Eskom’s decision to stop taking on new independent power producers (IPP) has put it on a collision course with Cape Town mayor Patricia de Lille who believes the decision will cripple electricity supply to the Western Cape.
Eskom board chairman Ben Ngubane wrote to Energy Minister Tina Joemat-Petterson to inform her the board would not sign further power purchase agreements without engagement. Eskom later released a statement saying it took the decision to protect its financial sustainability.
Ms De Lille released a statement on Monday July 25 demanding that Ms Joemat-Pettersson permit the City to buy renewable energy from IPPs in light of Eskom’s decision.
“We will not sit back passively waiting to be crippled by Eskom’s decision, especially amid rapidly escalating electricity prices. Our outdated electricity regime forces us to be wholly dependent on Eskom for our energy requirements,” said Ms De Lille.
“The time has come to restructure the entire South African electricity industry and break the vertical monopoly status that Eskom has enjoyed and enriched themselves with while South Africa’s consumers and our economy have suffered.”
The Cape Chamber of Commerce president Janine Myburgh supported the mayor, saying it was clear Eskom had turned its back on the future.
“I was shocked when Eskom said it would no longer sign any agreements to buy renewable energy. Cape Town is justified in demanding the right to buy cheaper electricity from IPPs. The simple fact is that the electricity from the new power stations will cost between R1.05 cents to R1.20 a unit, while electricity for PV solar and wind will cost between 60 and 80 cents a unit,” said Ms Myburgh, describing the decision as “mind-boggling”.
DA energy spokesman Gordon Mackay said Eskom’s decision may will lead to 2 145 megawatts of power being excluded, which would cripple the national power grid and lead to more blackouts in the future. Mr Mackay said independently produced energy stabilised the electricity supply and brought down the cost of power.
“IPPs have resulted in the decrease in the cost of electricity from R2.37kW/* in 2013 to R0.77kW/* in 2016, which is a vast decrease of 67 percent in two years. Large-scale and small-scale businesses depend on stable electricity supply, such as the manufacturing and mining industries. They will have no choice but to shed jobs as their costs rise and output will decreases due to the blocking of IPP’s by Eskom,” said Mr Mackay.
However Milnerton resident David Lipschitz, a homeowner IPP and owner of My Power Station, believes the City is scaremongering and feeding the public “half truths”. He reckons the cost of electricity will drop if Eskom does not take on more IPPs.
“The perception is that the cost of electricity will go up, but Eskom can’t stop existing IPP contracts. You and I are paying the IPPs through a feeding levy and everyone buying electricity pays the additional levy which funds IPPs,” he said.
“The City has been buying electricity legally from a wind farm for the last 10 years, it’s a bit of a political smokescreen to say they cannot buy electricity from IPPs,” said Mr Lipschitz.
Ms De Lille’s spokeswoman, Zara Nicholson, responded to Ms Lipschitz’s accusation, saying the City does buy power from the Darling Wind Farm but this arrangement had been made before the law changed, requiring them to seek ministerial permission to buy power from an IPP.
“The Darling Wind Farm has since been put under liquidation, and the City is busy engaging with the new owner as to what the status of that power purchase agreement actually is. The City of Cape Town is asking to be allowed to procure large-scale renewable energy from IPPs as opposed to being forced to buy our energy from Eskom.
“The current dispensation is that if we wish to buy any energy from an IPP, we need to obtain permission from the Minister of Energy. We have written to the minister twice in the last year to ask for such a determination,” said Ms Nicholson.
Eskom responded to the outcry to its decision saying its current financial plan could not support any new IPP connections as well as new energy purchases.It had not decided to cancel any renewable contracts or abandon IPPs, it stressed.
“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. We have signed power purchase agreements with all successful bidders, and we’re committed to sign all the remaining contracts,” said Eskom national spokesperson, Khulu Phasiwe.”
The South African Independent Power Producers Association, (SAIPPA), said the country needs a structure like Eskom, but IPPs need independent support and attention as well.
“While we need to be sensitive to maintenance of global confidencein the power market and also its impact on the economy as a whole, at face value the action taken by Eskom is fraught with risks of further eroding the existing level of confidence.
“The emergence of independent power producers, in the power market, needs requisite attention and support as well. The action by Eskom and implications thereof do not augur well. All in all an appeal, coupled with hope, is made to Eskom as well as the relevant ministries to be as inclusive as is possibl