State-owned power utility Eskom should diversify its generation mix, Electric Power Research Institute senior regional manager Barry MacColl said during a panel discussion on South Africa’s energy policy, and specifically the Integrated Resource Plan (IRP).

The panel, held earlier this month in Johannesburg, was jointly organised by the Spanish Chamber of Commerce in South Africa, the French-South African Chamber of Commerce (FSCC) and Afrika Verein – the German-African business association.

MacColl argued that the IRP was “anything but integrated at the moment”, primarily because it lacked sufficient detail of Eskom’s role in terms of the implementation of the IRP.

He suggested that Eskom was currently on the fringes of the IRP and the discussion surrounding the policy and, as such, viewed the IRP as a risk.

He further suggested that, given the circumstances, Eskom – in its decision against signing 27 power purchase agreements with independent power producers (IPPs) for almost two years – naturally resisted.

MacColl added that Eskom needed to transform its energy mix, and that it should be encouraged to do so by government or the IRP allocating some measure of renewables-based generation, rather than simply integrating IPP-produced energy into the national grid.

He also said the utility had a “huge” role to play in the regional power pool and that society as a whole had to try to resolve the nonpayment issue – Eskom is owed R12-billion by municipalities – and assist in reinstating its credibility, given that recent knocks were the result of political manoeuvring, rather than incompetence.

Izibani consultancy founder and FSCC chairperson Dr Yves Guenon agreed that there was a need for Eskom to diversify its power generation, and that the majority of the issues at Eskom were a result of mismanagement, politicking and general disorganisation. He also suggested that Eskom had been “excluded” from the IRP because it did not “belong” to the Department of Energy.

He recommended that Eskom be “reorganised”, that political influence be reduced and that the commercial segment be reviewed to streamline processes and engender faster reactions.

He stressed that he was optimistic about Eskom’s future because the entity had the necessary competence. He further suggested that people calling for the unbundling and dissolution of Eskom did not understand energy, and/or the realities of the country, because South Africa could not function without Eskom.

Herbert Smith Freehills partner Brigette Baillie added that unbundling Eskom would be an extremely complex process and that it would have to be done in a proper and considered fashion, or else, “we would destabilise the country”.

Engie Southern Africa business development VP Michael Steiner said one of the things that Eskom had done best was running and building the grid. “Taking that away from Eskom probably would be quite questionable.”

However, Steiner disagreed with MacColl’s suggestion that Eskom had a bigger role to play in terms of “regional integration”, which he views as a myth. He noted that it was all good and well to agree on the IRP, and then decide to sell surplus gigawatts to the Southern African Development Community (SADC) but “there is no space for gigawatts in the SADC region”.

Moreover, he pointed to a lack of interconnectors, which had been on the cards for “decades” and had yet to be realised.

Vestas business development director Malte Meyer was the only panellist to suggest that Eskom’s unbundling could be a huge economic success. He said State-owned monopolies strove to keep IPPs out, and slowed progress.

He also suggested that unbundling would not have to be a consultative process if the political will were present.

Panel moderator and Afrika Verein honorary South African representative Ignaz Fuesgen countered Meyer, noting that unbundling a national utility was “not as easy as it looks”, and that “Europe doesn’t always know better”.He added that regional problems required regional solutions.

Additionally, an audience member who declined to be named noted that the German unbundling had resulted in high price increases for consumers, and the process in France had proved a great success for many private companies but not for consumers.