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New power providers to be authorised

Mineral Resources and Energy Minister Gwede Mantashe and the National Energy Regulator of South Africa (Nersa) have published two draft determinations in terms of section 34(1) of the Electricity Regulation Act.

The determinations allow the entry of new energy suppliers to assist in powering up the country.

One determination allows 2000 megawatts of power to be procured for new-generation capacity from a range of energy sources and technologies, for the years 2019 to 2022. Another determination allows 11813MW to be obtained for the years 2022 to 2027.

This capacity will follow the process of previous — mostly renewable energy — procurement, with an open tender process. The national power utility — currently Eskom — must then buy that energy through power-purchase agreements and other project agreements that will be concluded in the course of the procurement process.

The draft determination said the procurement programme will target connection to the grid for the new-generation capacity as soon as possible and no later than December 2021. 

After 13 years of load-shedding dimming the country’s economic outlook, there now seems to be hope that the problem might be solved — depending on how fast the process goes. Although the first three windows of the renewable-energy build went ahead quickly, subsequent windows ground to a halt after Eskom refused to sign power-purchase agreements for the fourth bid window.

This meant the renewable build was unable to reach the scale that it could have. A large-scale build would also mean that the price of energy could drop because of factors such as components being built locally so that, for example, wind turbines are not being imported.

Without new power build— and a mix of wet coal and an ageing and overused Eskom coal-power fleet — the country has experienced damaging load-shedding in recent months. That fleet is also nearing the end of its life, with most plants set to be decommissioned in the next 15 years.

The faults at Medupi and Kusile — Eskom’s new coal-fired plants — have meant that neither of them have been able to provide a consistent supply of energy to the grid. They are also still not finished, with completion continually pushed back.

Last year, the country experienced stage six load-shedding for the first time. This means 6000MW of power was cut to alleviate pressure on the national grid. The capacity of Medupi is 4800MW.

This has left big and small businesses alike reeling, because Eskom has a monopoly on the national power supply. In his State of the Nation address last year, President Cyril Ramaphosa indicated that Eskom would be broken up into three parts. The transmission element of this would mean that private companies — such as wind and solar farms — could compete with Eskom to sell energy to the grid. 

The determinations for new capacity were published last Friday, on March 20.

These are in line with the country’s national energy plan — the Integrated Resource Plan (IRP) 2019. This is the blueprint for South Africa’s energy outlook and is meant to be updated every five years. But, for political reasons related to the desire to build a nuclear fleet that the plans said was unnecessary, the previous updates were not signed off, and the country was working from the original blueprint, which is more than a decade old, for several years.

In his 2020 budget speech, Finance Minister Tito Mboweni said that the government will do “whatever it takes” to ensure a stable electricity supply. He said the government has allocated R230-billion over 10 years to achieve the restructuring of the electricity sector.

He also announced that steps will be taken to expand electricity supply by facilitating faster private-sector involvement in the sector, which he said will catalyse confidence and growth more broadly — an economy cannot grow without power.

The budget review details that the government will facilitate large-scale additional power production: the department of mineral resources and energy is assessing information to procure 2000MW to 3000MW of power through its risk-mitigation programme.

“This will be connected to the national grid within three to 12 months from approval. Efforts are under way to acquire additional electricity from existing independent power producers,” the review said.

As well as these measures, the government has committed to open the fifth bid window for independent renewable-energy projects. It also said municipalities that are in good financial standing will be able to buy electricity directly from producers. The City of Cape Town is still going ahead with a court case to allow it to do so, because the regulations have not yet been finalised.

Tshegofatso Mathe is an Adamela Trust business reporter at the Mail & Guardian

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Tshegofatso Mathe
Tshegofatso Mathe
Tshegofatso Mathe is a financial trainee journalist at the Mail & Guardian.

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