eskom
Brian Molefe
Eskom’s Brian Molefe said that utility would not undertake ‘reckless trading’ by issuing budget quotes under the REEIPPP when it could not guarantee funding for the require connections.

In a statement this morning, Eskom said that the parastatal “fully supports the Department of Energy’s Renewable Energy Independent Power Producer Procurement Programme (RE-IPPP) and acknowledges that IPPs must play a role in the South African electricity market, and remain[s] committed to facilitating the entry of IPPs to strengthen the system adequacy and meet the growing electricity demand.”

As of 31 March 2015, total capacity of 5,701MW has been contracted with independent power producers (IPPs), of which 3,887MW relates to contracts under Department of Energy’s RE-IPPP, Eskom said in the release.

As of Eskom’s financial year-end (31 March 2015), “a total of 1,795MW of renewable energy generation capacity had been connected to the national grid, with an average load factor of 30.85%. Short- and medium-term contracts which were expiring at the end of March 2015 were renewed for another year so that they can continue to contribute to reducing the supply shortage.”

According to Eskom’s Group Chief Executive Brian Molefe: “Eskom is committed to supporting the grid integration of independent power projects as evidenced by the 43 projects connected to date since the inception of the procurement programme in 2011. For the renewable energy rounds 1 to 3 (Bid Windows 1 to 3) Eskom has spent R2.4 billion on the backbone infrastructure at both transmission and distribution level to enable the evacuation of energy from the IPPs.”

He continued: “Eskom believes that non-issuance of budget quotes is a temporary measure and that very soon a lasting solution will be found to address this matter.”

Temporary measure

Molefe reiterated that the decision to halt the issuance of budget quotes was a temporary measure taken to protect the financial sustainability of Eskom. This was because “no capital allocation was accommodated for in the current multi-year pricing regime (MYPD3) for IPPs beyond Bid Window 3.”

Effectively, Eskom cannot currently afford to support new IPP connections as well as energy purchases.

“While we acknowledge the discomfort that this decision will have on the IPP procurement programme, let me assure you that Eskom is currently engaging with all the relevant stakeholders to resolve this matter as soon as possible,” Molefe added.

“From a Transmission and Distribution perspective, Eskom has committed to continue with the network integration studies, develop and cost the appropriate solutions associated with IPP connection applications received for Bid Widows 4 and the expedited programme. This is to ensure that once the financial situation is resolved, budget quotes can be issued without any further delays.”

In the release, Eskom commented on media reports that quoted an alleged NERSA comment that Eskom’s application “for an exemption from the Grid Code was “cheeky” and tantamount to blackmail.”

The power utility continued that its decision to apply for the exemption showed the utility was not prepared to offer budget quotes without guarantees of where funding for such projects would come from.  The utility said to do so would be tantamount to “reckless trading.”

Eskom said further that “an application for exemption is allowed in terms of section 5(3) of the South African Grid Code, which states that:

“Any participant can apply for an exemption or derogation. Exemption and derogation from complying with provisions of the Grid Code may be granted by NERSA for the following reasons:

  • To provide for existing equipment that has not been designed with consideration for the provisions of the Grid Code
  • To facilitate transition through interim arrangements
  • To facilitate temporary conditions necessitating exemption”

Section 5 (4) further states that:

  • all exemption applications should clearly indicate the following:
  • the reason for the non-compliance,
  • the current capability (even if this is less than what the code specifies)
  • the duration of the exemptions
  • action plan put in place to fix the non-compliance and
  • any other information that can be used to justify why the exemption should be granted.”