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Energy crisis requires policy reform to resolve it – Seifsa

18th May 2022

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

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The reasons for South Africa’s energy crisis are well known and include the State ignoring the warnings that electricity generation was falling short, maintenance was not being undertaken, the grid having deteriorated to the point of near collapse and corruption being allowed to continue unbated, industry organisation Steel and Engineering Industries Federation of Southern Africa (Seifsa) COO Tafadzwa Chibanguza states.

He says that, what is needed now, is focus on what can be done to finally begin addressing the problem.

Chibanguza notes that the biggest issues facing energy users are the above-inflation increases in electricity tariffs and the ever-present rounds of load-shedding owing to the severe lack of capacity.

“We tend to equate the energy problem with Eskom but when viewing it from the broader energy supply industry (ESI) perspective and the roles played by the Department of Mineral Resources and Energy (DMRE), the National Energy Regulator of South Africa (Nersa), municipalities and independent power producers (IPPs), we see that Eskom is just one part of a much wider ecosystem and, for things to get better, we need more harmony between and among all these moving components,” he says.

South Africa has an energy shortfall of at least 4 000 MW, according to the Council for Scientific and Industrial Research, and this potentially represents a ready market for the private sector to invest in to the benefit of all, Chibanguza outlines.

He says that, as Eskom has stated repeatedly, the utility simply implements the policy set by the DMRE and, therefore, only the State can facilitate the inclusion and participation of the private sector.

“There are essentially two solutions to the crisis, which are not either/or options. One is what needs to be done in the immediate short term, the other what needs to be done in the longer term,” Chibanguza posits.

He says that the immediate solution would be for the DMRE to put the 4 000 MW out for bid under Bid Window 7 of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

“The department has tended to cap how much capacity can be bid for but suppliers typically bid for more. In the last bid window, 9 000 MW were bid for – more than double the shortfall - most of it coming from renewable energy providers; however, the department only procured 2 583 MW,” Chibanguza notes. 

The REIPPPP, which the DMRE developed in 2011, was intended to bring additional megawatts onto the grid through private-sector investment in wind, hydro and other sources of energy.

In April, the DMRE called for proposals under Bid Window 6, which is aimed at securing another 2 600 MW of renewable energy – about half of the 4 000 MW shortfall.

Chibanguza points out that the Integrated Resource Plan 2019 has been criticised for being too soft on coal, but notes that there are indications that the government is willing to revise it.

“Given the rate at which renewable energy prices have dropped since 2011 and with the downward trajectory only anticipated to intensify, a much faster adoption of renewable energy projects has the potential to be environment-friendly, while also limiting tariff inflation,” he notes.

Chibanguza outlines a possible longer-term solution as expediting the unbundling of Eskom to create an independent transmission company that will buy electricity from the market, including from State-owned Eskom and various IPPs, to sell to consumers.

“This ensures a bigger role for the private sector in the production of electricity, creating a competitive market that can make a real dent in tariff increases as well as increasing capacity, so that load-shedding eventually is phased out.

“Eskom will play a smaller but still-relevant role – as one of the providers of electricity for the country, though it will need to improve its efficiency significantly to remain relevant and competitive,” Chibanguza asserts.

He says that both of these solutions are attainable, and would make big changes to the country’s ESI, the economy, attractiveness to foreign investors and the everyday life of all citizens.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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