Category Archives: DoE

Op-Ed: Beyond patronage politics – where is South Africa going with Eskom?

Daily Maverick, Piet van Staden, EIUG, 3 July, 2017.

Eskom being constantly in the news for all the wrong reasons is masking a more structural problem – the utility’s financial sustainability as a vertically integrated public utility company in a rapidly changing world. By PIET VAN STADEN.

The seemingly never-ending series of reports and investigations on financial mismanagement at Eskom rightfully trigger a media frenzy. Concerned citizens can only hope that the many investigations and reports will eventually result in prosecutions where needed and that the rule of law will be seen to apply to everyone, irrespective of patronage or political affiliation.

However, Eskom being constantly in the news for all the wrong reasons is masking a more structural problem – Eskom’s financial sustainability as a vertically integrated public utility company in a rapidly changing world. The size of the problem is not well appreciated. The price risk to customers is not understood. And replacing the leadership and some board members will not solve the immediate debt and liquidity challenges staring us in the face.

Here is the full article

South Africa needs to find middle ground for electricity conundrum – former EIUG chair

Engineering News, 29 June, 2017.


If South Africa wants to prevent its deindustrialisation and find middle ground between the sustainability of State-owned Eskom and the affordability of electricity, a few “holy cows will have to be slaughtered”, former Energy Intensive User Group (EIUG) of Southern Africa chairperson Piet van Staden believes.

In an opinion piece published on EE Publishers on Thursday, Van Staden added that this required “out-of-the-box thinking” as business-as-usual would not do it. He also suggested that it could be a good idea to use the existing Ministerial Advisory Council on Energy or set up a special industry think tank to come up with proposals for EnergyMinister Mmamoloko Kubayi’s consideration.

He suggested that, over the short term, more cost-reflective pricing for large power users (LPUs) would help to sustain current sales, as well as generation displacement agreements where nonutility generation can be curtailed if it makes sense.

“In all such cases, the LPU prices should be above Eskom’s marginal costs to ensure the additional electricity sales still contribute to fixed costs.

“For a long-term solution, we will have to look at the industry structure, Eskom’s business model and the electricity pricing policy”, he said, adding that the current rate-of-return regulatory methodology spoke to a previous era, where utility companies were low risk/low return businesses, entitled to recover prudently incurred costs and earn a fair return on assets.

However, he pointed out that if the future belongs to distributed energy resources and some gas-fired independent power producers (IPPs), the question becomes how to optimally manage the decarbonisation journey, and not how to ensure Eskom’s generation fleet stays on as a sustainablebusiness ad infinitum.

The optimum way forward may be to separate the transmission and market businesses and ensure it is managed sustainably, while the existing Eskom generation business should be exposed to competition and managed as efficiently as possible to the end of life over the next few decades, he suggested.

Van Staden further noted that it may also be decided to maintain some momentum in the renewables programme by pre-investing until new capacity is really needed, as long as it formed part of an agreed national plan and the cost of renewables displacing cheaper Eskom generation is manageable.

Here is the full article

South Africa moving ahead with nuclear energy expansion

ESI Africa, 28 June, 2017

The South African energy minister, Mmamoloko Kubayi, has declared that government is still committed to rollout the nuclear energy expansion forming part of the country’s energy mix.

Kubayi noted in a statement that this is to ensure energy security, adding that government is committed to the provision of reliable and sustainable electricity supply, as part of reducing carbon emissions.

Nuclear conference

Minister Kubayi recently led a delegation to the 9th International Forum ATOMEXPO in Moscow, Russia.

(Ed. note: Aha, something is afoot, and it is not good for SA!)

According to the press release, during discussions the minister reiterated the department‘s openness and transparency, as well as to engage all spheres of government and the public, in line with the country’s legislation and policies.

“It is critical to recognise that the nuclear new build programme will enable the country to create jobs, develop skills and create industries. More critically, we encourage young people and women to participate in the energy sector,” she said.

NPC commissioner calls for energy-planning overhaul

Engineering News, Jarrad Wright, 14 June, 2017.

member of the National Planning Commission (NPC) has pointed to serious shortcomings in South Africa’s current energy planning processes and has called for future plans, including the highly contested Integrated Resource Plan (IRP) for electricity, to be compiled by a new independent technical entity with no interests in the future power generation mix.

Speaking at Wits Business School this week, Jarrad Wright reported that an NPC reference group had been established to consult on the future of energy planning in South Africa. Meetings would be held with various stakeholders in the coming months with the intention of arriving at a “more defined position” on the approach the country should adopt.

… Wright also appealed for “complete transparency” so that any deviation from the combined principles of “least-cost and least-risk” were not only quantified, but also subjected to public scrutiny and debate….

… The IRP Base Case has been widely criticised for including constraints on the amount of renewable energy that could be included in any one year. This limitation has been described as artificial, while the authors of the draft Base Case provided no technical or economic justification for the decision to impose such restrictions…

… Critics of the Base Case have even suggested that the restrictions were imposed purely to ensure that nuclearremained in the plan, despite its costs disadvantages. In the event, the Base Case includes more than 20 000 MW of nuclear capacity for inclusion in the generation mix by 2050, but delays the introduction of the first reactor to 2037…

To improve confidence in future IRPs, Wright suggested that the development and collation of all input assumptions, as well as all technical modelling, should be outsourced to a “purely technical entity that has no financial interest in the future power generation mix”. At present, Eskom performs the technical work on behalf of the DoE.

“Even though it is likely that the modelling is produced in an independent manner [within Eskom], the perception of independence is even more important than whether or not it is independent,” Wright asserted. …

Here is the full article

City of Cape Town Leads the Charge as Cities Look to Generate Their Own Clean Energy

GCX Newsletter, Adam Green, 5 June, 2017

City and provincial administrations in South Africa increasingly want to have the freedom and independence to procure clean energy directly, independent of what Eskom can offer. The City of Cape Town is leading the charge.

Mayor Patricia de Lille, in April, confirmed the city’s intention to forge ahead by taking the Minister of Energy to court for the right to procure energy directly from suppliers.

Why

The renewable industry has ground to a halt with Eskom’s continued delays in signing off on preferred bid winners from previous rounds of the Independent Power Producer Programme (IPPP), despite continued promises by Government to the contrary. To date, Eskom has signed 64 PPAs (power purchase agreements) for a total of 4 000MW. In addition to the signed PPAs, there are 37 PPAs remaining to be signed. It was expected that new energy minister Mmamoloko Kubayi would sign the outstanding contracts in April 2017, however, her office asked that the signing be delayed yet again. These 37 projects represent a total investment of R50 billion, 13 000 jobs in construction and a further 2 000 permanent jobs over the 20-year lifetime of the projects.

With economic growth at a virtual standstill, local economies are not waiting for Government, but taking the lead by creating opportunities and investment under the Green Economy. IPPP has been one of the key economic successes in SA since its launch in 2011. Provinces have taken notice and want to boost local economies by pursuing their own power generation. Benefits include job creation, both direct and indirect, creating new local industries within the energy sector and downstream businesses (parts, training, maintenance, accommodation etc). Independent power producers are required to provide jobs and to share ownership with local communities, and also to fund social projects in the surrounding community. By June 2016, R216 million has been spent on social-economic development since November 2013, and a total of R9.2 billion has been committed to the 64 active projects over their 20 year lifetimes…

… The City of Cape Town is preparing to take legal action against the energy minister over where it receives its electricity supply from. This legal action will be closely watched by city administrations across South Africa.

Here is the full article