State-owned power utility Eskom should diversify its energy mix, Electric Power Research Institute senior regional manager Barry MacColl said during a panel discussion on South Africa’s energy policy, and specifically the Integrated Resource Plan (IRP).
The panel, held on Thursday at the Mazars office, near Rosebank, was jointly organised by the Spanish Chamber of Commerce in South Africa, the French-South African Chamber of Commerce (FSCC) and Afrika Verein – the German-African business association.
MacColl commented that the IRP is “anything but integrated at the moment”, primarily because it lacks sufficient detail of Eskom’s role in terms of the implementation of the IRP.
He suggested that Eskom is currently on the fringes of the IRP and the discussion surrounding the policy and, as such, views the IRP as a risk.
He further suggested that given the circumstances Eskom – in its decision against signing 27 power purchase agreements (PPAs) with independent power producers (IPPs) for almost two years – had naturally resisted.
MacColl added that Eskom needs to transform its energy mix, and that it should be encouraged to do so by government or the IRP allocating some measure of renewable-based generation, rather than simply integrating IPP-produced energy into the national grid.
He also said the utility has a “huge” role to play in the regional power pool, and that society as a whole had to try to resolve the nonpayment issue – Eskom being owed R12-billion by municipalities – and assist in reinstating its credibility, given that recent knocks are the result of political manoeuvring, rather than incompetency.
Izibani consultancy founder and FSCC chairperson Dr Yves Guenon agreed with MacColl on the need for Eskom to diversify its power generation, and that the majority of the issues at Eskom are a result of mismanagement, politicking and general disorganisation. He also suggested that Eskom had been "excluded" from the IRP because it did not “belong” to the Department of Energy.
He recommended that Eskom be “reorganised”, that political influence be reduced and that the commercial segment is reviewed to streamline processes and engender faster reactions.
He stressed that he is optimistic for Eskom’s future because the entity has the necessary competency. He further suggested that people calling for the unbundling and dissolution of Eskom do not understand energy, and/or the realities of the country, because South Africa cannot function without Eskom.
Herbert Smith Freehills partner Brigette Baillie added that unbundling Eskom would be an extremely complex process and that it would have to be done in a proper and considered fashion, or else, “we would destabilise the country.”
Engie Southern Africa business development VP Michael Steiner said one of the things that Eskom has done best is run and build the grid. “Taking that away from Eskom probably would be quite questionable.”
However, Steiner disagreed with MacColl’s suggestion that Eskom had a bigger role to play in terms of “regional integration”, which he views as a myth. He noted that it is all good and well to agree on an IRP, and then decide to sell surplus gigawatts to the Southern African Development Community (SADC) but, “there is no space for gigawatts in the SADC region”.
Moreover, he pointed to a lack of interconnectors, which have been on the cards for “decades” and have yet to be realised.
Vestas business development director Malte Meyer was the only panellist to suggest that Eskom’s unbundling could be a huge economic success. He said State-owned monopolies strive to keep IPPs out, and slow progress.
He also suggested that unbundling would not have to be a consultative process if the political will were present.
Panel moderator and Afrika Verein honorary South African representative Ignaz Fuesgen countered Meyer noting that unbundling a national utility is “not as easy as it looks,” and that “Europe doesn’t always know better”, stating that regional problems require regional solutions.
Additionally, an audience member who declined to be named noted that the German unbundling resulted in high price increases for consumers, and the process in France proved a great success for many private companies but not for consumers.