Measures to improve energy generation

Thursday, February 13, 2020

Government will be implementing measures that are set to fundamentally improve South Africa’s energy generation capacity.

“Over the next few months, as Eskom works to restore its operational capabilities, we will be implementing measures that will fundamentally change the trajectory of energy generation in our country,” President Cyril Ramaphosa said.

Delivering his State of the Nation (SONA) Address to a Joint Sitting of Parliament on Thursday, President Ramaphosa assured South Africans that government was working to address the country’s energy challenge.

Eskom recently announced that the probability of load shedding was expected to increase as the power utility carries out its newly developed comprehensive maintenance plan, aimed at fixing its system which is constrained, unreliable and unpredictable.

Last December, Eskom implemented Stage 6 load shedding for the first time in its 96 year history.

Government has moved to rapidly and significantly increase generation capacity outside of Eskom by introducing measures that will be implemented in an effort to improve the constrained energy supply.

These include a Section 34 Ministerial Determination that will be issued shortly to give effect to the Integrated Resource Plan 2019, enabling the development of additional grid capacity from renewable energy, natural gas, hydro power, battery storage and coal.

“We will initiate the procurement of emergency power from projects that can deliver electricity into the grid within three to 12 months from approval. The National Energy Regulator will continue to register small scale distributed generation for own use of under 1 MW, for which no licence is required,” Ramaphosa said.

The National Energy Regulator will ensure that all applications by commercial and industrial users to produce electricity for own use above 1MW are processed within the prescribed 120 days.

The President noted that there is now no limit to installed capacity above 1MW.

“We will open bid window 5 of the renewable energy IPP and work with producers to accelerate the completion of window 4 projects,” he said.

Government will also negotiate supplementary power purchase agreements to acquire additional capacity from existing wind and solar plants.

In addition, measures will be put in place to enable municipalities in good financial standing to procure their own power from independent power producers.

“For over a decade, South Africans have had to contend with the effects of a constrained energy supply. I have spoken extensively about the critical role that Eskom plays in the economy of our country and in the livelihood of every South African,” Ramaphosa said.

The President said the load shedding of the last few months has had a debilitating effect on the economy.

“At its core, load shedding is the inevitable consequence of Eskom’s inability over many years – due to debt, lack of capacity and state capture – to service its power plants. The reality that we will need to accept is that in order for Eskom to undertake the fundamental maintenance necessary to improve the reliability of supply, load shedding will remain a possibility for the immediate future,” President Ramaphosa said. 

He said where load shedding is unavoidable, it must be undertaken in a manner that is predictable and minimises disruption and the cost to firms and households.

In line with the roadmap announced last year, Eskom has started with the process of divisionalising its three operating activities – generation, transmission and distribution – each of which will have its own board and management structures.

The President said the social partners organised under National Economic Development and Labour Council (Nedlac) have been meeting over the last two weeks to agree on the principles of a social compact on electricity.

“This is a historic and unprecedented development since it demonstrates the commitment of all social partners to take the necessary actions and make the necessary sacrifices to secure our energy needs,” Ramaphosa said.

The President said through this compact the social partners seek an efficient, productive and fit-for-purpose Eskom that generates electricity at affordable prices for communities and industries.

“This requires both a drastic reduction in costs – including a review of irregular contracts – and measures to mobilise resources that will reduce Eskom’s debt and inject fresh capital where needed,” he said.

The President said the social partners – trade unions, business, community and government – are committed to mobilising funding to address Eskom’s financial crisis in a financially sustainable manner.

“They would like to do this in a manner that does not put workers’ pensions at risk and that does not compromise the integrity of the financial system. While they work to finalise this agreement, the reality is that our energy system will remain constrained until new energy generation comes on stream,” he said.

The President said through these immediate measures and the work underway to fundamentally restructure the electricity industry, government will achieve a secure supply of reliable, affordable and, ultimately, sustainable energy. –