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Eskom meets with CEOs, BLSA, JSE to discuss possible electricity solutions

An image of an electricity pylon and the sun

Eskom is collaborating with business as part of its efforts to resolve the long-running electricity crisis.

Photo by Bloomberg

1st August 2022

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

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State-owned utility Eskom met with CEOs and leadership from over 70 private institutions in a session led by the JSE and business organisation Business Leadership South Africa (BLSA) on July 29, as part of ongoing efforts to resolve the long-running electricity crisis.

“The purpose of the discussions was to identify initiatives where the parties can collaborate and plant the seeds of opportunity to leverage private sector investment capacity and harvest the low hanging fruit in the electricity industry,” group CE André de Ruyter said.

Eskom highlights in a statement that key to the confidence-building initiative is the active contribution from South Africa’s biggest companies listed on Africa’s largest stock exchange, as well as other unlisted companies servicing the South African market.

During the session, De Ruyter shared Eskom’s strategy to address the security of power supply through increasing capacity and reducing demand. He called on the captains of the top companies and large electricity users to coordinate efforts towards supporting the strategy by pursuing opportunities to invest and realising savings benefits from the reforms of the electricity industry as recently announced by President Cyril Ramaphosa on August 25.

Financial services provider Standard Bank notes in a separate statement that some of the positives announced by the President were the removal of the licensing threshold on embedded private generation, the announcement of feed-in electricity tariffs for the outright purchase of privately generated electricity, tax incentives for the construction of commercial generation installations, and a virtual – albeit temporary – scrapping of private power generation application red tape.

“The effectiveness of these bold initiatives depends on how quickly they can be implemented and how successfully the expertise available in South Africa’s private sector can mobilise and gear capital in the development of an environmentally and financially sustainable public-private energy future,” says Standard Bank Business and Commercial Clients division natural resources head Berrie de Jager.

Eskom has identified four areas where it says the business sector can make a practical and impactful contribution towards a sustainable electricity supply industry.

Firstly, there are opportunities for the sector to invest in own-generation projects and independent power producers (IPPs) through land leasing and wheeling arrangements.

Secondly, the sector can encourage using electricity sparingly to safeguard the national grid through coordinated energy efficiency campaigns.

Thirdly, the sector can provide support for security interventions to protect the electricity infrastructure from vandalism and theft.

Lastly, the sector can contribute to the development and alignment of enabling policies related to the fiscus and environmental, energy and industrial sectors, it was noted.

“President Ramaphosa’s plan literally opens the door for investors and entrepreneurs to provide solutions that can have many other indirect and positive consequences for our country, especially when it comes to creating jobs. We need to work together to address the energy generation challenge to the benefit of all South Africans,” JSE CEO Leila Fourie said at the discussions.

The parties have committed to extending the discussions to stakeholders based in both Cape Town and Durban, where some of the large electricity users and potential electricity investors are based.

Meanwhile, through BLSA, a framework for delivery will be tabled with companies to ensure traction on the agreed initiatives. In her latest weekly newsletter, published on August 1, BLSA CEO Busi Mavuso says it was an “extremely positive” session, with business sensing the positive alignment of Eskom and government and the new focus on solving the problem.

Mavuso posits that there are several ways that business can help resolve the energy crisis. She outlines that this includes that companies can launch their own embedded generation projects and that they can also partner with IPPs, sign the power purchase agreements needed to enable IPPs to get financial close and start construction on new plants.

She adds that businesses can also lease land to IPPs in appropriate areas that are close to grid connection points and have abundant wind or solar resources.

“Eskom’s current drive to resolve the crisis envisages 10 GW of new generation being provided by private sector generators. De Ruyter promised to finalise wheeling arrangements so that IPPs can sell directly to corporate consumers and municipalities across the grid.

“De Ruyter said Eskom is a significant landowner and that 30 000 ha of land would be made available to businesses to set up plants. This is important not just to bring new generation to the grid, but also to ensure those affected are able to sustain their livelihoods.

“A lot of the land available is in Mpumalanga and, as Eskom retires its coal power stations, job creation for those who will be displaced will be important, something that can be achieved by making the land available to private generators,” Mavuso highlights.

She says business can also support Eskom’s wide-ranging efforts to improve its performance, including the security of infrastructure at risk of vandalism and theft.

“Business Against Crime, a division of BLSA, is active on many fronts in the fight against crime and we will look to ways we can support Eskom in ending cable theft and other damage to property that frustrates the delivery of electricity,” she points out.

Mavuso says there will need to be coordination between businesses, as well as coordination with Eskom and government.

“While the intentions are clear, there remain various regulatory impediments standing in the way of swiftly bringing new power onto the grid. Business has promised to examine these and highlight to government what actions are still needed to ensure we can collectively resolve the challenges as quickly as possible,” she points out.

Standard Bank, meanwhile, indicates that kickstarting stalled construction on Bid Window (BW) 5 IPP projects by addressing impractical local procurement requirements, doubling the size of BW 6 projects from 2 600 MW to 5 200 MW, issuing requests for proposals for battery storage, as well as the review and speeding up of Integrated Resource Plan allocations, are also significant developments, which the country’s existing energy sector should leverage and take to scale expeditiously.

De Jager says a notable element of the President’s recent announcement is the new opportunity that these pronouncements present in the decentralised energy generation space, that is “the niche and entirely untapped energy market that sits behind the Eskom or municipal meter”.

He posits that making this space available for general investment for the first time means that almost any business in any sector can now potentially generate – and sell – any amount of energy to the grid.

While Eskom will retain control through a soon-to-be spun-off transmission entity regulating and controlling the trading and transmission of energy across the grid, “the key challenge for South African businesses wishing to participate in the country’s new energy market is managing the financing, construction delays and cost overruns that typically plague private generation projects,” De Jager says.

To help businesses manage the operational and reputational challenges associated with independent energy generation, Standard Bank has developed a digital platform to support clients in procuring high-quality and financially sound solar photovoltaic solutions.

The PowerPulse platform is aimed at empowering ordinary businesses to produce, deliver, consume and trade energy. It also assists with financial modelling, delivering a report which can be used to justify renewable energy investments to boards or investors.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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