Green Economy Journal Issue 58

NEWS & SNIPPETS
NEWS & SNIPPETS
OF SA, GOVERNMENT AND
KARPOWERSHIPS
According to Rudi Dicks, head of the project management
office in the Presidency and member of the National Energy Crisis
Committee (NECOM), government is considering reducing the
term for Karpowership contracts as an “emergency measure”.
Dicks says contracts of potentially five to 10 years would be
preferable to the initial term of 20 years.
Despite being named as a preferred bidder in government’s
RMIPPPP in 2021 to provide over 1 200MW of power at three of
South African ports, Karpowership has drawn criticism over the
cost of its 20-year contract along with its refusal of environmental
authorisation for its three vessels at the Richards Bay, Ngqura and
Saldanha Bay docks.
NECOM has taken the view that a shorter-term period would
have to be looked at, potentially between five and 10 years.
By Andre van Wyk
ESKOM’S WOES WORSEN
Eskom’s financial losses and smothering debt levels are set to
balloon, making it more difficult for the power utility to stem
the tide of intensified blackouts across SA.
Eskom made a financial loss of R21.2-billion during 2022/3. Eskom
had budgeted for a R13.6-billion loss. Gross debt securities and
borrowings (or debt levels) increased to R439.1-billion in 2022/3
from R396.3-billion in 2021/2. The utility attributes the 11% increase
in its debt levels to the impact of the weak rand.
A broken business model
Eskom’s net revenue grew to R259.2-billion in 2022/3, up from
2021/2’s R247.6-billion. The utility cannot generate enough revenue
from its electricity tariffs approved by Nersa. In 2022, an increase
of 9.61% was granted to Eskom, lower than the 20.5% it asked for.
During 2022/3, Eskom spent R21.36-billion on diesel purchases
(more than double 2021/2).
Municipalities owe billions
Total invoiced municipal arrear debt increased to R58.5-billion at
year-end, up from 2021/2’s R44.8-billion. A total of 61 municipalities
has arrears debt of over R100-million each.
Eskom’s sales volumes were 3.1% lower than budgeted and
declined by 4.3% from 2021/2.
During 2022/3, Eskom received R21.9-billion in equity support
from government. Government has committed to taking over R254-
billion of Eskom debt in the next three years.
Daily Maverick
WIND FARM FOR SIBANYE-STILLWATER
AIIM consortium reached financial close on 89MW Castle Wind
Farm to supply renewable energy to Sibanye-Stillwater’s mining
operations via an Eskom wheeling agreement. The consortium
consists of African Infrastructure Investment Managers (AIIM),
African Clean Energy Developments (ACED) and Reatile Renewables.
This milestone marks the effective date of the PPA and the
commencement of construction. The energy will originate from
Castle Wind Farm (Northern Cape) and will result in energy cost
savings, increased energy security and decarbonisation benefits for
Sibanye-Stillwater.
This transaction will be the second private wind power wheeling
project in SA to have reached financial close. Rand Merchant Bank,
a division of FirstRand Bank Limited, is the sole-mandated lead
arranger for the project.
THE PRESIDENCY BUDGET VOTE 2023/4
Delivered by President Ramaphosa
Progress has been made in implementing measures outlined in
the Energy Action Plan. The private sector can invest in electricity
generation projects of any size. More than 100 projects are at
various stages of development, representing over 10 000MW of
new generation capacity and over R200-billion investment. The
exponential growth of private sector investment in electricity
generation is proof that this reform is having a major impact.
The procurement of new capacity has been accelerated. Three
projects from the risk mitigation programme have entered
construction, with a further five projects expected to reach financial
close during this quarter. Project agreements have been signed
for 25 preferred bidders from Bid Window 5 and 6 amounting to
approximately 2 800MW, of which 784MW is already in construction.
In the coming months, the procurement of more than 10 000MW
of additional generation capacity will be initiated. Municipalities can
procure power independently. Several municipalities have embarked
on processes to procure additional power of up to 1 500MW.
Government is driving progress on the unbundling of Eskom
into separate entities for generation, transmission and distribution.
Significant progress has been made towards the establishment of
the national transmission company as an independent subsidiary
of Eskom.
Government is pursuing sweeping legislative reform and has
introduced the Electricity Regulation Amendment Bill, which
seeks to establish a competitive electricity market and support the
unbundling of Eskom.
Another key piece of legislation, the Energy Security Bill, will
soon be introduced to streamline the regulatory framework
and accelerate construction of renewable energy projects. Tax
incentives have been introduced to support the rollout of rooftop
solar for households.
Jobs must be protected in sectors of the economy that must
decarbonise to remain competitive.
Where it may be necessary to delay the decommissioning
coal-fired power stations temporarily to address electricity supply
shortfall, any decision will be informed by a detailed technical
assessment, the timeframe in which new generation capacity is
expected and the impact on SA’s decarbonisation trajectory.
Trade, Industry and Competition recently announced the
establishment of an energy resilience fund of R1.3-billion.
The value of projects currently in construction is over R300-billion,
including energy, water infrastructure and rural roads projects.
The pipeline of green hydrogen projects with a value of over
R300-billion is significant. Among these projects is the Boegoebaai
Green Hydrogen (Northern Cape) with a potential to create
thousands of jobs.
Two years ago, the Blue Drop and Green Drop water quality
monitoring systems were administered to monitor SA’s water
quality. This will enable stronger intervention in municipalities
that fail to meet the minimum standards for water service delivery.
Last year’s Green Drop report points to serious challenges in
municipalities when it comes to managing water resources. The
challenges in water provision highlight the broader challenge of
dysfunctionality in many municipalities.
NERSA: GREEN LIGHT FOR ESKOM
Nersa has announced its approval for Eskom’s plan to purchase 344.5MW new generation
capacity. Eskom can procure 75MW of new generation capacity from solar at Lethabo
Power Station (Free State) and 19.5MW (solar) at Sere Wind Farm (Western Cape) as well
as 100MW (solar) and a 150MW battery energy storage system at Komati Power Station
in Mpumulanga.
The generation capacity must be procured by Eskom through tendering procedures that
are fair and cost-effective. Nersa has approved the national free basic electricity rate of
172.76c/kWh for 2023/4, effective from July.
Business Report
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