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Eskom to face Nersa tribunal over IPPs

Impose a daily penalty until IPPs are signed, asks wind producers.

The national energy regulator Nersa has launched a formal investigation into Eskom’s refusal to sign at least 37 outstanding power purchase agreements with independent power producers.

This follows a complaint by the South African Wind Energy Association (SAWEA) lodged in October last year.

Moneyweb earlier reported that an April 11 deadline set by former energy minister Tina Joemat-Pettersson for the signing was cancelled when a new energy minister was appointed in President Jacob Zuma’s cabinet reshuffle. No new deadline was set.

The projects represent an investment of R50 billion. The power purchase agreements are a prerequisite for financial close, which means construction cannot start and the whole process stalls.

Eskom has delayed signing the agreements by more than a year already and caused concern that international investors might withdraw from the programme.

The South African Renewable Energy Council (SAREC) earlier got a legal opinion, stating that Eskom was legally bound to sign the agreements. Zuma, in his State of the Nation Address in February, announced that Eskom would sign the agreements.

The utility nevertheless refuses to do so, arguing that renewable energy is expensive and Eskom has a surplus generation capacity from its own fleet.

SAWEA asked Nersa in October to find that Eskom is contravening its license conditions and to impose a fine of 10% of Eskom’s annual turnover per day, from the day Eskom receives the notice of contravention – until the agreements are signed.

Martin says SAWEA’s aim is not to impose penalties on Eskom as such. It merely wants the agreements to be signed and is asking for the penalties in an effort to force Eskom to do so.

In its complaint SAWEA lists the laws, ministerial regulations and licenses that empower the minister of energy to procure new generation capacity and energy from independent power producers (IPPs) and to instruct Eskom to enter into the resulting power purchase agreements (PPAs) as the buyer.

“As far as we are aware, the legal framework does not grant Eskom any discretion in this regard”, SAWEA says.

The association further points out that Eskom has no undue financial risk. The risks are allocated to either the IPP, the consumer from whom cost is recovered through tariffs or the state “via the government guarantee contained in the Implementation Agreement between each IPP and the Department of Energy”.

SAWEA points out that Eskom previously tried to block or delay the implementation of the Department of Energy’s renewable energy independent power producer procurement (REIPPP) programme when it requested exemption from the obligation to issue quotes to customers for new connections to its grid.

Eskom later resumed issuing the budget quotes.

Nersa’s electricity sub-committee last week decided to proceed with a formal investigation into Eskom’s conduct after a preliminary investigation found that there was sufficient grounds to warrant further action.

It decided that Nersa’s full-time regulator member for electricity Mbulelo Ncetezo would head up the investigation.

Martin says Nersa will establish a tribunal to consider the findings. She says the entire process could be finalised within two weeks.

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You go Brenda Martin – give Eskom a klap like they deserve! SOE’s are responsible to govt and for them to run rouge as they have been doing must be stopped. They cannot be allowed to continue to defy what they are legally told and/or required to do. The officials responsible for this behaviour are derelict in their duties and ALL court awards have to be made with costs against these individuals, otherwise they will continue to act with impunity (govt doesn’t give a damn and is toothless) and the public purse foots the bill. STOP THE ROT!!!

New wind an solar plants will most definitely supply power cheaper than Medupi and Kusile. What is Eskom going to do about Medupi and Kusile? And why bother with nuclear at all if there is surplus power? The country needs flexible generation that will complement wind and solar, not coal and nuclear.

Don’t be ridiculous. There are a number of fundamental issues here that have culminated in this debacle and as usual these are ignored.

Firstly Eskom is run as a fiefdom not a business. ISPs compete with Eskom and it is not in Eskom’s interest to purchase energy from ISP’s as it can generate electricity cheaper using its existing setup owing to the fact that the ANC have killed the economy and thus electricity demand. The fact that the public thinks this is a good idea merely means that Eskom will gladly pass the costs on to them. What is important to consider is not what the costs of the coal plants versus ISP price paid by Eskom but what are the operating expenses and marginal costs of the coal plants.

Eskom must be broken up, privatised and the regime must allow competition. The grid function must be taken away from Eskom and the grid company allowed to purchase energy from whomever they see fit in an open market on a willing buyer willing seller basis. The vested interest structure cannot be allowed to continue.

Secondly the regime has less business sense than Eskom. This should come as no surprise. Eskom is seen as a repository for ANC cadres and a strategic asset to wield power and influence over the masses. What this lack of business acumen means to the consumer is higher prices, tax wastage, mis-allocated resources and future shortages. The regime must allow competition in all spheres.

Thirdly there there are no reliable data with which to draw conclusions. I have asked many times for useful data such as what the marginal costs/ opex of various power plants and what Eskom is required to pay the ISPs for a kWh and where this energy transfer will take place. There is a lot of misinformation out there and erroneous beliefs that SA can easily dispense with coal and nuclear and rely on wind and solar with the base load supplemented by unicorns.

I’m not so keen on wind-power myself.

Every time I drive past one of these wind farms, there always seem to be one or two windmills at a standstill – which hardly inspires confidence in the claimed longevity, ROI, and reliability of windpower from these sources.

But the one renewable technology I do get excited about is CSP (Concentrating Solar Power) with storage.

This could be the game-changer in the renewables field, because it provides a constant flow of electricity even when the sun has gone down.

SA is building the Redstone plant near Kimberly – which will provide 100MW with a 12 hour reserve – sufficient power to supply 200 000 homes at peak power, even long after the sun has gone down.

the real reason for non signing is that they’re still wanting to pull off the nuclear deal…..

Other alternative is “tidal lagoon renewable power”, with our coastline I am sure this sort of technology could be economically viable within SA coastlines.

Article on Reuters states that Tidal projects were expected to last around 120 years, it was difficult to compare their cost with other sources of power generation such as nuclear plants, which typically last around 45 years.

Cost estimates given in Pounds for large scale projects, over 500 megawatts, the cost over 30 years would be 1.41 pounds per household per year, around 40 percent cheaper than the equivalent cost for nuclear.

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