/ 14 October 2022

Eskom leases land to companies for private renewable energy projects

Eskom Holdings Soc Ltd Chief Executive Officer Brian Molefe Interview
Eskom told Parliament’s standing committee on public accounts that it was targeting suppliers mentioned in the Zondo report

Eskom has signed lease agreements with four independent power producer investors for the use of land parcels worth R40-billion in investments.

The land, owned by the state-owned power utility, is around the Medupi and Tutuka coal-fired power stations in Mpumalanga.

The lease agreements were awarded to HDF Energy South Africa, Red Rocket SA, Sola Group and Mainstream Renewable Power Developments South Africa to construct new, clean-energy generation capacity.

The four investors will lease a total of 6 184 hectares of land for 30 years each and will contribute at least 2 000MW to the national electricity grid.

“It is anticipated that the generators will be connected to the grid within 24 to 36 months from financial closure, subject to environmental, land zoning and other regulatory approvals,” Eskom CEO André de Ruyter said at the signing ceremony on Friday.

He said these projects were independent of the renewable energy independent power producer bid window process and Eskom’s power purchase agreement requests to generate renewable energy.

“Because Eskom is not the buyer of electricity for these projects, there is no requirement for treasury guarantees to underpin these agreements, therefore, they present no risk or burden for the SA taxpayers,” De Ruyter said.

“These projects have been enabled by the announcement made by President Cyril Ramaphosa earlier this year that the previous 100MW licensing cap on new privately-owned generation projects will be lifted completely.”

This comes in response to Ramaphosa’s call for an ambitious and bold plan to address the energy crisis which has seen Eskom implementing rolling blackouts, due to limited energy reserves.

Company expectations

De Ruyter said the companies were expected to invest about R40-billion to develop this “first batch” of private renewable energy projects on Eskom-owned land.

“The projects are part of putting together an energy mix for SA that is sensible and that will create jobs by generating clean energy in Mpumalanga,” he said.

Eskom would issue new tenders for parcels of land every quarter, with a view to enabling and accelerating investment in renewable generation capacity.

“The fact that these land leases will attract an estimated investment of some R40-billion to areas traditionally associated with coal-fired electricity generation makes this a compelling proof point for the just energy transition to a lower-carbon economy,” said De Ruyter.

The companies are given access on a “use it or lose it basis and, if they fail to reach certain development goals within a three-year period, the land will be taken back by Eskom”, he said.

Energy Mix

In a statement, the utility said the winning bidders would do comprehensive feasibility studies to determine which technologies, or what mix of solar, wind and battery storage, they will implement at each site. The exact generation capacity will be known only once the studies have been completed.

“The bidders will sell the electricity on a bilateral basis to customers that will sign power-purchase agreements with the developers. The electricity will be wheeled across the Eskom grid, generating revenue for Eskom from its existing assets,” Eskom said.

De Ruyter said the next phase of land leases would focus on properties around the Kendal and Kusile power stations in Mpumalanga, as well as the retired Ingagane Power Station in Newcastle, KwaZulu-Natal. These parcels would be offered to the market in the coming months.

De Ruyter added that by making Eskom land available close to the power stations, where there is sufficient grid capacity, “we have taken an innovative step to find the quickest way possible and within our scope of influence to boost the country’s generation capacity”. 

He said the land leasing initiative was aimed at providing relief to the constrained electricity system. 

“There is a dire need to alleviate pressure on the system by adding as many megawatts as possible in the shortest possible time, thus increasing Eskom’s ability to conduct maintenance at its existing fleet, reducing load-shedding,” the Eskom boss said.