HomeIndustry SectorsGenerationRSA independent power purchasing authority by April 2011

RSA independent power purchasing authority by April 2011

Nelisiwe Magubane,
Director General for
Department of Energy
14 September 2010 – South Africa plans to establish an independent power purchasing authority by April 2011 in an effort to encourage private investment in power generation, a senior energy official said on Monday.

Under the existing system, the state-owned power utility Eskom, the country’s main power distributor, also buys power from independent producers.

Once established, the independent authority is expected to take over the purchasing function from Eskom and will buy power from the state utility and independent power producers (IPPs).

Nelisiwe Magubane, director general for electricity at the Department of Energy, told a conference that the independent body would also take responsibility for distribution and planning later down the line.

"By April next year it should be established … as soon as parliament has approved the legislation we are going to establish it almost immediately," Magubane told Reuters on the sidelines of the conference.

"It is our view that it should not only be an entity that buys power, but also plans and dispatches. It will take up to 10 years for the entity to do all these functions," she said.

South Africa’s power demand is expected to grow by 3 percent annually over the next 20 years, leading to a doubling by 2030 of present demand levels of around 37,000 MW.

Private producers say they could supply thousands of much-needed megawatts, either through greenfield projects or via cogeneration at their plants, but these plans have been delayed by a lack of power purchase deals.

Magubane said the establishment of an independent buyer is key to attracting private sector investment in electricity generation in South Africa, the continent’s largest economy.

"Investors need to be sure that they will be treated fairly and in a transparent manner," Magubane said.

Eskom has been struggling to plug a national power deficit due to fast-rising power demand and its own financial constraints.

The national grid nearly collapsed in 2008, forcing mines and smelters to suspend operations for several days and costing billions of dollars in lost output.