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Wheeling and dealing with Eskom?
In the past, cheap electricity was one of
South Africa’s major competitive advantages in attracting foreign investments
to our shores. As a result we have built up an extremely energy-intensive
economy.
However, a lack of focus on the
modernisation of our energy infrastructure has not only undermined the
affordability of electricity, but it has created a situation in which economic
expansion in almost all sectors is limited by insufficient and an unreliable
electricity supply characterised by ‘load shedding’ and frequent power outages.
What’s needed is a radical overhaul of the
institutional framework governing the energy sector in South Africa. One of the
major steps that must be taken, if the situation is to improve. is to encourage
businesses to become part of the energy solution.
Eskom currently accounts for 98% of all electricity
generated in South Africa, with Independent Power Producers (IPPs) contributing
only 2%. This ratio must change significantly if we’re going to unlock the true
energy potential in our country.
One of the first steps should be to allow
for Wheeling through the grid so as to allow companies to procure electricity
directly from IPPs and future utility-type power generators.
This would require the creation of an
operator other than Eskom who owns the grid and is entrusted with energy
modelling and procurement of energy from both Eskom and IPPs.
Wheeling, in the local context, is limited
to the transportation of electric power over Eskom’s transmission lines by
IPPs and other energy producers to balance their demand and supply levels.
Wheeling should allow IPPs to sell energy
to energy-intensive companies using the national grid. This provision would
allow energy-dependant companies to directly procure their energy from an IPP,
thus gaining a secure supply at a cost they can negotiate privately.
To prevent continued over-reliance on coal
by IPPs, Wheeling can be made subject to commitments by companies to procure a
certain percentage of their energy from renewable sources.
The ‘privatisation’ of supply through
direct contracts facilitated by Wheeling is beneficial not only for large
energy users, who gain reliable energy supply at agreed prices, but also for
South African households, who are relieved of the responsibility to co-fund Eskom’s
energy expansion from which they will not necessarily benefit directly.
The prohibition of this level of
privatisation underlines the limitations associated with Eskom’s poor levels of
management of the national grid and the control it has – through the Energy
Minister – over the expansion of generation capacity by IPPs. This also
constrains the capacity of IPPs to provide creative solutions to the worsening
energy crisis.
In the process Eskom has been shielded from
any potential competition with devastating consequences for the efficiency of
its new, increasingly behind-schedule, build programme.
When it comes to the use of the Eskom grid,
IPPs in SA have, according to the Transmission Grid Code and the Distribution
Network Code, the same non-discriminatory rights of access as a load.
In terms of the Codes, non-Eskom generators
and Eskom generators should be treated equally regarding access. However
generators have to be licensed to generate and trade before access can be
provided.
While NERSA (the National Energy Regulator
of SA) is said to be in the process of developing a framework for power generators,
there is currently no framework for use-of-system charges for IPPs.
A ‘consultation paper’ is expected in
February 2015. NERSA says its aim is to ensure an “orderly introduction” of
embedded generation, which it views as inevitable, notwithstanding the
prevailing legislative impediments.
The bottom line is that IPPs and other
power generators who wish to Wheel energy currently face a mountain of challenges
which have not only stalled the process but limited its scope too.
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