Lynne Brown says: Low power demand leaves little room for independent producers

Public Enterprises Minister Lynne Brown on Wednesday said given a surplus of electricity and low demand, the current trajectory and pace at which independently produced power is added to the grid could be detrimental to consumers.

The minister’s written reply to a parliamentary question
by Dean Macpherson sheds some light on her view regarding the resistance by Eskom to connect independent power producers to the grid.

 

 

Former Eskom CEO Brian Molefe refused to sign a purchasing agreement with independent power producers, saying this would be too expensive for Eskom.
Brown said in the last six months to end September, electricity demand grew year on year by only 1.2% and had been fairly flat for the past decade.

"The current capacity being added on the grid is based on the integrated resource plan 2010 which projected higher demand for electricity based on the economy growing close to 6%. This means that we are currently adding on capacity to the grid at a rate higher than what is required," Brown said.
The key assumptions in the integrated resource plan needed to be updated to provide a robust plan, she said.

"The biggest risk with having too much capacity is what happens to the plants that will potentially become stranded. While Eskom can push for a more aggressive export strategy to mitigate this, it comes with its own limitations including transmission capacity. The challenge then becomes that Eskom would still need to collect the same level of revenue to cover the incurred costs.
"This is particularly critical at a time where Eskom’s balance sheet is highly indebted due to the build cycle. So with low volumes, the price of electricity will have to rise to sustain the required level of revenue, meaning consumers will have to pay more for electricity."

Brown said she had a responsibility to safeguard Eskom’s assets, which belonged to the country, to ensure that the maximum value was derived.
"The current trajectory will potentially be detrimental to consumers and it is critical that the integrated resource plan is concluded so we can have a plan that offers maximum protection for consumers," Brown said.

Replying to another question by DA mineral resources spokesman James Lorimer, Brown said Optimum Coal Mine was fined R2m in August 2015 for the delivery of substandard coal to Eskom.
This had not yet been paid as no agreement had been reached and the matter was still the subject of arbitration.

With regards to Eskom’s long-term coal suppliers, excluding Optimum Colliery which supplies Hendrina Power Station, a total of R90m in penalties was levied for the period April 1 2015 to September 30 2016.
"Fines normally referred to as penalties have been levied in all instances where coal quality is at the bottom end of the expected range. A coal penalty regime is a standard condition of Eskom contracts," Brown said.