Generation and distribution crucial for South Africa

16th May 2014

By: Ilan Solomons

Creamer Media Staff Writer

  

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Much emphasis is placed on State-owned power utility Eskom’s lack of electricity generation capacity but distribution is an equally important issue for South Africa, management consulting, technology services and outsourcing com- pany Accenture South Africa Energy senior executive Kenneth Robinson tells Engineering News.

He notes that in the past 20 years, Eskom has commissioned the 4 110 MW Majuba coal-fired power station, in Mpumalanga, and returned to service several previously mothballed power stations, such as the 1 600 MW Camden, 1 200 MW Grootvlei and the 1 000 MW Komati coal-fired power stations, but even these activities were insufficient to meet the country’s growing electricity needs.

Robinson explains that government harboured thoughts of unbundling certain divisions of Eskom and opening the local market to private power companies.

“However, none of this materialised and, eventually, in 2007, Eskom started physical construction of the new 4 800 MW Medupi coal-fired power station,” he points out.

Moreover, Robinson notes that only the State has the right to license new power generation plants under the Electricity Regulation Act of 2006.

“This impacts [on] Eskom, and also independent power producers who may wish to build and operate their own power stations to directly supply consumers,” he adds.

In 2011, former Energy Minister Dipuo Peters said that government needed to make an “an immediate decision” on the building of a new nuclear power station, but nothing has materialised since then.

According to the Integrated Resource Plan for 2010, about 40 000 MW of additional electricity capacity was needed by 2030 to ensure that the country had sufficient electricity capacity.
“In overall terms, this means that South Africa needs to commission a new major power station every two years. Although there has been progress on renewable-energy projects, the country has not completed construction of a new major power station in the last six years,” states Robinson.

Nonetheless, he believes that the greater challenge facing South Africa is not power generation, but power distribution.

“Eskom’s distribution division is reasonable, the maintenance backlog is at manageable levels, cus- tomer service is reasonable and Eskom’s customer service index is continuously improving.”

However, Robinson says, some communities which receive their electricity from the weaker municipal distributors are affected by poor service, owing to the lack of resources and the technical capabilities of those municipal authorities.

He says that a consequence of weak municipal distribution is that it will discourage business oper- ations in these areas, owing to uncertain electricity supply.

“This could inhibit government’s aim of promoting rural development and, thereby, job creation,” Robinson emphasises.

The National Energy Regulator of South Africa has not withdrawn distribution licences from municipalities that fail to meet regulated standards. Doing so would test a provision in the Constitution that reserves for municipalities the right of electricity reticulation.

The Constitution also states that if municipalities are not functioning properly, their duties can be assumed by either provincial or national government.

“This would force an underperforming municipal power distributor to make alternative arrangements, including buying a distribution service from a neighbouring municipality or relinquishing the responsibility of power distribution to Eskom directly,” he says.

Robinson believes that the majority of underperforming municipalities should, in fact, cede power distribution activities to Eskom, which is already responsible for distributing electricity to about 140 municipalities in South Africa.

Too Little or Too Much?

Some commentators claim that the electricity intensity of the eco- nomy – the extra kilowatt hours required to increase a country’s gross domestic product – is dropping.

Robinson says these commentators regard South Africa as developing from a manufacturing- and mining-based economy to a services-based industry, such as telecommunications and information technology services, which are significantly less energy intensive than heavy industrial manufacturing or mining.

“I disagree with the argument that South Africa will develop into a predominantly service-based economy, as the current unemployment rate in South Africa is about 25.2%, which equates to about 15-million unemployed people. Most of them are not sufficiently skilled to play an active role in service industries,” states Robinson.

Therefore, he says, the majority of unskilled unemployed people rely heavily on electricity-intensive industries, such as the manufacturing and mining sectors, for job opportunities.

“We need to have surplus electricity to provide the necessary confidence for local and global investors to invest in the local mining and manufacturing industries. If there is not sufficient electricity, unskilled unemployed people may never gain employment,” Robinson warns.

“This is why it is crucial for South Africa to continue to build more new power stations – despite the claims that the country will have unnecessary excess electricity capacity in the next 10 to 20 years – and to upgrade municipal distribution. Power is crucial to ensure long-term sustainability of the economy, which will remain energy intensive for the foresee- able future,” he concludes.

Edited by Megan van Wyngaardt
Creamer Media Contributing Editor Online

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