Progress has been made in negotiations between Eskom and national energy regulator Nersa and if all goes well, Eskom can resume issuing budget quotes for renewable energy projects within a week.
This is what Thava Govender, Eskom group executive of transmission and sustainability, told stakeholders at the utility’s Transmission Development Forum on Friday. The Transmission Development Plan (TDP) for the next ten years was introduced to stakeholders at the event, but concern remains about the funding of the plan.
Moneyweb earlier reported that Eskom applied for exemption from the grid code provision that places an obligation on it to issue budget quotes within six months.
Eskom asked for exemption until March 31 2018, which is the last day of the current five-year tariff determination (MYPD3). It said it needed a guarantee from Nersa that it will be granted the revenue to pay for renewable energy from these projects, once they become commercially operational.
Nersa in its electricity sub-committee meeting last week however, said such a guarantee is unnecessary. Eskom should follow the legislated processes to get the revenue it needs.
The revenue allocated by Nersa to Eskom in MYPD3 only includes money to pay for renewable energy projects up to the Department of Energy’s Bid Window 3.
All projects beyond that, including 26 projects valued at almost R50 billion from bid window 4, were not included, since they were expected to only be completed beyond MYPD3. The department however expedited its renewable energy procurement to assist Eskom, as it was battling with a crippled generation fleet to keep the lights on. This left the utility with a funding gap in this regard.
Eskom’s stance may defeat the purpose of the expedited procurement and put government’s renewable energy procurement programme at risk of serious delay and loss of investor confidence.
Budget quotes are a prerequisite for financial close and the moratorium that was placed on budget quotes by the Eskom board since August 1, will delay progress towards financial close and subsequent construction.
Govender said Eskom received a letter from Nersa about the issue on Friday morning and was working through it. He was positive that a speedy resolution was possible.
Watch an interview with Govender here:
Eskom senior manager of infrastructure investment planning Leslie Naidoo, told delegates that Eskom has already successfully connected 42 projects with a total generation capacity of 2 142MW to the grid. About 88% are in operation already.
While the projects pay for the infrastructure needed for connection, Eskom has invested R2.4 billion in strengthening the grid accordingly.
Eskom senior manager of finance Ragini Ramkumar said it will cost the utility more than R30 billion until 2025 to connect all IPPs – including new gas and coal IPPs – beyond bid window 3.
That is included in the total of R213 billion for grid development for the next ten years. R151 billion is needed to connect Medupi, Kusile, Ingula and the renewable projects up to bid window 3.
Naidoo said the infrastructure is ready for the connection of the first three units of Medupi and Kusile and the first unit of Ingula.
Ramkumar said pressure on Eskom’s liquidity may however impact the execution of the TDP and the integration of IPPs may trigger extensive network reinforcement.
Delays in getting servitudes and water licences are further risk factors.
Under-investment in transmission infrastructure threatens network reliability and load growth in the country. The execution ability to accomplish the plan remains a challenge, he said.
Naidoo said Eskom would not be able to reach the so-called N1-standard for grid reliability compliance as earlier anticipated. Due to financial constraints this deadline may only be met in 2022/23 and only provided the necessary funds are allocated for the purpose in the next tariff period (MYPD4).
The TDP provides for 9 9969km of 765kV lines to be constructed in the next ten years, 6 504km of 400kV lines, and 355km of 275kV lines. Added to that it requires 165 new transformers, 21 new capacitors and 21 new reactors.
Eskom chief executive Brian Molefe said the [MYPD3] funding gap of R280 billion has resulted in the rephrasing of capital investment in transmission projects. “Although I am currently working to ensure that we are able to close this funding gap and am optimistic regarding the availability of funds, I am conscious of the time it takes to turn this tide,” he said.