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NPC moves to facilitate public-private power crisis ‘conversations’

7th November 2014

By: Terence Creamer

Creamer Media Editor

  

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The National Planning Commission (NPC) is aiming to facilitate a series of “quiet conversations” between public and private stakeholders in the energy milieu in the coming months in an effort to unblock obstacles to greater private sector investment in the sector.

Three commissioners – Professor Anton Eberhard, Professor Malusi Balintulo and Professor Mike Muller – met with role-players in the electricity and liquid fuels sectors in Johannesburg this week to discuss areas of concern. The meeting was held in collaboration with the South African National Energy Association (Sanea) and brought together executives from petroleum, mining, industrial and renewable-energy companies, as well as academics, government officials, energy association leaders and senior managers from Eskom.

The meeting was called amid growing concern over security of electricity supply and following load shedding by Eskom on November 2, precipitated by a dramatic loss of output at the Majuba power station following a catastrophic coal silo collapse on November 1.

Eberhard argued that the incident was symptomatic of serious system constraints that had been worsened by delays to the introduction of new capacity from the Medupi and Kusile coal-fired power projects and maintenance backlogs, which were showing themselves in the form of unplanned plant outages and a fall in Eskom’s electricity availability factor (EAF).

The decline in the EAF from over 90% in 2000 to 75% in 2013 meant the system was on a “knife edge”, despite demand having declined to 2007 levels, owing to reduced consumption from the mining and industrial sectors since the global economic crisis.

Delegates to the consultative forum agreed that there was a need to have urgent discussions with government on a range of short- and longer term initiatives to deal with a power crisis that had first emerged during the Western Cape blackouts in 2006 and was potentially set to continue for another five years, owing to Eskom’s new-build delays.

It was agreed that the discussions should deal with ways of unblocking several demand-side initiatives that could be introduced in the short-term to ease system constraints.

Priority would be given to finding ways to move ahead with a cogeneration procurement programme and to finding an institutional and financial framework to restart Eskom’s integrated demand management schemes, which had all but stalled after the National Energy Regulator had determined that the programmes should not be funded through the tariff.

Efforts would also be made to ensure stakeholders re-engaged on Eskom’s so-called “coal cliff”, which related to the fact that many of the utility’s coal contracts were either set to expire, or were associated with mines that either required recapitalisation, or faced closure.

It was felt that the processes established under the aegis of the South African Coal Roadmap should be reinvigorated in an effort to find “win-win” solutions that offered Eskom coal-supply security and the miners a prospect of earning a fair return by being able to supply both domestic and export markets.

Industry and institutional reform was also seen as urgent in light of the stalled legislative process designed to level the playing field between Eskom and independent power producers (IPPs) through the introduction of an Independent System and Market Operator outside of Eskom.

But there was also a view that the National Treasury and Department of Energy’s IPP procurement office might require “institutionalisation” to ensure that its successes in the renewable-energy sector were not made vulnerable to changes in political priorities.

There was also a desire to find a solution to Eskom’s current connection constraints, which had led to delays to the financial close of the bid-window three renewable projects and which also threatened to undermine future bid windows, as well as planned baseload coal and gas bidding processes.

A “pragmatic” discussion would also be pursued about the backlog in the electricity distribution industry, which was now estimated at R65-billion and was seen as the cause of most of the blackouts and brownouts experienced across the country.

Sanea MD Brian Day said the idea would be to canvass these issues with government in an effort to come up with collective actions to deal with the immediate crisis and set up action-oriented process for addressing some of the longer-term structural problems.

It would hoped that the initial meetings would be held either before the end of the year or early in 2015.

Edited by Creamer Media Reporter

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