Nersa extends deadline for comment on Eskom’s move to reserve grid for public IPPs

26th May 2024 By: Terence Creamer - Creamer Media Editor

Nersa extends deadline for comment on Eskom’s move to reserve grid for public IPPs

The National Energy Regulator of South Africa (Nersa) has extended to June 17 the deadline for comment on Eskom’s application to preserve and reserve grid capacity for independent power producers (IPPs) participating in public procurement processes implemented in line with Section 34 of the Electricity Regulation Act (ERA).

The initial deadline was May 25.

In its submission, Eskom is seeking permission to discriminate in favour of public procurement IPP projects, at the expense of private IPP projects, arguing that such discrimination would be in the “public interest”.

“Without any form of protection, public procurement programmes remain incapable of competing with the much more agile and well-funded private sector energy procurement programmes.

“Therefore, without grid preservation/reservation in favour of the public energy procurement programmes, these programmes are likely to continue failing as evidenced by the recent failure of Bid Window 6 (BW6) of the Renewable Energy Independent Power Producer Procurement Programme,” Eskom says in its submission.

During BW6 in 2022, none of the 23 wind projects vying for 3 200 MW advanced to the preferred-bidder stage, owing to the grid capacity on which their bids were based being allocated to projects that secured grid connection budget quotes over the same capacity.

This was made possible by reforms made to Schedule 2 of the Electricity Regulation Act, which allowed private projects to proceed without a licence and which Eskom says, “resulted in an exponential increase in applications for grid connections from IPPs with private power purchase agreements”.

Private IPPs, Eskom claims, are moving at a faster pace to secure grid-connection capacity compared with Section 34 IPPs, which must go through a protracted procurement process.

Although Nersa’s consultation paper makes specific reference to BW7, the deadline for which has already shifted out once and appears poised to be extended again, Eskom’s submission is suggestive of broader and ongoing preservation and reservation requests.

Market reaction is expected to be negative, given that it is in clear breach of the open and non-discriminatory access stipulated in legislation and the Grid Code.

In its submission, Eskom bases its public-interest justification on the argument that the continued failure of public procurement programmes will erode investor confidence, undermine government efforts to attract foreign direct investment, and frustrate ambitions related to the just energy transition and climate mitigation.