The South African Renewable Energy Council (SAREC) has questioned an Eskom claim that independent power producers (IPPs) accounted for 25% of its primary energy costs in 2018/19, while supplying only 5% of the grid’s energy requirements.
In a statement released following the release of financial results by the State-owned utility, SAREC argued that cost of primary energy – such as coal, diesel and nuclear fuel – delivered to Eskom’s power stations for conversion to electricity, could not be compared with the cost of the finished product, or electricity, delivered to the Eskom grid by IPPs.
The primary energy costs listed by Eskom, the organisation said, included marginal fuel costs only and did not include the initial and replacement capital expenditure Eskom had to incur across its fleet.
“Furthermore, the tariff paid by Eskom to IPPs is not a primary energy cost, but is an all-inclusive cost, which includes capital expenditure.”
SAREC also dismissed the persistent suggestion – raised again in a complaint currently being investigated by the Public Protector – that Eskom’s financial position was being undermined by power purchase agreements with the IPPs.
“Eskom has been awarded full tariff cost recovery by the National Energy Regulator of South Africa for all power from IPPs.
“As such, Eskom is not subsidising its purchases from IPPs with income generated from its own generation activities. IPPs also fund any upgrades that are required to the grid to ensure that their power is evacuated and services the country as a whole.”