BLSA CEO Busi Mavuso
South Africa will eventually find itself with a thoroughly modern electricity supply sector, including many generators competing with each other, an effective distribution operator and a wide marketplace for consumers to buy electricity.
Businesses should see through the doom and gloom of the current electricity mess and plan for the brighter future on the horizon, Business Leadership South Africa CEO Busi Mavuso suggests in her latest weekly newsletter, while also asking whether business is ready for an electricity system that works.
She says it is easy to lose sight of the longer-term outlook for electricity generation and distribution when the current situation involves being wracked by seemingly never-ending load-shedding.
However, she believes the policy environment is undergoing the necessary fundamental changes to allow a world in which the private sector can be largely responsible for generating and selling electricity and distributing some of it too.
“Now is the time for businesses to be planning for it. Eskom is proceeding with its internal reorganisation into three distinct units. The transmission unit, in particular, will become an independent system operator, free to buy electricity from whoever can sell it at the lowest price.”
Mavuso adds that, with government having amended the Electricity Regulation Act (ERA) last year to allow companies to build electricity plants of up to 100 MW for own use without first obtaining a licence from the National Energy Regulator of South Africa (Nersa), it ushers in the opportunity of wheeling electricity over the grid to different operations and selling it to different consumers.
“This opens the way for dedicated generation companies to be set up, which can wheel electricity across the grid directly to customers,” she explains.
The opportunities for business are obvious, she states, as plants created for own use can become viable in the knowledge that excess capacity can be sold into the grid.
Of course, there remain some serious impediments to overcome before this scenario can pan out. For example, the ERA amendment hitting a new roadblock with the Nersa insisting on a registration process, which is almost as cumbersome as licensing.
“The Eskom unbundling [into three legal entities] is going to be difficult as Eskom’s balance sheet remains stressed and debt holders will have to agree to an unbundling that will change the asset mix they currently have rights to,” Mavuso notes.
She is, nevertheless, positive that the country will find a way through these challenges.
She points out that the Presidency and the National Treasury, through Operation Vulindlela, are focused on sorting out these obstacles to the 100 MW generation exemption.
This while Eskom is undergoing a wider resolution to its debt situation that includes the unbundling of the transmission business.
“Eventually, we will have an energy system that delivers both reliability and low-cost production that we all crave. It will be far greener than our current reliance on coal-based generation and it will support local economic activity through the supply chain required to build and maintain it.
“The strategic thinking needed now is how to plan for it,” Mavuso concludes.