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Editorial: It should be eco, not ego, for Eskom

Eskom can’t help but sully everything it touches. This time around it’s the flagship renewables project that hangs in limbo, amid the parastatal’s financial woes and political posturing.

There is no reason green-power producers should be in such a position. The Renewable Energy Independent Power Producer Procurement Programme has been a great success. Since 2011, 3 800MW of green power and R168-billion in private-sector investment has been committed to the programme. Wind energy can now be produced more cheaply than the estimated cost of coal power from the long-delayed Medupi and Kusile mammoths, which are also suffering from vast cost overruns.

The programme has been so successful that, earlier this year, the department of energy announced plans to accelerate and expand it with an additional 6 300MW in green-power tenders. Eskom is required to pay for the green energy at an agreed price, but this is catered for by the energy regulator’s electricity tariff decisions. In fact, the programme is cash-positive for the parastatal, which is running diesel generators flat-out – and at exorbitant expense – to keep the national power network pumping.

As far back as 1998, an energy policy white paper recognised that independent power needed to enter the market – and Cabinet later endorsed the view. But the mess at Eskom and increasing power supply problems meant that the plan was abandoned. Previous procurement programmes for independent power, run by Eskom, were decidedly unsuccessful.

The only thing Eskom has to do now is connect the greenpower projects to the national grid – but even this is proving to be a hard ask. Despite the fact that the utility recently secured a development loan of R4-billion to connect new projects to the grid, and that many of the renewable projects take on a lot of their own connection costs anyway, Eskom won’t commit to any future renewables connections and off-take until they know the energy regulator will provide for it. Eskom has requested a breather until 2018 and is, in effect, holding the energy sector’s golden child ransom to get its own financial fix.

Certainly, energy prices have been unreflective of cost for far too long. But poor planning and the mismanagement of ego-builds Medupi and Kusile are Eskom’s own actions and responsibility. Each above-inflation tariff hike from the regulator leaves the utility hungry for more. Any money handed to it disappears into a financial hole. No funds are ring-fenced and the true cost of the mega-builds remains unclear.

Such disruptive actions again call into question the good sense of Eskom’s absolute ownership of the national power grid. Private investors could easily put funds into the network and help to upgrade it, but it’s politically anathema to the utility to promote such “privatisation”.

With local government elections looming next year, Eskom will face immense pressure to keep the lights on. The national energy regulator will be obliged to make the electorate happy. South Africa’s green-power projects can only hope that their interests are catered for.

This editorial was originally published in the M&G newspaper on October 30 2015. An incorrect figure relating to private sector investment, R168-million, has since been corrected to the correct amount, R168-billion.

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