Eskom: We will sign renewable deal

Johannesburg - Eskom will comply with the decision by Energy Minister Mmamoloko Kubayi that it must sign power purchase agreements with renewable independent power producers by the end of October.

Eskom spokesperson Khulu Phasiwe told Fin24 the state utility is working with the Department of Energy in preparation for the signing of the agreements.

Kubayi announced last Friday that Eskom would have to sign outstanding power purchase agreement with renewable power producers by the end of October, but that the tariffs in the agreement would have to be renegotiated and can't be more than 77 cents per KWh.

She said the new deal is binding on Eskom, who has been fully canvassed along with the Department of Public Enterprises, as well as the National Treasury.

Public Enterprises Minister Lynne Brown is fully on board with her ministerial colleague's decision, her spokesperson Colin Cruywagen told Fin24.

"The minister was fully involved in the process that led up to the process. She is happy with the outcome," he said, after questions emerged whether Brown or Eskom fully supported Kubayi's decision.

Eskom has refused to sign the last round of bid's power purchase agreements, claiming that current tariffs are unaffordable for the cash-strapped utility, and that it also doesn't need the new projects because there is a surplus of electricity available at the moment.

In Parliament earlier this year, Brown said Eskom would not be able to afford anything over 77c. It is understood that Eskom pressured for a R0.61/kWh tariff cap, but ultimately had to settle for the 77 cents in the final deal.

While wind power and solar power in the last rounds comes close to the 77c and should be able to sign on, concentrated solar power will probably present a bigger challenge.

Wind power’s average tariff was R1.36 per kWh in the first round, but had fallen to 68 cents in the fifth round. Photovoltaic power’s tariff amounted to R3.29 in the beginning but dropped to 82 cents in the last round.

For concentrated solar power the tariff came to R3.20 per kWh. In the last round it had fallen to R1.62 during the day, rising to R4.37 for power produced at peak periods.

Kubayi agreed that concentrated solar power is an expensive technology. “We have to look at the sustainability of the pricing. We are committing to paying tariffs for 20 years, not only two years.”

Contracts to be signed 

The first round bidders, who have already signed power purchase agreements with Eskom, will not be affected. It is the earlier rounds' more expensive tariffs that angered Eskom, leading to the impasse.

Eskom currently has excess generation capacity, due to Kusile and Medupi coming online. Based on current demand patterns, the situation is projected to remain this way until 2021, said Kubayi.

Both the energy and public enterprises departments agree that the majority of the projects in Bid Window 3.5 and 4 should be commissioned closer to 2021 and should then have a minimal contribution to the overcapacity up to 2021.

Kubayi also said South Africa’s National Integrated Energy Plan and Integrated Resource Plan should be concluded first, to give an indication of the capacity South Africa will need before any additional bidding rounds can take place.

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