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Cabinet sets up electricity ‘war room’ as it unveils five-point stabilisation plan

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Cabinet sets up electricity ‘war room’ as it unveils five-point stabilisation plan

Photo by Duane Daws

11th December 2014

By: Terence Creamer
Creamer Media Editor

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Cabinet has approved a five-point plan to address the current strain on South Africa’s electricity system as well as the creation of a technical “war room” to undertake various interventions to improve supply security over the short and medium term.

Since the start of November, the country has descended into protracted periods of confidence sapping rotational power cuts, which are designed to prevent the electricity network from experiencing a total blackout.

Minister in The Presidency Jeff Radebe announced that the five-point plan included:

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  • Interventions by Eskom over a period of 30 days to stabilise the system, with a focus on raising the availability of its coal-fired plant to above 80%, from 72% currently.
  • Harnessing short-term independent power producer (IPP) and cogeneration opportunities.
  • Accelerating programmes to substitute diesel with gas at the open cycle gas turbines (OCGTs), in the Western Cape.
  • Launching coal and cogeneration IPP procurement programmes by the end of January.
  • And managing demand through energy efficiency projects within households, municipalities and commercial buildings.

Eskom had also been requested to provide a detailed finance plan of its cash-flow requirements for the continued purchase of diesel beyond the end of January 2015 and for a three-year extension of short-term IPP and cogeneration power purchase agreements (PPAs) – the PPAs covering around 1 000 MW are due to expire in March.

Eskom CEO Tshediso Matona recently called for a “national conversation” on the continued use of expensive diesel at the OCGT plants, which were being relied on increasingly to keep the lights on.

The utility had indicated that its diesel budget would again exceed the allocation granted to it by the regulator for 2014/15. Eskom spent a massive R10.5-billion on diesel fuel in 2013/14, which was R8.1-billion above the R2.5-billion set aside by the regulator in its revenue determination for the period. Eskom expected to spend a similar amount in 2014/15, against an approved OCGT cost allocation of only R2.7-billion.

Public Enterprises Minister Lynne Brown said it could not be assumed that there would be an additional bail-out of Eskom beyond that already outlined by Finance Minister Nhlanhla Nene in October and indicated that various options would be considered, including the extension of further guarantees to enable Eskom to deal with its cash crunch.

But Radebe, who read the Cabinet statement, said the plan would be presented before the end of 2014 and that “government will finance the funding model”.

Meanwhile, Energy Minister Tina Joemat-Pettersson said the war room, which would be housed at Eskom, would include technical experts from the Departments of Energy, Cooperative Governance and Traditional Affairs, Public Enterprises, Trade and Industry, Economic Development, Water Affairs, the National Treasury and Eskom.

It would also turn to local and international experts from the private sectors should such resources be required to implement the five-point plan.

Joemat-Pettersson also confirmed that the much-anticipated requests for proposals (RFPs) for the coal and cogeneration IPP procurement programmes would be issued by the end of January.

The baseload coal RFP would be for 2 500 MW, while the tender for cogeneration was expected to be for 800 MW and include near-term prospects from the sugar and paper sectors.

An RFP had already been issued by the Development Bank of Southern Africa on behalf of the Department of Energy and the National Treasury for international and domestic advisers able to design, develop and implement programmes for the procurement of energy from IPPs that could generate electricity from renewable-energy, gas, coal and cogeneration plants, as well as hydroelectric sources in South Africa and within the region.

The programme was likely to be run along similar lines to the Renewable Energy Independent Power Producer Procurement Programme, or REIPPPP, where there have already been four bid windows.

Cabinet also announced sweeping changes to the composition of the Eskom board, but retained Zola Tsotsi as chairperson, despite speculation suggesting that he was to be replaced.

Deputy President Cyril Ramaphosa had also been given the mandate of overseeing the turnaround strategy of Eskom, as well as those being pursued at South African Airways (SAA) and the South African Post Office, with shareholder responsibility for SAA to be transferred from the Department of Public Enterprises to National Treasury.

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