Public Enterprises Minister Lynne Brown says that South Africa is currently adding electricity capacity to the grid at a rate higher than what is required and argues that the “current trajectory” could be detrimental to consumers.

She asserts, therefore, that it is “critical that the Integrated Resource Plan (IRP) is concluded so we can have a plan that offers maximum protection for consumers”.

“So, with low volumes, the price of electricity will have to rise to sustain the required level of revenue, meaning consumers will have to pay more for electricity.”

Her argument appears to gel with one that has been made previously by Eskom, which has argued that the pace and scale of new independent power producer (IPP) connections, particularly renewables projects, be curtailed.

South Africa’s highly acclaimed Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) was thrown into doubt earlier this year when the State-owned utility wrote to Brown and Energy Minister Tina Joemat-Pettersson calling for guidance before signing new power purchase agreements.

Eskom argued that such guidance was required in light of changed circumstances, whereby the electricity market, which had been in deficit since 2008, was likely to experience a growing surplus until at least 2023.

As a result of Eskom’s move, some 26 projects that had already been adjudicated under the REIPPPP were placed in limbo. The impasse has not eased despite the recently released draft Integrated Resource Plan (IRP) stating that “all projects that are in Bid Window 4.5, expedited, smalls and the 900 MW of baseload coal are considered committed and will be included in the IRP update base case”.

The South African Wind Energy Association has lodged a complaint against Eskom with the National Energy Regulator of South Africa and it is also considering legal action, owing to what it views as the utility’s defiance of a Ministerial determination and stated government policy on the matter.

Writing in response to a Parliamentary question posed by the Democratic Alliance’s Dean Macpherson on the steps taken by the Minister to secure the investments, Brown noted that the IRP review would “provide appropriate guidance on the technology, scale and timing of the electricity requirements for the country with the objective of meeting energy security and diversifying the energy mix”.

However, she stressed that the assumptions in the prevailing IRP, which is six years out of date, needed to be updated “to provide a robust plan”, particularly given far weaker demand growth than that assumed in the existing plan.

“The current capacity being added to the grid is based on the IRP 2010, which projected higher demand for electricity based on the economy growing close to 6%. This means that we are currently adding capacity to the grid at a rate higher than what is required,” she wrote,

Brown added that there was a risk of plants becoming “stranded”, noting that there were grid limitations to Eskom pursuing a more aggressive export strategy.

“These Eskom assets belong to the South African public; I have a responsibility to safeguard these and ensure that South Africans derive maximum value,” she said, arguing that this was particularly critical at a time when Eskom’s balance sheet was highly indebted owing to the build cycle.

The statement came as Brown confirmed Eskom group executive for generation Matshela Koko as acting CEO at the utility.

The appointment followed the November 11 resignation of Brian Molefe, which came in the wake of the release of the Public Protector’s 'State of Capture' report, in which he was implicated. Molefe has said his resignation is not an admission of guilt and that he intends clearing his name.

President Jacob Zuma subsequently announced that he would be taking the remedial action proposed in the report on judicial review. The report ordered that Zuma establish a commission of inquiry, which should be led by a judge selected by Chief Justice Mogoeng Mogoeng.

Brown said she had approved Koko’s appointment in line with a recommendation by the Eskom board.

“Mr Koko has a wealth of experience and understands the challenges Eskom faces. His appointment will also ensure continuity at Eskom. “I have also asked the board to immediately start the process to appoint a permanent group CEO and [indicated] that this process needs their urgent attention,” the Minister said.

She also called on Koko to ensure that the current trajectory at Eskom continued.

Koko is a strong proponent of the proposed nuclear build programme and Eskom’s role as procurer, owner and operator.

He has indicated that a controversial request for proposals should be issued to nuclear vendors before the end of the year, despite the absence of a finalised Integrated Resource Plan (IRP) and a draft IRP base case that indicates that the first new nuclear capacity would be required only in 2037.

Koko has justified the proposed release of the tender on the basis of a sample IRP scenario, which shows that the first new nuclear capacity will be required by 2026.

He is also opposing the signing of power purchase agreements for 26 new renewable-energy projects, despite these having already been adjudicated under the REIPPPP.

He argues that the capacity is not required in light of an Eskom forecast of an expanding electricity supply surplus to 2023 and has, therefore, called for the pace and scale of the renewables roll-out to be curtailed.