Renewable energy programme will not collapse Eskom

Posted On Saturday, 09 March 2019 17:37 Published by
Rate this item
(0 votes)

President Cyril Ramaphosa says the financial and operational challenges faced by power utility Eskom are not caused by the Independent Power Producer (IPP) programme.

 CYRIL-RAMAPHOSA

Responding to oral questions in the National Assembly on Thursday, the President said the IPPs would not collapse Eskom. He said the power utility’s headwinds are as a result of a number of factors – from State capture to poor maintenance of its power plants.

“The severe financial and operational challenges currently being experienced by Eskom are not caused by the independent power producers programme, and in particular the renewable energy projects.

“Eskom’s challenges have been driven by massive cost and time overruns on the new build programme, the effects of State capture and corruption, collapse in governance, unsustainable debt levels and poor maintenance of plants,” he said.

He said this in response to a question by EFF leader Julius Malema, who had asked about the cost to Eskom of the independent power producers that signed the latest round of power purchasing agreements with Eskom and if the costs of the agreements would collapse the power utility. 

The President said the independent power producers are investing their own debt and equity to construct the projects, including the cost of connecting these power projects to the grid.

He said the value of the 27 independent power producers agreements signed in April 2018, represented in terms of private sector investment, is R57 billion.

To date, the total value of private investment in South Africa’s renewable energy generation capacity is R202 billion.

It is expected that a total of 372 MW will be connected to the grid between now and March 2020 and that Eskom will buy electricity worth R170 million in the 2019/20 financial year.

“These IPP costs are fully covered by Nersa, the regulator, through the cost recovery mechanism in the multi-year price determination process.

“In other words, the costs that Eskom incurs in buying electricity from the IPPs are recovered in the tariff set by the regulator.

“The costs of the most recent power purchase agreements will only be incurred when these plants are constructed and connected to the grid.

“The costs will therefore certainly not collapse the power utility,” he said.

Unbundling of Eskom will not lead to privatisation

The President said, meanwhile, that the unbundling of Eskom will not lead to its privatisation.

This follows his announcement during the State of the Nation Address that government is looking at reconfiguring Eskom’s operations into three separate State-owned entities – generation, distribution and transmission.

On Thursday, the President said to support Eskom’s financial turnaround plan, which focuses on driving efficiency and reducing costs, government has allocated R23 billion a year for the next three years to support Eskom during its reconfiguration.

“In turning its operations around, Eskom has developed a plan that focuses on resolving unplanned breakdowns, addressing the performance and reliability challenges affecting the new units at Medupi and Kusile, improving coal stocks and strengthening human resource capacity.

“Alongside these direct interventions, the plan is to restructure Eskom into separate State-owned entities responsible for generation, transmission and distribution.

“This proposed restructuring is in line with the 1998 Energy Policy White Paper.

“Contrary to what some have claimed, restructuring will not result in the privatisation of Eskom,” President Ramaphosa said. 

He said the main benefit of separation will be to improve financial management and ability to raise funding as well as transparency, and being able to mitigate and distribute risks and strengthen incentives for efficiency.

Last modified on Saturday, 09 March 2019 17:47

Most Popular

New Maluti Crescent to open on 21 March and transform shopping in Phuthaditjhaba

Feb 28, 2019
MD  PAUL GERAD
Maluti Crescent Shopping Centre will open on 21 March 2019 when it will officially become…

Fairvest Property Holdings Limited announced solid results for the six months to December 2018

Feb 27, 2019
DARREN WILDER
Fairvest Property Holdings Limited today again announced solid results for the six months…

Iconic new Cape Town building The Rubik launches on to market

Mar 06, 2019
00 THE RUBIK
The Rubik , a newly launched luxury mixed-use building situated in the heart of Cape…

Redefine Properties on track to drive sustainable growth in ‘watershed’ election year

Feb 25, 2019
1 ANDREW KONING
While economic conditions remain challenging, Redefine Properties (JSE: RDF) continues to…

Renewable energy programme attracts R209.4 billion to SA economy

Feb 25, 2019
JEFF RADEBE
The Renewable Energy Independent Power Producer Procurement Programme (REIPPP) is making…

Please publish modules in offcanvas position.