Page 38 - Energize July 2021

VIEWS AND OPINION

Urgent action vital for an enabling energy supply industry

by Fanele Mondi, Energy Intensive Users Group

o foster the prosperity of all South Africans, a reliable electricity supply, stable
electricity costs and the decarbonisation of the economy is essential. Additional
Tgeneration capacity will assist to close the national electricity supply deficit. It is,
therefore, encouraging that Government intends to increase the generation licence threshold
from 1 MW to 100 MW.
The unreliability of Eskom’s supply, resulting in regular load shedding, and the higher
than inflation electricity price increases over the last 13 years, have severely affected business
competitiveness and prosperity and make it difficult to conduct operational planning and
motivate for investment in new growth opportunities.
Large electricity consumers are investigating and developing alternative electricity supply
options to mitigate production disruptions, above-inflation tariff increases and to accelerate the Fanele Mondi
decarbonisation of their operations. However, the complex permitting and licensing regime has
discouraged or at least reduced investments at this level.
A key advantage of the higher threshold will be the direct investments and job creation
during the construction of new generation capacity, with additional expenditure on goods and Given that any new energy generation
services during operation. Another is that South Africa would develop a potential competitive will take some time to come online, load
advantage by exploiting the abundant land, wind, and solar resources with which we are shedding is likely to continue. Eskom must
blessed. Most of the own-use generation projects are likely to be for renewable energy that will therefore expedite and radically enhance
enable the transition to lower-cost, lower-carbon electricity provision as a strategic input for its maintenance recovery programme,
consumers. The decarbonisation of companies’ operations will help them to attract investment as poor maintenance and plant
and to meet the product needs of their customers under the growing environmental, social and unpredictability is a major contributor to
governance pressures. current load shedding. Equally important is
Currently, Eskom produces emergency power by running expensive diesel open-cycle gas the delivery of the risk mitigation projects
turbines in excess of their designed capacity. The higher threshold will prevent these high costs which are also intended to close the short-
and reduce volatility in price increases. The net effect of improved reliability and contained term energy deficit. The approval of own-
electricity costs will be improved economic performance for all consumers and the country. use generation will not, on its own, result
Own-use generation will free up Eskom supply capacity that could be redirected to stimulate in the immediate end to load shedding, as
economic growth, while also giving Eskom the time to perform regular maintenance and execute the development and execution of these
refurbishment projects. projects will take some time.
Where deployment is close to large energy users’ operations, local employment and supplier While these transformative steps
development would result and capacity stresses on Eskom transmission lines would be limited. will make a significant difference, there
For mines – especially underground and deep level – it can form an anchor in post-closure is an urgent need to collectively shape
economic plans. the future of our ESI and ensure a just
Although this revision of the threshold limit is a progressive step towards improving and energy transition for the benefit of all
mitigating some energy supply challenges, more changes are needed to unlock the electricity stakeholders. Within this process, it will
supply industry’s (ESI’s) inherent potential and enabling policy and regulatory dispensations be important to address climate change
for own-use generation. A number of actions need to be considered and expedited as a matter through the decarbonisation of our
of urgency. Should the lifting of the licensing threshold result in significant new investment in value chains, through a change in energy
renewable generation, it will have to be accompanied by regular updating of the Integrated mix in favour of less carbon-intensive
Resource Plan (IRP) to ensure that the required investments are made to balance the renewables generation technologies. This transition
and maintain grid stability. In this regard, there have been calls for bi-annual updating of the IRP has to be made in a sustainable manner
with public participation on input assumptions and policy adjustments. that ensures energy security, system
Further electricity market liberalisation will be required to de-risk willing buyer/willing seller reliability and price affordability. As Eskom
investments in generation. Renewable generation technologies are capital intensive and lending alone cannot deliver this, the public and
institutions will price in the power purchase agreement (PPA) underwriting risk of single off- private sectors will be required to play a
takers, being exposed to commodity prices, exchange rate fluctuations and possibly a remaining significant role in co-creating the future
plant life of less than the typical PPA tenure of 20 years. ESI. Legislation and regulations, together
With an increasing number of generation participants in the industry, the need for easy with a well-coordinated, inclusive,
access to the grid becomes increasingly important. This necessitates urgent improvement transparent and beneficial process for
and standardisation of the current wheeling arrangements into a single coherent framework, all stakeholders will be vital to define a
spanning both Eskom and municipal distribution systems. collective ESI vision and strategy.
Finally, the establishment of an independent market operator, possibly under Eskom
transmission, should be expedited to ensure fair market operation while also ensuring that Contact EIUG, info@eiug.org.za,
consumer interests are protected. www.eiug.org.za

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