Eskom's hostility towards independent power producers (IPPs) can no longer be disputed, or ignored. The antagonism has also brought to the fore the oft-repeated warning about the genuine risk associated with the current structure of the industry, where IPPs are beholden to a dominant competitor for both grid access and payment.

The hostility is unlikely to ease entirely even if the utility is forced to abide – which it surely must – by stated policy, which sees IPPs playing a larger role in the future electricity mix. In fact, the policy is that private generators should contribute 30% and Eskom 70%, leaving some theoretical headroom for continued IPP growth.

The policy, over which Eskom has no say, also designates the Department of Energy (DoE) as the procurer of IPP capacity, with Eskom as the buyer. The utility, in turn, recovers the revenue needed to pay for IPPs through the tariff and the National Energy Regulator of South Africa has, to date, never questioned this pass-through, despite having disallowed some diesel and coal cost variances.

Eskom’s pushback has, nevertheless, intensified, despite Energy Minister Tina Joemat-Pettersson's insistence that the IPP programme is going ahead and notwithstanding Cabinet's recent confirmation that South Africa has no intention of “changing course midstream” in its support for a programme that has facilitated nearly R200-billion-worth of private investment.

The utility’s argument is that the IPP programme is too expensive and will cost the country R1.2-trillion over the next 20 years for only 7 300 MW of capacity. Chairperson Ben Ngubane has, therefore, written to Joemat-Pettersson to indicate that Eskom is unwilling, in the absence of further consultations, to sign power purchase agreements (PPAs) beyond the preferred projects selected under bid widow 4.5 of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

This immediately raised serious question marks over the ‘expedited round’ for a further 1 800 MW of renewables capacity, as well as the two projects that participated in the first bid window of the Coal Baseload IPP Programme.

Things have transpired even more dramatically, however, with Eskom withholding its signature on a 20-year PPA for the 100 MW Redstone concentrated solar plant, which was adjudicated before bid window 4.5, during the third bid window of the REIPPPP. The solar thermal plant – being developed by ACWA Power, of Saudi Arabia, and SolarReserve, of the US – incorporates 1.2 GWh of energy storage, which enables it to produce during peak periods. Eskom was initially poised to sign the PPA in late July, but later decided that it would not conclude the deal in light of a cost increase from R50-billion to over R60-billion for the PPA period. The utility claims to need clarity from the DoE and the Department of Public Enterprises prior to signing, arguing that it could be accused of “wasteful expenditure” if it proceeds.

Such actions have placed a pall over the IPP programme, which is not going unnoticed by potential investors. Besides conflicting with energy policy, the utility’s actions are also at odds with the country’s stated industrial policy, which aims to use the security of demand created by a consistent procurement programme to stimulate investment by solar and wind component manufacturers.

While it is somewhat comforting to learn that a process has been initiated to resolve the immediate impasse on some renewables projects, there is still no sign that policymakers are truly willing to tackle the deeper structural issues that currently bedevil the sector.

Surely, the more stable supply environment offers the ideal opportunity for the initiation of an evidence-based debate on how South Africa can fulfil the objective of ensuring affordable and reliable electricity that is supportive of economic growth and human development.

To achieve such an outcome, some decisive leadership is required. Whether this is achievable in the current friction-filled political environment is open for debate. What is not in question, though, is that the current uncertainty – fuelled by a failure, by government, to announce adjudicated projects and release an updated Integrated Resource Plan, as well as Eskom’s refusal to sign PPAs with preferred bidders – is causing real damage.