Draft determinations propose over 13000MW new-build power

By independent power producers, and none by Eskom.
This is a big shift from the current Eskom monopoly towards a more diversified electricity supply industry. Image: Shutterstock

Friday saw the National Energy Regulator of South Africa (Nersa) publish two draft determinations by Mineral Resources and Energy Minister Gwede Mantashe in terms of Section 34 (1) of the Electricity Regulation Act.

These so-called draft ‘S34 determinations’ are the first step in the process of procurement of new electricity generation capacity in South Africa, totalling some 13 813 megawatts (MW) from independent power producers (IPPs).

The first draft S34 determination relates to the procurement of 2 000MW of new generation capacity between 2019 and 2022, and the second draft S34 determination to the procurement of a further 11 813MW between 2022 and 2027.

These determinations begin the procurement process after the gazetting of the South African national integrated resource plan (IRP) for electricity, 2019 on November 18, 2019.

The determinations were submitted to Nersa by the minister on February 21 for “concurrence” by the energy regulator.

A high court judgment in April 2017 ruled that in terms of the Electricity Regulation Act and the Promotion of Administrative Justice Act, Nersa is required to concur with the draft determinations, following a public consultation process, before they become final and are gazetted.

The public consultation process commenced after Nersa published two consultation papers on March 18. These call for public comment and input on the two draft S34 determinations issued by Mantashe by April 14 and May 7 respectively.

Nersa now ‘requires’ more time

Despite the current electricity supply emergency, which has resulted in up to Stage 6 (6 000MW) load shedding in SA, Nersa has indicated that now, more than a month since receiving the draft S34 determinations, it will require a further three months to concur with the first S34 determination, and six months for the second.

Read: Stage 4 load shedding after Koeberg unit trips

Nersa did not seem to get the message from Mantashe when he said recently: “Officials in the department are used to working according to rules, where it takes three months to do this, or six months to do that. The situation we are in requires a change of approach. That’s why we are engaging with Nersa and everybody to say: ‘Guys, let’s accelerate processes, because if we don’t, we are going to be plunged into darkness’.”

The Department of Mineral Resources and Energy (DMRE) and Nersa are coming under increasing pressure and criticism for the snail’s pace of their bureaucratic processes and decisions. The energy regulator refutes this criticism and says that: “Nersa is cognisant of the urgency of the request [for concurrence] as evidenced by the proposed fast-tracked concurrence process in the consultation papers.”

Tendering procedures

The draft S34 determinations indicate that electricity produced from the new generation capacity will be procured from IPPs “through one or more tendering procedures which are fair, transparent, competitive and cost effective”.

The electricity procured from IPPs by the DMRE in terms of the draft S34 determinations may only be sold to Eskom as the designated buyer of the electricity, in accordance with power purchase agreements (PPAs) concluded in the course of the procurement programmes.

Recent statements by the ministers of public enterprises and mineral resources and energy have indicated that Eskom should not be excluded from building, owning and operating new renewable energy generation capacity. However, the draft Section 34 determinations indicate that all new generation capacity up to 2027 – wind, solar, energy storage, gas and coal-fired – will come from IPPs. None of the new generation capacity will come from Eskom itself.

Read: Dealing with the elephant in the room that is Eskom

This is a big shift away from the current Eskom monopoly, towards a more diversified electricity supply industry.

It also represents a significant diversification away from South Africa’s overdependence on coal as the primary energy for power generation, which currently stands at about 80% of the total electricity generated in South Africa.

© 2020 – EE Business Intelligence (Pty) Ltd. All rights reserved. This article may not be published without the written permission of EE Business Intelligence.

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The generation of electricity by non Eskom sources is the way to go and is an important step towards privatization, splitting up Eskom and getting the electricity supply working.

What will derail this process is if wealth is destroyed. How do you destroy wealth? you buy electricity from the ISP at a higher price than you sell it to the municipality. If Eskom or the transmission company cannot make a profit then the whole process is doomed.

The article is disingenuous at best. Energy is traded not power. 13000MW is misleading as the added capacity will seldom if every produce this. On average it will probably produce 20% of this. Normally at the wrong time. An honest assessment would compare the energy these ISPs produce against the shortfall. There is no ways this is going to make up a 6000MW deficit.

If you account for the all the billions of Rands of bailouts and disappearing money (past and, no doubt, future), extrapolate that into a true unit cost per MW, then also account for all the lack of generation during important times (important to industry / the economy) due to load shedding, then won’t IPP’s still be cheaper and more dependable than Eskom was or ever will be?

Ok so by logic we have a problem in Eskom, rather than fixing THE problem we ignore it and go for something else, expensive unreliable generation..

but wait we still want this problem Eskom to transport and distribute the expensive unreliable power..

great problem solving there

All objective commentators should study the CSIR document before giving their opinion. New sun and wind generation comes in at less than half of the cost per energy generated than for new coal. Wind farms are connected to the grid. The different projects combined, act as one. The wind always blows somewhere.

Read the CSIR document guys.

I admit not having read the CSIR document Sensei so shoot me down as needed. But isn’t it that lowest cost producers supply first within their capability (limitations on flexibility die to lower wind or sun energy at times)? Then climb up the cost ladder.

Best of all is for energy supply at times be opened to be tendered on by users. Then anyone and everyone can have a go!

I suspect that IPP “suppliers” will need all the BEE/AA (aka ANC mafia rip off) in order to supply.

Paul, the REIPP process was the best process of its kind in the world. Local beneficiation, employment opportunities, community participation, opportunities for local suppliers, the development of a new industry, an abundant supply of clean energy at a lower cost structure and huge benefits to the whole economy was part of the process.

The communist dogma in Luthuli House destroyed this project in which we were world leaders. Now we are just another communist failure with a chronic shortage of expensive energy and high unemployment with an evaporating tax base and communities without opportunities.

“best process of its kind in the world.” for whom?
The country? or
the technology providers?

Can it be for both?

Casi, Have you read the CSIR report? Have you read my post? The REIPP process was the best in the world for the benefits it offers to the local consumer and the transparency of the entire process. If such a venture does not benefit the consumer then it is not feasible. See this in relation to the SOEs, and especially relative to the Eskom disaster. Go a step further and compare the criminality and incompetence of Luthuli House to the service to consumers from the free market enterprises like Shoprite and Spar, to name only two.

Sensei you are probably a nice person, but you smell of being an economist.

Any “solution” proposed for large scale utility provision can not get away from ONE fundamental issue. COST

Public does NOT have to make a profit
Public finance is by far the cheapest

How can private supply cheaper services considering the above ?

Private utilities can not be cheaper that a public service END of story.

Again, expensive electricity is perhaps better than none, yet the majority are going to suffer.

Money goes to private business interests riding on subsidies from the taxpayers.,

Fix the problem, Eskom.

So you believe the trash written in that CSIR document?

Just another pipe-dream fantasy illusion.

We are all discussing the same information on a circular reference basis.
The IRP that eventually received approval was debated and consulted to death.
The CSIR technical independent study showed (using people with the right technical knowledge) that the IRP is the right way to move forward on a least cost basis (except for additional coal).
Now once again we start nonsense public participation when we all agreed last year this is what needs to happen.
So the S34 will get done.
Then there will be RFP which will take another 6 months to bid and then 6 months to adjudicate and then the relevant parties will get selected and then guess what each of these will have to apply to Nersa for a generation licence and yes you guessed it
Another public participation process that will take 4 to 6 months. The emergency power will take until december 2021 before construction can commence.
Please all the sub 1 MW PV – we know you are more expensive and Eskom cant get a margin but you are the only buffer developing to reduce load shedding in any format. Please build more and as fast as you can

I must say yes African negotiations can carry on and on..Africa has all the time in the world.

Perhaps when they are really interested the terms can actually be to the advantage for the country and not the IPP industry..

Fix Eskom, SA can not leave its own coal resources underutilized and pay euros to import foreign tech instead.

Still in the draft stages…………….ages before reality ala ANC style.

some ones palm needs to get greased before anything happens.

Good grief. We have some of the world’s highest solar radiation. We have vast areas of unproductive land. We have 3000kms of coastline where the wind always blows. We have an excellent countrywide energy distribution grid. Solar panel costs have declined to about a fifth of what they were 10 years ago. We have technologically advanced switching systems that can balance varying supply. We have highly capable companies that can install PV power on small and large scale.

Factories (post lockdown) work during the day. Offices run. Airconditioners operate, as do traffic lights, homes and the rest. We NEED ample power supply during the day for SA to (ultimately) prosper. We HAVE that ample supply. Eskom is a polluting, dying dinosaur. The rest of the world is moving towards renewables. Yet we still have our denialists here. What is your case? A link to coal, maybe?

Agree with Dougalan 100%.

Seems to me that CSP (Concentrated Solar Power) with molten salt storage is already a production-proven technology that provides after hours power in spades. And is quickly constructed and implemented. Seems more reliable in actual delivered power compared to windfarms (notice how many of the individual windmills are “stopped” next time you drive past a windfarm).

Anyone know what’s happening to the CSP project at Upington? And why are we not building more as fa’s as we can?

End of comments.

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