By Antoinette Slabbert.
Energy regulator Nersa’s electricity sub-committee on Friday unanimously recommended that the regulator reject Eskom’s application to reserve grid capacity in constraint areas for renewable energy projects procured by the state.
This would have been to the detriment of projects contracted by private sector entities.
The meeting was attended by all the regulator members, and from a recording that Moneyweb watched, it seems likely that they will all support the recommendation when it is served before the full regulator board.
This will bring relief to the booming private energy supply industry, which feared being excluded from the remaining grid capacity especially in restrained areas like the Eastern, Western and Northern Cape.
Non-profit company GreenCape believes this market can attract investments of about R214 billion, or R36 billion annually, from now until 2030, doubling the government’s green power purchases.
If Eskom succeeded with its application, it could have negatively impacted such investments.
Capacity problem remains
The recommendation however provides no solution to the risk that lack of grid access poses to government’s Renewable Energy Independent Power Producer Procurement Programme (Reipppp).
In its application Eskom stated that the Reipppp’s Bid Window 6 failed in 2022 when no wind energy projects were awarded due to a lack of grid access after the process was overtaken by private sector projects that took up all the remaining grid access.
This left 23 wind projects, in which about R100 million had been invested at the time, stranded.
Bid Window 7 has been delayed in the face of this challenge.
The allocation of grid access has since been a bone of contention in the industry.
The Energy Intensive Users Group (EIUG) previously stated that the way grid access is granted is of extreme importance for the entire renewable energy industry.
“If handled incorrectly, it could damage the credibility and reputation of state and private institutions and undermine the national interest,” it said.
“If the application is approved, the opportunities for private independent power producers to gain fair and balanced access to the grid could be limited. This raise[s] concerns that intensive power users will not achieve their carbon reduction targets in time and will consequently be exposed to export levies.
“This is certainly not in the country’s best interest, and an alternative solution that is fair to both private and public independent power producers must be sought.”
The sub-committee considered Eskom’s application in terms of Section 21(2) of the Electricity Regulation Act, which provides that:
A licensee may not discriminate between customers or classes of customers regarding access, tariffs, prices and conditions of service, except for objectively justifiable and identifiable differences approved by the Regulator.
It was not satisfied that Eskom’s motivation provided “objectively justifiable and identifiable differences” between IPPs serving the private sector and those that sell energy to the state, for it to allow Eskom to discriminate between them.
Insufficient detail
Nomfundo Maseti, full-time regulator member for piped gas and a member of the electricity sub-committee, pointed out that Eskom failed to indicate the extent of the discrimination.
Eskom did not specify in its application the area where it planned to reserve grid capacity, how much capacity would be affected, or for how long the practice would continue.
Maseti further asked if Eskom, in justifying its application, gave any indication of the possible impact on the market or proposed any mechanism to allocate grid access.
These issues, the meeting decided, would be addressed when the reasons for the decision are formulated.
Following the failure of Bid Window 6, Eskom changed its grid access rules from first-come-first-served to first-ready-first-served.
This favoured shovel-ready projects and would have seen projects that had been awarded the right to grid access by Eskom, but were not at the same stage of readiness, lose this access.
The matter almost went to court, but the litigation was withdrawn with Eskom establishing interim rules that did not distinguish between power projects for the private sector and those for the government.
This application would have once again changed that.