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Eskom is sinking the economy in the name of greening it, claims forum

Renewable energy is expensive, unnecessary and authorised without proper public participation, says Coal Transporters Forum as it heads to court.

Eskom’s renewable energy drive is a financial disaster for consumers and an economic disaster for the country, according to papers before the Pretoria High Court.

The Coal Transporters Forum is asking the court to have dozens of power purchase agreements (PPAs) signed with independent power producers (IPPs) set aside on the grounds that the National Energy Regulator of SA (Nersa) authorised them without proper public consultation.

Lack of public participation sank the proposed nuclear deal in 2017 when challenged in court by Earthlife and the South African Faith Communities Environment Institute. Coal transporters believe the Pretoria court should find in its favour on the same grounds.

The court papers provide a fascinating insight into the costs of alternative energy. Eskom is purchasing renewable energy for 214 cents per kilowatt hour (kWh) when coal can produce the same electricity for 32 cents.

Eskom is then on-selling this renewable energy to the consumer at 86 cents per kWh. This cost the economy R9 billion in 2016, a cost that will be repeated each year until 2021. It also reduces coal consumption by three million tons a year, rising to 10 million tons by 2021, the court documents state.

Read: Business chamber asks Nersa to stop all new IPPs 

Massive risk

These IPP contracts expose Eskom to massive risk, says the Forum. Nersa’s 2.2% tariff increase for 2017/2018 effectively means Eskom is sinking deeper into liquidity problems, at the ultimate cost of consumers and taxpayers.

“This means government is providing guarantees to the IPPs to destroy jobs in the mining sector,” says the Forum, which tallies the economic cost of the renewable energy programme as follows: Eskom will be forced to shut down at least five coal-fired power stations, one million permanent jobs will be lost, and 17 towns in three provinces reliant on coal mining will become ghost towns. Many more thousands of workers involved in coal transportation will be retrenched.

In short, it threatens to sink swathes of the economy in the name of greening it.

How did we end up in this mess?

In its answering affidavit, Nersa concedes that it did not allow for a public participation process, but followed the then minister of energy’s decision to procure renewable energy. The type of energy to be produced by Eskom is the minister of energy’s decision, in consultation with the regulator. The then minister Tina Joemat-Pettersson pushed the renewable energy contracts even though Eskom had spare capacity of 23%, excluding imports, renewable energy and other power purchases, says the Forum.

In response to the Forum’s court challenge, the Department of Energy’s director-general Thabane Zulu argues that the Forum was aware of the intention to sign agreements with the IPPs yet avoided seeking an urgent interdict as it lacked the necessary legal grounds. The agreements are now legally in force and cannot be stopped. Zulu says the Forum should have sought a review of the minister’s decision rather than a non-urgent interdict. He also challenges the Forum’s legal standing to bring its case before the court.

Interestingly, then acting CEO of Eskom Matshela Koko refused to sign off on the IPP agreements on the grounds these would bankrupt the company. He resigned early last year after being given a resign-or-be-fired ultimatum. In an article in The Daily Maverick last year, Koko outlines some of the background to the rush to renewables, driven at cabinet and departmental level.

‘No logical basis’

There was simply no logical basis for committing to renewable offtake agreements to the value of R56 billion when Eskom has 23% reserve capacity, sufficient to last the country until about 2025 before additional capacity is needed, said Koko.

The IPPs, also cited as respondents in the Forum’s court challenge, argue that the minister’s decision, with the backing of Nersa, is an administrative action that can only be set aside on review.

The 2003 White Paper on Renewable Energy committed the department to generating at least 10 000 gigawatt hours of energy from renewable sources by 2013. In 2009, at the Copenhagen Conference of the Parties (COP 15), former president Jacob Zuma committed to a 34% reduction in SA’s CO2 emissions by 2020, and below 42% by 2025. This renewable energy drive was supposed to create 300 000 ‘green’ jobs by 2020, though energy experts have blown holes in this claim. Nothing like this has been produced.

The department’s Integrated Resource Plan 2010-2030, published in 2011, provides for a target of 17 800MW of energy from renewable sources by 2030.  

There is an even bigger problem for the renewable energy independent power producers programme. The National Energy Regulator Act requires Nersa decisions to be in writing and to be based on reasons, facts and evidence. Most importantly, any Nersa decisions must be made available to the public.

No social or economic impact assessment appears to have been done prior to signing off on the IPP contracts. If such studies had been properly and independently done, some energy experts say that that many of these renewable projects would have been killed at conception.

The Forum’s court case will be heard in March.

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COMMENTS   26

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When I pointed out at the time that Eskom has to sell the electricity bought from the IPPs at a lower price than it paid for, (and this excludes distribution costs which increases the cost even more) I was shouted down by the fans of the renewables. I wonder how many billions these deals cost to the country. I am also sure that the extra cost contributed to the fiscal problems of Eskom, although I would not deny that mismanagement is the major source of the problems.

Absolutely, Hun. They scream from the rooftops about new renewable builds being cheaper than new coal / new nuclear. What they always omit to mention is the price of EXISTING coal. Very cheap. R0.30 per kWh almost 10 per cent of the price the IPPs are getting. They also omit the price of the renewable BACKUP which is invariably required. The fact is the population has been brainwashed so effectively that they cannot even realise it. Paying R2.14 per kWh and selling this for R0.86 is simply wealth destruction on a grand scale. The ANC may as well transfer a few tens of billion to a random overseas European bank account and be done with it.

I also warned about this folly numerous times but the renewable fans are incapable of reason. They use terms like dinosaurs ( a real rational argument there), post links, scream vested interests and mention the Australian experience. South Australia (renewable Mecca) has the most expensive electricity in the world and the grid collapses regularly. Australian CSPs were an absolute disaster.

Finally, never confuse Eskom mismanagement with making sound decisions with energy security. Two different issues altogether.

The only exit strategy is to privatise the sorry mess and let the market sort it out where the ANC have failed. When the privately owned grid distribution company buys electricity, let them choose between R0.30 coal power or R2.12 IPP power.

Suck it up suckers you are being bled dry.

Ah, old RichardtheGreat the miner punting smoke filled toxic coal fuel source at any cost…cough cough

Hey, no doubt ‘green’ energy is currently more expensive compared to coal….but you glossing over some important issues:

Firstly,as mass adoption continues alternative energy cost will decrease with economy of scale

In addition, the upside as everyone becomes independent and LESS reliant on corrupt entities like ESKUM etc is the real advantage

I just converted my home to a combination of gas/solar – was it expensive compared to present ESKUM supplied power – yes ?

But hell is it worth it whenever we have our frequent load shedding in our area, and life can continue as normal in our house

And, ESKUMS impending implosion/continual electricity increases is making an investment into alternative energy even MORE ATTRACTIVE….look at what just happened in Zim where the govt has carte blanche to set fuel prices at any ludicrous figure, and Zim fuel is now the most EXPENSIVE in the world !

We all know our govt is made up of like minded buffoons and capable of the very same, and could easily dish out a similar move with ESKUM

Anyway, lets not forget to mention too the important upside for the earth as we veer away from the toxic effects of mining as much as possible

Time to ditch the carrier pigeon and move to the internet Richie

Aye, true.

Try selling your own-made beer to a brewery for a higher price than what the brewery sells their beer to consumers. What is the brewery supposed to do with what it would buy from you? They can’t sell it, except at a loss.

Neither can Eskom buy IPP power for more than their own product, and provide it to consumers, except at a huge loss.

No rocket science here. Just some expectant ignorance by some.

Can someone explain this please: how is it that, the world over, the per-kWh new build cost of renewables including a storage scheme is cheaper than the cost of coal when remediation costs are excluded, yet in South Africa this is not so?

An Australian power producer, whose business consists primarily of coal-fired thermal power stations, has just released a business case concluding that renewables would be cheaper and more profitable than coal, and that it saw no sense in further coal build.

Eskom is having its Kodak moment at the taxpayers’ expense and the Coal Transporters Forum is destroying roads never designed for that level of traffic by transporting coal that should be on trains or conveyor belts. From start to finish, the entire mess is a chain of failures by government.

The only sensible course is to allow Eskom to collapse, grit our teeth, and accept an IMF bailout. If we survived Zuma, we can survive that. Then maybe we can put the country on a course for economic recovery. There is no other option, because Eskom is in a death spiral and cannot trade its way out of the hole it’s in.

Guys, the reality is not whether to convert to alternative energy or not

If you havent already in a personal capacity, the impending implosion of ESKUM will make that decision for you

Try live a few days without power

And with regards to power on a national scale, having ALL of the country reliant on ONE source is a disaster waiting to happen

You ask for an explanation. It simply that the figures being suggested are not factually true, they’re fictional. Do the sums YOURSELF, without an expectant bias, and like I found, it’s surprise, surprise.

@NAvigator…….yes, the reality is Eskom is most probably PURPOSEFULLY sabotaging itself

Lets all bear in mind, they are milking the proverbial cow for all its worth and siphoning BILLIONS into their own pockets

Does anyone really think they can pull themselves away from this succulent teat ??

Never….they will suck every last drop, till it implodes and those that got rich escape

Just like Zuma…the Gupta’s…etc etc

Rinse.Repeat !!!

Rofl. The absurdities of “green” power. Why is this a surprise to anyone. The same story the world over.

And motorised transport is destroying the horse and ox wagon industry.

Vested interests complaining that they are not allowed to languish in the 20th century any longer. Eskom bankrupted themselves creating all of the road coal transporters, time for the dinosaurs to be put out to pasture.

I really expected the coal transporters to welcome wind and solar power…

Somebody famous said that people should judge him by who is enemies are. Very appropriate in this case.

So the Coal Transporters Forum is against any form of energy creation that doesn’t use coal… well, duh! They are the very definition of a vested interest.

The real reason ESKOM is the state it’s in has nothing to do with the IPPP.

“Eskom is going nowhere and is technically bankrupt until it changes how it does its business. The cost of Eskom’s inefficiencies from 2006 to now amounts to more than half a trillion rand because of rampant corruption, maladministration, poor procurement decisions and poor leadership.” — OUTA Energy Head Ronald Chauke.

He also questioned the cost of coal.

“Coal costs should be R30-billion a year. This year [coal] cost R73.3-billion. Where is the missing R40-billion? How difficult can it be to spot R40-billion? There is something wrong and someone needs to be held accountable for this mess.”

http://www.engineeringnews.co.za/article/organisations-criticise-untransparent-and-inefficient-eskom-2019-01-14

…AND the same (quote) “rampant corruption, maladministration, poor procurement decisions” is found in all ANC-controlled city councils. The same councils that owes Eskom a few billion in outstanding debt. And unable to collect.

Well, I for one am almost ready to cancel Eskom and be self-sufficient.
I am not going to hang around and wait for it to collapse. The corruption and decay of Eskom is intertwined with their reliance on coal.

Eskom is lying once again! ‘Greening’ my butt! The problem is too many plebs workings there who shouldn’t be!

Eskom is bankrupt.

“There was simply no logical basis for committing to renewable offtake agreements to the value of R56 billion when Eskom has 23% reserve capacity, sufficient to last the country until about 2025 before additional capacity is needed, said Koko.”

Amazing. This is then why there were organized blackouts, the need for nuclear power and packs of lies and disinformation, all because we had a big reserve capacity. It would seem that a bunch of liars came together, had a meeting, and now are amazed at the outcome.

Renewables and coal should be able to work together as they are complementary in providing sustained power on the short and long term. I think the energy producers, regulators, coal transporters, mines and users in SA should get together (for once) and come up with a workable plan. This idiotic dog eats dog scenario is not going to get us anywhere. The government needs to concentrate on real issues in SA for a change or soon they will not be the government.

This is a disappointing article that shows a lack of any critical thinking. The “journalist” has just regurgitated what the trucker’s union tells him. Some facts: the average tariff across wind and solar projects in the early Rounds was ~2R/kWh. In the most recent Round 4.5 ( October 2015), new wind and solar PV costs were below 0.6 R/kWh: cheaper than Eskom can produce power and significantly cheaper that Medupi or Kusile, if they are ever completed. Granted, the initial Rounds were expensive, but this was required to get the programme off the ground, attract FDI and incentivise developers to spend significant sums, at risk, to enter the country. Investment decisions must be made based on the most recent renewable tariffs.

The author regurgitates the point that coal-fired power stations will be decommissioned due to the REIPPPP. This is false. Eskom coal plants were designed and built for 50-year life. The recently released draft IRP shows that about 12 600MW of electricity from coal generation by Eskom will be decommissioned cumulatively by 2030. This will increase to 34 400MW by 2050. This is generation supply that needs to be replaced. And it will be replaced by renewable energy: no coal new build will receive the finance or environmental permits it requires to build these plants. No court challenge will change this reality. The Journalist then quotes Matshela Koko saying that Eskom has 23% reserve capacity, why then the load shedding in late 2018? The fact of the matter is that had Eskom signed IPP purchase power agreements from 2016, there would have been ~2000 MW on the grid, the country would have saved millions in diesel used for emergency open cycle turbines and load shedding could well have been avoided.

The reality is that the Eskom fleet availability is running at below 70 % due to years of mismanagement and to put it bluntly, rampant corruption. Bear in mind that every percentage-point of availability is roughly 400 MW of baseload capacity on the grid. So you can see what is needed going forward to compensate for eskoms inefficiency.

I agree with you in part benos but I think you are sanitising the “Granted, the initial Rounds were expensive, but this was required to get the programme off the ground, attract FDI and incentivise developers to spend significant sums, at risk, to enter the country. Investment decisions must be made based on the most recent renewable tariffs”.

I was involved in renewable energy at that time on a smaller scale (and less economical?) of around 10MW to maybe 50MW. We were astonished at the initial rates which were well over double our projected (and realised for a few projects) rates at the time. This included all the aspects you mention and there was a logjam of money for renewable and “low carbon” projects awaiting a home. But through some opaque process, only a selected few mega projects got going at massive rates. Our smaller (and much cheaper) projects got Eskom opposition, mostly about grid codes, at every turn, regardless that these were sophisticated systems working in many countries throughout the world. Delays occurred and all sorts of threats were needed to get them linked in.

The “Eskom renewables” stink; just like the rest of Eskom and have done renewable energy production in SA a massive disservice.

It would be nice to hear more objective arguments! There seems to be a lot of pre- judgement on the issue. The CSIR study is difficult to decipher. One question I have is whether the accounting has been done properly- the spiraling costs of building coal power plants, the cost of roads to supply coal, health costs, environmental damage, etc.

Indeed, the cost of coal does not simply equate to the price of a truckful… there are huge threats to our future as a species associated the continued use of fossil fuels. We are already seeing the results in the increase in drought, wildfires and other extreme weather patterns. If we have not reined in the use of fossil fuels to a major extent by 2030 we will be in danger of heating our planet to the point where massive consequences will result. The planet is already 1 degree hotter than normal on average, the danger point is anything over 1,5 degrees. We simply cannot AFFORD to risk reaching this tipping point…

https://www.nature.com/articles/d41586-018-07586-5

Going forward, renewable energy (RE) is the cheapest energy solution, not clean coal. RE is comparatively quick to develop and construct. Chile signed solar in 2018 at $0.029/kWh. Moaning about REIPPPP round 1 is pointless. Tariffs have plummeted ever since. The future is RE.

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