State-owned power utility Eskom is progressing with plans to repower and repurpose some of its coal power stations, build greenfield power plants with cleaner technologies and invest in necessary grid infrastructure to support these plans.
Repowering and repurposing the Komati power station, in Mpumalanga, is being prioritised by Eskom this year.
The utility is also advancing solutions such as containerised microgrid plants that will drive local industrialisation and ensure access to electricity for the 13% of citizens who are without access to electricity. Eskom is also engaging with lenders to fund the roll-out of the containerised microgrid solution.
Further, Eskom is also undertaking modelling work to determine the pace of the utility’s transition to use more renewable-energy sources to meet decarbonisation targets. This modelling work will provide details on the timing of coal unit shutdowns and what this will contribute to emissions reduction.
Coupled with this will be the off-grid infrastructure required to support the transition, and to quantify financing requirements.
“We have completed socioeconomic impact studies at some of these power plants, and have plans to complete seven more of these studies over the coming years,” says Eskom.
To consider the impact of the energy transition, Eskom’s will also provide information on the impact that shutting down old coal power plants will have on vulnerable sectors such as water.
Modelling has led to estimations that significant amounts of water can be saved, freeing water for uses such as human consumption and agriculture.
Further, the utility highlights that studies – conducted by research entities GreenCape and the National Business Initiative – show that investing in renewable-energy sources can result in a net jobs gain.
Certainty and predictability is, however, needed to grow local manufacturing capacity necessary to support these renewable-energy sources, as well as the transmission infrastructure that is critical, Eskom stresses.
To support this need for certainty, Eskom is engaging the local manufacturing industry, the Department of Trade, Industry and Competition, as well as other stakeholders, to drive a joint, concentrated effort.
“Eskom’s Distribution entity intends to facilitate a liberalised energy market and grid, and is planning and implementing projects for the connection of independent power producers (IPPs). The challenge is enabling policy and regulatory and tariff changes to support the transition. The capital expenditure required to modernise and strengthen the grid for connecting IPPs and distributed energy sources is also a challenge.”
Eskom points out that vital elements in implementing a clearly defined regulatory regime include a sustainable industry with cost reflective tariffs, least cost to the economy through avoiding the duplication of infrastructure, and adequate mechanisms to deal with social and developmental mandates.
President Cyril Ramaphosa announced in June that government had lifted the threshold for companies to produce their own electricity without a licence to 100 MW.
Schedule 2 of the Electricity Regulation Act was amended to increase the National Energy Regulator of South Africa’s licensing threshold for embedded generation projects from 1 MW to 100 MW.
Eskom is assessing the impact that this change could have.
“Although we look forward to getting a clearer understanding of the volumes and sizes of plants that would apply for connection under this amendment, these plants still need to adhere to the Grid Code and grid connection application processes. Factors to consider include the location of the plant in relation to the available network in the area, and additional infrastructure requirements.”
The company argues that this legislative and industry change creates the need for transparent, unbundled and cost-reflective tariffs.
There is also a need for a wholesale tariff, a mechanism to cater for associated costs and a fall-back position, where Eskom will remain the supplier of energy as a “last resort”.
Discussions are also ongoing between Eskom and the Department of Mineral Resources and Energy (DMRE) on how lifting the licensing exemption threshold will impact on tariff structures being reformed to address the recovery of unbundled network charges, fixed costs, subsidies and legacy costs.
Eskom supports the unbundling of tariffs to reflect the different services being provided in a transparent manner such as energy costs recovered through energy charges. This is particularly important in terms of the unbundling of Eskom and costs being reflected in the tariff.
The utility is also working towards separating the wholesale and retail tariffs; this includes discussions with the DMRE on the recovery of subsidies embedded in these tariffs and legacy costs such as government’s Renewable Energy Independent Power Producer Procurement Programme.
Eskom is developing a new payment model for nonpaying municipalities, for which the utility is engaging with stakeholders at presidential, government, provincial and municipal level.
“The Active Partnering Model is a proposal where Eskom provides technical, administrative and revenue management support to improve payments owed to Eskom. Forty-five municipalities, including the top 20 defaulting municipalities, have been engaged.”
To date, three municipalities have signed service level agreements with Eskom, while negotiations with four other municipalities are at an “advanced stage”.
Those municipalities that choose not to engage with support structures will need to follow the prescribed debt management process.
“Eskom intends to contribute to the rebuilding of municipal capacity to increase municipalities’ ability to deliver on their constitutional obligations of service delivery to their communities and economy, while securing Eskom sales and revenue.”