By Carol Paton.
The government’s energy action plan is slowly taking shape, with some significant milestones reached in recent weeks, including obtaining a licence for Eskom’s new transmission company.
In a briefing on Friday, Presidency official Rudi Dicks said that the licence had been approved by the National Energy Regulator of SA (Nersa), which would now allow 30 days of public comment. This means the company could be established by the deadline of 31 March, provided that government appoints the board before then.
The appointment of the board has taken the government inordinately long. Eskom, of which the transmission company will be a subsidiary, made recommendations for directors more than a year ago. The establishment of the transmission company will open the way towards the unbundling of Eskom and put in place the basis for a competitive energy generation sector, where multiple generators sell to the national grid.
Dicks said, this will enable us to move from a single-seller model where Eskom was the only generator. A licence for the transmission company is the first step. This will allow the company to raise capital independently to fund Eskom’s transmission investment plans. Eskom estimates that about R150 billion must be invested to strengthen the grid.
A second significant milestone was the exemption of Eskom from certain generation regulations by the Department of Mineral Resources and Energy, which will allow it to procure excess power from existing independent power producers through what is called “the standard offer”.
Eskom also received an exemption to enable it to procure around 800MW of emergency power. This will be the first energy procurement Eskom has done in more than a decade since it began the construction of Medupi and Kusile. Due to Eskom’s over-borrowed financial position, subsequent energy generation projects have been financed and built by the private sector with the power sold on to Eskom.
The Eskom tender for emergency power will be technologically agnostic, with the controversial option of power ship not ruled out. But to license new generation capacity, Eskom would have to persuade Nersa that it will be able to recover the cost of generation, something it has been unable to achieve. Energy contracts with power ships are notoriously costly.
“The technology will be agnostic, and the decision will be a function of how quickly power can be brought on the grid and the cost. Eskom will need to make a decision on how it will recover the cost,” said Dicks. Further significant announcements are expected in Finance Minister Enoch Godongwana’s Budget on Wednesday. These include the possibility of tax breaks for households that install solar PV generation and more information of a feed-in tariff for households that wish to sell back to the grid.
But while other aspects of the plan take shape, Eskom looks set to miss its energy availability (EAF) target of 60% at the end of March. The EAF is the percentage of the plant that is working and available to dispatch electricity. The target was set by the new Eskom board, which has been charged with achieving a 75% EAF. Eskom insiders mostly view the board’s targets as unachievable.
But, said Thomas Conradie, Eskom’s acting head of generation: “The EAF is at 53.8%, and we anticipate when we return some units, it will increase although other units must be taken out for maintenance. Sixty percent by the end of March will be very difficult.”
Conradie said Eskom had been burning diesel quite intensely through February to keep load shedding at Stages 3 and 4. He said this had been funded from Eskom’s own resources and that the company was still in talks with Treasury and commercial banks to secure funding for March’s diesel bill.