Aug 24, 2012
Power developers deeply frustrated by ‘regulatory obfuscation’Back
Engineering|Africa|CoAL|Eskom|Industrial|PROJECT|Projects|System|Africa|South Africa|Electricity Supply|Energy|Mining|Power Generation|Power-generation|Doug Kuni|Infrastructure|Pieter Van Dam|Power|South Africa
© Reuse this
In fact, MD Doug Kuni said last week that efforts currently being pursued to “keep the lights on”, which included power buy-backs from smelters and incentives for companies and individuals to reduce consumption, were creating the “illusion” that the power crisis was in hand.
He estimated that South Africa still had a 5 000 MW supply gap to close, over and above the projects being implemented by State utility Eskom. But the lack of urgency being shown in clearing the hurdles for independent power producers (IPPs) was undermining investment, which, in turn, was depressing the country’s growth and job creation outlook.
South Africa’s growth outlook for 2012 had already been downgraded by a number of economists, including the National Treasury, which had warned that it was unlikely that the country would expand by the 2.7% it had forecast in February. In addition, in its latest economic update on South Africa, the World Bank said the bottlenecks in electricity supply were an important constraint to a faster pickup in growth.
“Eskom is doing all it can to keep the lights burning, but at what cost?” Kuni mused.
Developers and their funders were particularly concerned about the level of Ministerial discretion that had been included in the Electricity Regulations on New Generation Capacity, as well as the Electricity Regulation Second Amendment Bill and the Independent System and Market Operator Bill.
The prevailing regulations stipulate that a Ministerial determination, or exemption, be obtained by an IPP ahead of licensing by the National Energy Regulator of South Africa (Nersa).
However, Kuni said the preconditions for gaining a determination were not well defined – a risk that was making it impossible for developers to secure funding support from lenders.
Nersa full-time member for electricity Thembani Bukula confirmed with Engineering News that a Ministerial determination, or exemption, was indeed a requirement for the licensing of an IPP.
He also confirmed that several coal-fired power station licence applications had been turned away in recent months owing to the fact that the applicant was not in possession of such documentation.
Also hampering projects was the current lack of certainty surrounding the ability to wheel power produced by an IPP over Eskom’s transmission infrastructure.
The uncertainty was preventing a number of projects from proceeding, as most developments would have capacity surplus to the needs of the industrial or mining customer on whose site the project would be developed.
Infrastructure and energy consultant Pieter van Dam said there were several viable projects being held up primarily by the absence of a wheeling framework. Private capital, he said, was being “tied up” by the fact that there was no “enabling mechanism” to facilitate wheeling.
Kuni stressed that the 1998 policy that envisaged the introduction of IPPs was being undermined by the “obfuscation of the regulatory environment”.
“If we want to make up the backlog in power generation capacity, we cannot rely on Eskom alone. So, the point of making life absolutely difficult for private power producers is a question that remains unanswered,” Kuni lamented.
Edited by: Martin Zhuwakinyu© Reuse this Comment Guidelines (150 word limit)
Other News This Week News
Updated 6 hours ago The South African Chamber of Commerce and Industry (Sacci) would work with the office of the Afican National Congress (ANC) secretary-general Gwede Mathashe on a series of constructive engagements on improving the domestic economic climate and building a more...
Updated 6 hours ago JSE-listed investment and empowerment group Grand Parade Investments (GPI) and electronics contract manufacturer Tellumat have teamed up to create a 51:49 joint venture company Grand Tellumat Manufacturing. The transaction would see the engineering skills and...
Updated 6 hours ago JSE-listed property group Redefine Properties on Friday said its acquisition of all the assets and the property portfolio of Fountainhead Property Trust, had not been approved by the requisite majority of Fountainhead unitholders and would, therefore, not be...
Recent Research Reports
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
This Week's Magazine
The multibillion-rand development of the Zendai Modderfontein New City, east of Johannesburg, will aim to exemplify an integrated city node, says property group Zendai South Africa COO Wenhui Du. The development will focus on the Modderfontein Gautrain station to be...
The South African Civil Aviation Authority (CAA) hopes to have finalised regulations for the flying of Unmanned Air Vehicles (UAVs) – also designated Remotely Piloted Air Systems (RPAS) and popularly called drones – in the country’s civilian airspace by the end...
Various stakeholders have expressed optimism that the Small Business Development Ministry, created after the national elections in May, will add much needed impetus to enterprise development in South Africa, where a strengthening of the entrepreneurial culture is...
Capturing and storing carbon dioxide (CO2) is the only way through which the world will achieve the lowest of the United Nations Framework Convention on Climate Change’s (UNFCCC) global warming predictions, called the representative concentration pathway (RCP) 2.6....
The City of Johannesburg has recovered R107-million following the arrest of 22 people allegedly involved in corruption, collusion, fraud and tampering with the city’s electricity systems, which had ultimately cost the city R200-million in lost revenue.