Eskom fully behind independent power producers

Pretoria - Eskom fully supports the Department of Energy’s Renewable Energy Independent Power Producer Procurement Programme (RE-IPPP), saying that IPPs must play a role in the country’s electricity market.

In a statement on Tuesday, the power utility said it remains committed to facilitating the entry of Independent Power Producers (IPPs) to strengthen the system and meet the growing electricity demand.

“Total capacity of 5 701MW has been contracted with IPPs as at 31 March 2015. 3 887MW of this relates to contracts under the Department of Energy’s RE-IPPP.”

On 31 March 2015, which is the financial year-end of Eskom, 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 that 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.

“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.

“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,” said Eskom’s Group Chief Executive Brian Molefe.

The Chief Executive said the decision to temporarily halt the issuance of budget quotes was taken to protect the financial sustainability of Eskom due to the fact that no capital allocation was accommodated for in the current multi-year pricing regime (MYPD3) for IPPs beyond Bid Window 3.

“In essence, Eskom’s current financial plan cannot support any 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.

“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,” Molefe added.

The power utility said it was surprised to read media reports that quoted the National Energy Regulator of SA (Nersa) as saying that its application for an exemption from the grid code was “cheeky” and tantamount to blackmail.

“Eskom believes that its application for exemption from the grid code was correct because issuing binding budget quotes without guarantees of how it will source the funding for such a capital intensive project would have been akin to reckless trading. Importantly, an application for exemption is allowed in terms of section 5(3) of the South African grid code,” said Eskom.

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, and to facilitate temporary conditions necessitating exemption.

The utility said it followed the prescripts of the grid code in requesting for an exemption from the network code.