Category Archives: Treasury

No end in sight to Eskom delays in signing renewable energy PPAs

Chris Yelland, EE Publishers, 4 August, 2017.

There appears to be no end in sight for resolution of the impasse caused by Eskom’s refusal to sign any new power purchase agreements (PPAs) with renewable energy independent power producers (IPPs) in terms of the Department of Energy’s (DoE’s) internationally acclaimed Renewable Energy IPP Procurement (REIPPP) programme.

In an interview with EE Publishers’ investigative editor Chris Yelland on 4 August 2017, Energy Minister Mmamoloko Kubayi would not give any specific timeline for the signing of 37 duly procured renewable energy supply contracts from IPPs, which have now been delayed for over two years.

“We have recently expanded the DoE, DPE and Eskom task team investigating the matter to include the DG of the National Treasury. So there’s been a lot of work done. But a big issue is Eskom’s balance sheet”, said Minister Kubayi.

“Treasury issues guarantees to Eskom, and Eskom is concerned that if they are required to sign PPAs for REIPPP bid window 3.5, 4 and 5 projects, it will further impact negatively on their balance sheet. This is why we had to include Treasury to have a look at the impact to ensure we do not get another downgrade. We are waiting for the task team to come back to us.”

Following President Zuma’s instruction in his state-of-the-nation address on 9 February 2017 for Eskom to sign the outstanding PPAs with IPPs, Minister Kubayi’s predecessor, Tina Joemat-Pettersson set a date of 11 April 2017 to sign the PPAs.

However, following her appointment on 31 March 2017, new Energy Minster Kubayi postponed the signing in order to enable further consultation with Department of Public Enterprises (DPE) Minister Lynne Brown and Eskom, and a DoE, DPE and Eskom task team was established to chart the way forward and report back by the first week of June 2017.

The subsequent further addition of the National Treasury to the task team has now delayed resolution of the matter still further, with no end in sight…

(Ed. note: Perhaps we have to wait for yet another Treasury Minister? Pravin, come back!)

The South African government hasn’t given up the fight for nuclear

Hartmut Winkler, Professor of Physics, University of Johannesburg, in The Conversation, 17 May, 2017.

Nuclear energy in South Africa is a highly contested issue; so much so that a court recently ruled against the government’s plans to issue a contract for the construction of eight new nuclear power stations.

The ruling appeared to have delivered a significant blow to President Jacob Zuma, and those who support him, who had set their sights on immediate nuclear expansion. The court’s decision was met with jubilation by those opposing the nuclear plan.

The expectation was that the government would appeal the decision. It didn’t, but this shouldn’t be read as a shift in its thinking.

Minister of Energy Nkhensani Kubayi made it clear after the court ruling that, while there would be no appeal, the government remained fully committed to nuclear expansion, and was planning to initiate a new process without delay.

This signals a realisation by government that an appeal would have little chance of success, and that a lengthy court process would tie up the parties in legal cases for months or even years. This would delay a nuclear build even further.

The minister has made it clear that the government is not giving up on its push for the controversial nuclear plan. But it has realised the process must start from scratch. This is the clearest indication yet that Zuma intends launching the nuclear build before his term of office ends in 2019.

Adding to fears that the government isn’t giving up the fight was the surprise reinstatement of Brian Molefe as CEO of the country’s power utility Eskom. Molefe left the job under a cloud six months ago. His reappointment led to immediate and widespread public outrage. Many have interpreted his return as beefing up the quest for nuclear.

Molefe’s return, however, isn’t as critical to the nuclear project as imagined, as Eskom has maintained his pro-nuclear stance in his absence.

What’s more important is that it’s clear that contestation around the future of South Africa’s energy sector will continue unabated. This despite the president having been severely weakened in recent months, and with it the power of the pro-nuclear lobby supported by his faction.

And here is the original in The Conversation

Structure of the market needs to be revised to ensure least-cost energy

BusinessDay, Anton Eberhard, 9 May, 2017

The battle for SA’s nuclear and energy future is not over. While many South Africans welcomed the decision by the High Court in Cape Town setting aside international nuclear energy treaties and declaring the government’s nuclear procurement programme unlawful and unconstitutional, President Jacob Zuma and his allies have not given up. Ultimately, the structure of SA’s power market will need to change to ensure an optimal and least-cost energy mix.

Reforming the power sector will be the more important struggle.

Unfortunately, the court’s nuclear decisions were essentially around procedural issues and it declined to rule on substantive matters, such as the rationality of procuring nuclear power when the government’s own updated electricity plan says it is not needed.

Here is the full article

 

A Summary of The Nuclear Deal, Why It Failed and What This Means For South Africa.

Global Carbon Exchange, 5 May, 2017

Everyone should know that, for now anyway, the programme has effectively been sent back to the drawing board (hopefully not that same one that “crafted” the last programme).

Perhaps a bit of history is needed to get to grips with all the failings of the Nuclear Programme.

Here is the full article

Op-Ed: Can any South African Nuclear Energy Procurement ever Succeed?

Daily Maverick, Dirk de Vos, 5 May, 2017

Should the whole nuclear energy procurement process start up again, the few nuclear vendors that still remain should ask themselves: is it really worth the bother? By DIRK DE VOS.

As most of us know, the recent Cape High Court decision in favour of the applicants, Earthlife Africa Johannesburg (ELA-JHB) and the Southern African Faith Communities’ Environment Institute (SAFCEI), to set aside nuclear procurement agreements was an utter thumping.

All South Africans owe a debt of gratitude especially since both NGO’s operate under significant financial constraints (donations can be made here) and for some, this was a replay of the David and Goliath story in the book of Samuel. Malcolm Gladwell’s take on that story is worth retelling.

Gladwell suggests that David was never going to lose that battle. Firstly, he was an adept slingshot and a stone from his sling had the stopping power of a .45 calibre pistol. Secondly, Goliath, the giant, may have suffered from acromegaly, an affliction of many giants, that causes partial blindness. So, you have a lumbering (large) target who cannot see well against a highly adept boy with his slingshot. The outcome was not in doubt. In sporting terms, the Cape High Court decision was like a 10-0 score line in soccer or, in a cricket test, an innings defeat on the second day. We are yet to see whether the new Minister of Energy will appeal the decision but it is hard to see how a “rematch” in any higher court will result in a different outcome.

Briefly, the court’s decision did two things. It set aside the previous Minister of Energy’s decision to proceed with the procurement of nuclear energy due to a number of flagrant departures from section 34 of the Electricity Regulation Act (ERA), which governs how such determinations should be made. It also set aside the Russian Nuclear Agreement as it should have – and did not – receive Parliamentary approval as required by section 231(2) of the Constitution. This agreement purported to create a number of obligations and liabilities for South Africa (including taking on all liabilities for a nuclear accident). The Constitution requires that these types of agreements with substantive impacts be approved by parliament. More basic framework co-operation agreements with the USA and South Korea – which, being of a more technical, administrative nature, did not require parliamentary approval – were also set aside on the basis that they were not tabled in parliament within a reasonable time, as required by section 231(3) of the Constitution.

The most striking thing about the judgment is not the decision itself, but just how underhand, dishonest and profoundly inept the government has been in the whole affair. In a sense, they were worse off than Goliath – it was almost a process of self-sabotage. “Oh well”, says the nuclear lobby and in particular, NECSA – which by the way has just secured 85% of the total budget of R787 million allocated to nuclear by the Department of Energy for the next financial year, “the court decision said nothing about the wisdom of procuring nuclear energy as such and South Africa should just start the nuclear procurement process from scratch”. That is true. The court’s decision was mostly about procedural matters, but it raises an important question: could procuring nuclear power ever be done legitimately in a way that satisfies the Constitution and the rule of law? It’s an important question because the answer should guide whether anyone, especially taxpayer-funded entities, should bother even trying.

The answer is no and this is why. The Constitution was not drafted to prevent South Africa from procuring nuclear power, but, given the state of the nuclear energy sector in 2017, it makes it extremely difficult, if not impossible. It is perhaps this very reality that has driven the underhandedness that we have seen.

Here is the full article