Eskom’s COVID-19 power curtailment bid stuns wind sector

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South Africa’s wind energy industry is seeking legal counsel over Eskom’s decision to curtail operational wind farms, with the utility citing reduced demand in relation to COVID-19, claiming force majeure (unforeseeable circumstances that prevent someone from fulfilling a contract).

In a statement yesterday, the power utility said with the COVID-19 national lockdown in full effect, Eskom has experienced a significant reduction in demand for electricity.

It says electricity usage has dropped by between 7 500MW and 9 000MW since the lockdown came into effect last week. This has allowed Eskom to operate without the need to implement load-shedding, it notes.

“In order to protect the integrity of the system, Eskom has taken some generation units offline. From midnight on Friday, 3 April, we will add Koeberg Unit 2 to these units, which are all available to return to service at short notice should the need arise. Koeberg Unit 2 is scheduled to return to service by 30 April, if not called before then.

“As part of protecting the integrity of the power system, Eskom has also issued force majeure notices to the wind independent power producers (IPPs). These notices serve to alert the wind IPPs of the possibility that Eskom may from time to time curtail their supply to the grid during the national lockdown.

“Should this remote possibility happen, the IPPs will be afforded one day of relief for every day, or part thereof, of lost production. This will ensure none of the wind IPPs are worse off than before the force majeure,” says Eskom.

However, the wind energy sector argues that despite government issuing an official notice on 25 March, classifying electricity production, supply and maintenance as essential services, Eskom is proposing to curtail operational wind farms, citing reduced demand in relation to COVID-19, claiming force majeure.

Industry body, the South African Wind Energy Association says: “This comes as a surprise to the 22 operational wind farms, who have a combined installed capacity of 1 980MW, as the power utility failed to alert or warn the independent power producers of such action, prior to issuing the notices.”

In fact, says SAWEA, Eskom’s single buyer office sent a letter to all operating IPPs last week (25 March), to confirm the categorisation of essential services applies to facilities currently in operation.

“It is concerning that wind energy power producers have not been given an opportunity to engage on this matter with Eskom, despite both Eskom and government confirming that operational IPPs are in fact an essential service, just five days ago,” says Ntombifuthi Ntuli, CEO of SAWEA.

“The industry will be approaching Eskom with a view to finding a constructive resolution that does not prejudice the country, nor the power producers.”

SAWEA says it is the opinion of energy specialists that should power curtailment be required, the wind sector is able to curtail on short notice and in precise increments.

However, it contends that according to the agreements in place, energy producers must be paid a deemed energy fee in line with the philosophy that all power that would have been generated is paid for.

The industry is seeking legal counsel on whether the reduced electricity demand as a result of COVID-19 does in fact constitute force majeure, as declared by Eskom, as some experts deem reduced demand as a normal system event, which would, therefore, not imply a force majeure event.

Additionally, experts raise the point that South Africa is in actual fact not currently facing a structural oversupply and the fact that Eskom is still struggling to keep the system stable, despite shift in demand patterns.

“Eskom has indicated in their letter to IPPs that they will make provision for the extension of the power purchase agreement period to make up for the curtailment period; however, we are concerned about the immediate impact this will have on shareholders, particularly BBBEE partners and community trusts, who have loans to repay,” adds Ntuli.

The 12 wind farms currently under construction across the country went into lockdown, with a confirmation that delays, directly related to the lockdown period, will not attract any penalties.

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