The process to procure "emergency" energy capacity, essential to minimise load-shedding when the economy returns to normal, edged closer to being realised this week, with a decision by SA’s energy regulator that it should proceed.
The procurement of 2,000MW of new capacity was announced by President Cyril Ramaphosa in December. Eskom has about 44,000MW of installed capacity but has frequently been unable to meet demand of about 28,000MW due to plant outages.
While it was intended as an urgent measure to tackle the power gap, the process has not yet begun and it is expected it will take several years before it comes on stream.
Ramaphosa announced the emergency measure after the country experienced stage 4 load-shedding for the first time due to an unprecedented rate of Eskom plant failures.
The Covid-19 lockdown has significantly lowered demand, sparing the economy from load-shedding, while Eskom’s plant has continued to perform poorly, with only 64% of total capacity available for dispatch.
Department of mineral resources & energy deputy director-general Jacob Mbele told a parliamentary committee meeting on Tuesday that the National Energy Regulator of SA (Nersa) had concurred with the ministerial determination made at the end of February.
The determination and concurrence process are required by section 34 of the Electricity Regulation Act.
"One of the biggest milestones has been achieved with the concurrence of Nersa on the section 34 determination last week. The department is now working with the Independent Power Producer (IPP) office and preparing documentation for procurement of 2,000MW and we believe that it should be out in the next month to month-and-a-half," said Mbele.
Procurement
The IPP office will run the procurement process for bidders — which could include both renewable and other energy producers — and Eskom will be the buyer of the power.
Eskom has raised concerns with the energy department over the cost of the first three rounds of renewable energy procurement, which were expensive relative to other energy sources. Prices of renewable energy have since reduced substantially and wind- and solar-generated power have the shortest construction times of all energy technologies.
Eskom and the government have also been concerned about the risk-sharing with IPPs, which they say has been unevenly weighted on Eskom. Power purchase agreements are signed by Eskom and guaranteed by the Treasury. "We have also addressed issues with Eskom of risk-sharing and these have been sorted out. There is confirmation that Eskom will be the buyer," said Mbele.
Nersa spokesperson Charles Hlebela confirmed the decision. A second determination made by mineral resources & energy minister Gwede Mantashe in February for a new round of renewable energy was still under consideration, he said.
It is more than six months since Ramaphosa said the government would procure more capacity urgently. But it took Mantashe two-and-a-half months to make the determination and Nersa almost three months to concur. After the bidding process successful projects usually take as long as a year to achieve financial close, which requires all contracting with Eskom to be done before financing can be secured.
Industry sources say a likely scenario is that construction will begin in 2022.
Solar PV can take 12-18 months to build, wind 18-24 months, gas about five years and coal about seven years, assuming finance is available.
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