Aug 24, 2012
Power developers deeply frustrated by ‘regulatory obfuscation’Back
Engineering|Africa|CoAL|Coal-fired Power Station|Environment|Eskom|Industrial|Mining|PROJECT|Projects|System|Africa|South Africa|Electricity Supply|Energy|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)
Creamer Media Senior Deputy Editor
Other News This Week News
Recent Research Reports
Water 2015: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2015 Report considers the aforementioned issues, not only in the South African context but also in the African and global context in terms of supply and demand, water stress and insecurity, and access to water and sanitation, besides others.
Input Sector Review: Pumps 2015 (PDF Report)
Creamer Media’s 2015 Input Sector Review on Pumps provides an overview of South Africa’s pumps industry with particular focus on pump manufacture and supply, aftermarket services, marketing strategies, local and export demand, imports, sector support, investment...
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
Road and Rail 2015: A review of South Africa's road and rail sectors (PDF Report)
Creamer Media’s Road and Rail 2015 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 infrastructure and network, the funding and maintenance of these respective networks, and...
Defence 2015: A review of South Africa's defence sector (PDF Report)
Creamer Media’s Coal 2015 report examines South Africa’s coal industry with regards to the business environment, the key participants in the sector, local demand, export sales and coal logistics, projects being undertaken by the large and smaller participants in the...
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
This Week's Magazine
The BMW Group will invest R6-billion at BMW Group South Africa’s (BMW SA’s) Rosslyn plant to produce the next-generation X3 sports-activity vehicle (SAV) for the local and export markets. Rosslyn will continue production of the current 3 Series through its lifecycle,...
The lack of consequences for poor performance and transgressions on the part of contractors remains a significant hurdle to tackling South Africa’s service delivery challenges, delegates heard at the Consulting Engineers South Africa Infrastructure Indaba, on...
City of Ekurhuleni executive mayor Mondli Gungubele earlier this month officially named the city’s bus rapid transit (BRT) system, Harambee.
About 58% of unstructured data stored by companies is dark data, which means that the value or regulatory importance of the data has not been determined. Subsequently, most of the stored data add costs, rather than increasing revenue or reduce regulatory risks, says...
Effective logistics, import/export and manufacturing consulting services require detailed industry knowledge and experience, but can add significant value to these industries by providing expert advice on various technical elements in their value chains, says...