SA’s energy agenda safe with Eskom ?

In order to achieve the objectives of the New Growth Path, especially the achievement of 6% economic growth and the creation of 5 million jobs, there is a need to focus attention on the critical challenge of ensuring uninterrupted power supply.

The load shedding that plagued the country a few years ago was costly for the economy and ran the risk of disrupting industry and threatening investment. Last week in Parliament, we reflected on how South Africa can avoid this potential threat to our power supply by, among other things, focusing on the role of Eskom in providing leadership on this important aspect of economic development.

Eskom’s core responsibility is to ensure the security of electricity supply, particularly as reserve margins will remain tight until new capacity is built. This will require close monitoring of the extent and effectiveness of Eskom’s maintenance practices and its technical plan as a whole.

The power utility’s rolling capital investment programme has climbed from R92bn in 2005 to R549bn to date. This trend shows that the government and Eskom are paying serious attention to guaranteeing the security of supply. The government and Eskom are working hard to ensure that the funding of capital investment is in place so that the roll-out of the programme can take place timeously and efficiently.

Eskom is also working on a next generation supplier development plan to ensure that the impact of this expenditure on the country’s industrial capabilities is optimised.

Eskom has launched the “49 million” campaign to create a culture of energy efficiency and saving to mitigate the risks the constrained power system pose.

It further seeks to reduce the impact of rising energy prices on competitiveness and household budgets and to respond to the need to reduce South Africa’s carbon footprint.

The government will carefully monitor the roll-out of the campaign and provide concrete support when necessary. It is crucial that industries take steps to achieve bulk energy savings, to collectively benefit the economy. Their agreement to save 10% of power consumption is to be commended but needs to be sustained for long-term impact.

The government is further monitoring Eskom’s role in future energy provision in line with the integrated resource plan (IRP), which may require us to find new and innovative sources of finance.

Eskom alone will not guarantee security of supply; therefore, additional investment in new electricity generating capacity has to be secured from the private sector over the next few years up to the delivery of the first unit of the Medupi power station. This is where public and private partnerships are crucial.

Through its medium-term power purchase programme, Eskom has signed contracts with five independent power producers since April 2010 for supply totalling about 373MW. It has further sourced about 200MW from municipalities just for this winter.

In order to pursue South Africa’s commitment to carbon reduction and clean energy and in line with the IRP, Eskom has incorporated renewable energy projects into its build programme.

This is a crucial building block for the future of power supply in the country. To this end, the African Development Bank has approved a $365m (R2.46bn) loan to Eskom for the 100MW concentrated solar power plant and the 100MW wind power plant.

Eskom has submitted a $250m loan application to the World Bank for funding from the clean technology fund, the final outcome of which is expected later this year. These developments follow the World Bank’s award of a loan last year that will enable Eskom to move ahead with the new Medupi power plant.

The World Bank at that time noted that “access to energy was essential for fighting poverty and catalysing growth”.

It said support to Eskom combined much-needed investments to boost generation capacity for growing small and large businesses, creating jobs and helping lay the foundations for a clean energy future through investments in solar and wind power.

The bank noted South Africa’s achievement in increasing energy access from 30% of citizens to more than 80% since 1994 and its free basic electricity policy that provides 50KW of free electricity a month to poor families.

Having received firm government support, work is ongoing to find sources of funding to further strengthen Eskom’s balance sheet without placing undue pressure on the fiscus.