Government will allocate an additional R20-billion to power utility Eskom, it was announced on Thursday. The money would be made available in February’s budget, said government spokesperson Themba Maseko, following a post-Cabinet briefing in Cape Town. It would be paid out over three years, starting in the 2011/12 financial year.
It was initially announced that the money would be raised through the liquidation of “non-core” state assets, but government issued a correction shortly afterwards, saying the money would come from the budget.
Maseko said that this could result in an increase in the budget deficit, currently at 5,3%, but it would depend on the savings achieved in the budget process, as well as the amount of revenue collected.
The equity injection comes on top of an additional R174-billion in loan guarantees from government, announced two weeks ago, and a loan of R15-billion from the Development Bank of Southern Africa.
Government was concerned about security of supply, Maseko said. In addition, energy was key to growing the economy and providing jobs, as envisaged in the New Growth Path, government’s new economic policy.
The money would also help strengthen Eskom’s balance sheet and allow the company to raise additional funds on capital markets, said Maseko. Government hoped that the additional money would also help shield consumers and the wider economy from further steep tariff increases by Eskom, Maseko said.
The announcement comes at a time when South Africa is considering various options to increase its power capacity over the next 25 years in terms of the draft Integrated Resource Plan (IRP2010).
Critics have long argued that electricity planning has been too “Eskom-heavy” and coal-reliant.
However, there is growing alarm among environmental and energy experts that the IRP2010 does not make sufficient allowance for renewable energy, maximise energy efficiency, or enable South Africa to meet emission reduction targets.
Leaked copy
The Mail & Guardian has been leaked a copy of a draft scenario, requested by the environmental affairs department, which takes into account additional carbon reduction measures in the electricity sector, but which was controversially excluded from the draft IRP2010.
The report notes that the revised balanced scenario, which IRP2010 ultimately recommends as the country’s best option, will have implications for South Africa’s ability to meet emissions targets.
“The revised balanced scenario allows for an annual emissions peak of 305-million tonnes [of greenhouse gases] before declining to a plateau of emissions between 260- to 275-million tonnes per year thereafter,” says the report. “The DEA is concerned that this peak and plateau exceeds the policy requirement, especially the Copenhagen aspirations.”
Under the Copenhagen accord signed last year, South Africa has conditionally agreed to reduce emissions by 34% by 2020 and by 42% by 2025.
The report recommends additional measures to reduce emissions by including more power from biomass, up to 1GW, as well as an additional 1GW of solar thermal power. It includes the addition of a programme after 2015, allowing for an additional three million solar water heaters. The scenario includes further demand-side management measures, which save about 6298MW of power, 1 878MW more than the revised Âbalanced scenario.
The cost to the country is higher than that of the revised balanced scenario, reaching R884-billion, while the revised balanced scenario would cost R856-billion. Electricity prices also peak at R1,16/kWh, as opposed to the R1,11 reached under the revised balanced scenario.
Ompi Aphane, the energy department’s acting deputy director general for electricity, nuclear and clean energy, denied that scenario planning had been manipulated.
“The scenarios presented to the IMC [Inter-ministerial committee on energy] were agreed between the government departments and any suggestion that deliberate action was taken to prevent the IMC from considering any scenario is misleading,” Aphane said. “We believe that, as a developing country, the extent to which we have departed from being a fossil-dominated electricity sector is commendable. At the same time it would be irresponsible to immediately abandon the development of the fossil resources that we have.”
Richard Worthington of the World Wildlife Fund said the electricity supply industry accounted for about 40% of national emissions. The electricity supply industry was an easy area through which to achieve mitigation, he said.