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Renewable energy costs to keep escalating, says Eskom

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In 2018, Eskom purchased renewable energy power at an average cost of 222c/kWh.
In 2018, Eskom purchased renewable energy power at an average cost of 222c/kWh.

Costs associated with renewable energy independent power producers (IPPs) will continue to increase due to commitments from the earlier bid windows.

This is according to power utility Eskom, which is seeking to hike SA's electricity tariffs by 15% per annum over the next three years.

The power utility last week made a presentation at the National Energy Regulator of SA's public hearings into Eskom's Regulatory Clearing Account application for year five of the third multi-year price determination (MYPD3), as well as the fourth multi-year price determination (MYPD4) application focused on coal and IPPs.

In 2018, Eskom purchased IPP power at an average cost of 222c/kWh. In the previous financial year, the power utility bought 11 529GWh of energy from IPPs at R21.7 billion, at an average cost of 188c/kWh.

According to Eskom, at 31 March 2018, total available IPP capacity of 4 779MW consisted of renewable IPPs of 3 774MW and IPP gas peakers of 1 005MW. In 2017, the total was 5 027MW.

Eskom's general manager for energy trading, Callie Fabricius, explained the IPP programme is a government decision with limited Eskom participation in deciding which IPPs to buy from and the prices paid to it.

"In terms of Regulations of Electricity Regulation Act, the minister of energy makes a determination that Eskom becomes the buyer of energy from IPPs. And regulation says we must implement this," he said.

Fabricius added that the output of IPPs to the system will increase from this year to the end of the MYPD period by 64%.

"Even though the relative cost of particular technologies is decreasing over time, Eskom costs associated with renewable IPPs will continue to increase due to commitments from the earlier bid windows."

Although SA's energy sector is still largely coal-driven, government is making efforts to support renewable energy in the country's energy mix.

In August, SA's energy minister Jeff Radebe released the long-awaited Integrated Resource Plan, a 20-year energy roadmap to meet the country's future power needs.

In 2030, the government envisages SA's energy mix will consist of 34 000MW of coal, representing 46% of installed capacity; 11 930MW of gas, or 16% of installed capacity; 11 442MW of wind, or 15% of installed capacity; 7 958MW of photovoltaic (PV, or solar); and 4 696MW of hydropower, or 6% of installed capacity.

Launching its election manifesto last week, the ANC said it will "continue to support the use of renewable technologies in the country's energy mix to reduce the cost of energy".

Meanwhile, Eskom's proposal has been met with resistance, with civic group, the Organisation Undoing Tax Abuse, saying the public should not have to pay the price for Eskom's corruption and poor leadership.

Vainola Makan, the Southern African Faith Communities' Environment Institute's energy and climate justice campaign co-ordinator, says: "If granted, this price increase will severely impact all consumers of electricity across the country, many of whom are already struggling to pay their daily bills.

"Communities should not have to bear the brunt of the energy increases every year, particularly since Eskom management does not seem committed to recovering the mismanaged funds."

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