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

Balwin's Munyaka registers record R850 million in opening weekend sales, selling 555 apartments

Mar 09, 2020
Steve_Brookes_Balwin_Properties
JSE listed Balwin Properties, a developer that cares about environmentally responsible…

Balwin Properties and ABSA launch South Africa’s first green home loan

Mar 13, 2020
Apartment 71933
JSE-listed Balwin Properties Limited (Balwin Properties or the Company) and Absa Group…

Growthpoint reports a steady first half with its growth strategies paying dividends

Mar 11, 2020
Growthpoint Properties Group CEO Norbert Sassee
Growthpoint Properties (JSE: GRT) reported distributable income growth of 2.2% to R3.2bn,…

Spear REIT launches innovative self-isolation campaign for returning travellers in Cape Town, South Africa to combat COVID-19:

Mar 18, 2020
Double Tree Op
JSE listed Spear REIT Limited, the owner of the Double Tree by Hilton Cape Town, is the…

Financial Fitness – Is this the right time to buy property?

Mar 20, 2020
Governor Lesetja Kganyago SARB1
With the South African Reserve Bank’s announcement of interest rates cut of 100 basis…

Please publish modules in offcanvas position.