob Zuma's directive that the power utility will sign the outstanding power purchase agreements (PPAs) with the industry.

Zuma made the remarks this month when he delivered the State of the Nation Address and assured the industry that government is committed to the overall independent power producers programme and is expanding the initiative.

However, SAREC alleges signs are already emerging that Eskom will drag its feet wherever possible to resist signing outstanding PPAs with renewable producers.

Eskom has also been accused of sitting on multibillion-rand loans that it signed last year to boost the country's renewable energy industry. The loans were secured from the African Development Bank (R20 billion) and the New Development Bank (NDB) (R2.6 billion).

Budget quotes

Before PPAs can be signed, SAREC says Eskom must first finalise budget quotes for each independent power producer (IPP), being Eskom's quoted cost to connect the new plant to the national grid.

It points out that all such budget quotes had expired during the long delay as Eskom refused to move forward with the process.

"Despite the president's injunction, Eskom has yet to issue a single IPP with an updated budget quote. Eskom managers report that the Eskom board and interim CEO have yet to approve the formal issuance of these quoted," says Brenda Martin, chair of SAREC.

"Of even more concern, are emerging reports that budget quotes may only be approved if the cost of connection is significantly increased compared to the original quotes and, of even greater concern, on condition that renewable tariffs are capped at 62c/kWh," she adds.

As a national utility, the industry body charges that Eskom is not a policy-maker and has no legal authority to negotiate tariffs with preferred bidders.

SAREC's legal opinion from senior counsel has already indicated that ministerial determinations are binding on Eskom and the utility has no discretion to impose further conditions on preferred bidders, or to negotiate tariffs following a completed competitive tender process.

"Eskom's duty is to timeously and clearly follow the president's directive and move rapidly to sign the outstanding power purchase agreements. South Africa cannot afford to suspend the entry of R58 billion into the economy and the creation of 13 000 much-needed jobs," says Martin.

Keep waiting

Responding to ITWeb this morning, Eskom said it will sign the renewable energy projects as envisaged by the government.

"Eskom supports the introduction of the renewable energy independent power producers as envisaged in government's Renewable Energy Independent Power Producers Programme (REIPPP).

"To date, Eskom has signed 64 PPAs for a total of 4 000MW under the REIPP programme and two PPAs for the open-cycle turbines for a total of over 1 000MW. In addition to the signed PPAs, there are 2 383MW of renewable PPAs remaining to be signed, which have been approved by Eskom board's investment and finance committee, and for which the necessary approvals have been received from the minister of public enterprises."

Furthermore, the power utility says energy regulator, Nersa has provided the necessary assurances for cost recovery of these PPAs. "Eskom's primary objective has always been to deliver reliable energy supply at the least cost to the consumer."

Commenting on the loan saga, the power utility says: "Eskom and the NDB have agreed on the timelines for the conclusion and signing of the loan agreement. Future funding from the NDB will be in line with their criteria and based on the list of projects prioritised in the Eskom Capital Plan."

On the African Development Bank loan, the parastatal says it is fulfilling conditions for utilisation of the loans, but no utilisation has taken place. No re-negotiation of the terms and conditions of the loan has taken place, it adds.

Competition killer

Richard Halsey, a member of Project 90 by 2030, says having a monopoly on generation, transmission and a fair amount of distribution is not beneficial for the energy system or for the country.

"Part of the problem with the current structure is it deters competition. Essentially, the IPPs are now at competition and Eskom appears to be trying to cut them out, especially as - at least for the time being - they are not struggling with capacity at their own plants," Halsey notes.

Nonetheless, he notes that since Eskom is a state-owned enterprise (SOE), it should not be trying to cut out competition, especially if the said competition is now cheaper in addition to being better for jobs, the environment, etc.

"However, Eskom also tries to function as a corporation, and as such are trying to protect their core business, which is burning coal to produce electricity. It clearly is not working if a SOE can for over eight months now (since July 2016) defy instruction from the state, which owns it. Why is this happening? Who stands to benefit from this?"

Meanwhile, tomorrow social justice organisations are taking to the streets and the court to demand an end to what they claim is "the secret processes around SA's biggest ever procurement deal - the R1 trillion proposed nuclear deal".

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