Efforts to let municipalities buy power from IPPs will be supported by operational changes announced by Eskom chief executive André de Ruyter, which include separating the utility into three divisions. Photo: Ian Landsberg/African News Agency (ANA)
Efforts to let municipalities buy power from IPPs will be supported by operational changes announced by Eskom chief executive André de Ruyter, which include separating the utility into three divisions. Photo: Ian Landsberg/African News Agency (ANA)

Budget Speech 2020: IPPs eyed to supply electricity

By Dineo Faku Time of article published Feb 27, 2020

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JOHANNESBURG – The National Treasury said yesterday that efforts were under way to acquire additional electricity from existing Independent Power Producers (IPPs).

The Treasury said in the 2020 Budget review that steps to expand electricity supply and to facilitate faster private-sector involvement in the sector would catalyse confidence and growth more broadly. 

It said the Department of Mineral Resources and Energy was assessing information to procure 2 000 to 3 000 megawatts of power through its risk mitigation programme to facilitate large-scale additional power production. 

The power would be connected to the national grid within three to 12 months from approval. 

“The government has committed to open bid window 5 and make it possible for municipalities in good financial standing to buy electricity from IPPs. These efforts will be supported by operational changes announced by new Eskom chief executive (André de Ruyter), which include separating the utility into three divisions, resuming scheduled maintenance practices, fixing defects at Medupi and Kusile, and buying energy from entities with excess supply,” it said.

The Treasury said that the undertaking of procurement processes was critical.

“Regulatory processes need to be simplified to meet deadlines for responses to licensing applications. Self-generation could reduce demand pressures and boost overall supply,” it said.

Mineral Resources Minister Gwede Mantashe told the Investing in Mining Indaba earlier this month that the government had given the mining industry the green light for self-generation of electricity to mitigate against the impact of Eskom’s load shedding. De Ruyter has said that the power cuts would persist over the next 12 to 18 months as Eskom upped its maintenance.

The Treasury said Eskom would reinstate its demand management strategy, with a clear schedule that allowed users to mitigate the most disruptive effects of unplanned outages.

It said annual electricity sector production declined 1.4 percent in 2019 as Eskom’s load shedding hurt the economy.

“Eskom’s energy availability factor, which measures the ratio of available power to the maximum amount that could be produced on a scale of 100, fell from an average of 71.8 in 2018 to 67 in 2019 – and below 60 in December 2019,” it said. 

“A range of factors contributed to the decline, including operational failures at Medupi and Kusile, unreliable coal and diesel supply, and weather-related problems.”

BUSINESS REPORT

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