South Africa’s power utility Eskom says it fully supports the Department of Energy’s Renewable Energy Independent Power Producer Procurement Programme (RE-IPPP) and acknowledges that IPPs must play a role in the South African electricity market, and remain committed to facilitating the entry of IPPs to strengthen the system adequacy and meet the growing electricity demand.
Total capacity of 5 701MW has been contracted with independent power producers (IPPs) as at 31 March 2015, of which 3 887MW relates to contracts under Department of Energy’s RE-IPPP.
On 31 March 2015, which is the financial year-end of Eskom, a total of 1 795MW of renewable energy generation capacity had been connected to the national grid, with an average load factor of 30.85%. Short- and medium-term contracts which were expiring at the end of March 2015 were renewed for another year so that they can continue to contribute to reducing the supply shortage.
Eskom’s Group Chief Executive Brian Molefe said the corporation is committed to supporting the grid integration of independent power projects as evidenced by the 43 projects connected to date since the inception of the procurement programme in 2011.
“For the renewable energy rounds 1 to 3 (Bid Windows 1 to 3) Eskom has spent R2.4 billion on the backbone infrastructure at both transmission and distribution level to enable the evacuation of energy from the IPPs. Eskom believes that non-issuance of budget quotes is a temporary measure and that very soon a lasting solution will be found to address this matter,” he said.
Molefe added that the decision to temporarily halt the issuance of budget quotes was taken to protect the financial sustainability of Eskom due to the fact that no capital allocation was accommodated for in the current multi-year pricing regime (MYPD3) for IPPs beyond Bid Window 3. In essence, Eskom’s current financial plan cannot support any new IPP connections as well as energy purchases.
“While we acknowledge the discomfort that this decision will have on the IPP procurement programme, let me assure you that Eskom is currently engaging with all the relevant stakeholders to resolve this matter as soon as possible,” he noted.
“From a Transmission and Distribution perspective, Eskom has committed to continue with the network integration studies, develop and cost the appropriate solutions associated with IPP connection applications received for Bid Widows 4 and the expedited programme. This is to ensure that once the financial situation is resolved, budget quotes can be issued without any further delays,” Molefe added.
It is against this backdrop that Eskom was surprised to read media reports that quoted Nersa as saying that its application for an exemption from the Grid Code was “cheeky” and tantamount to blackmail.
Eskom believes that its application for exemption from the Grid Code was correct because issuing binding budget quotes without guarantees of how it will source the funding for such a capital intensive project would have been akin to reckless trading.