Eskom crisis worries South African renewable energy producers

The South African wind industry this month attempted to deflect a threat to renewable energy interests caused by problems at state-owned Eskom.

A renegotiation of terms with successful bidders in the first two rounds of the country’s Independent Renewable Energy Producer Supply Program (REIPPPP) would constitute “a clear breach of contract and damage investor confidence,” he said. South African Wind Energy Association.

The statement came in response to reports that South Africa’s SOE Minister Pravin Gordhan was considering a review of the REIPPPP terms promised to independent power producers (IPPs).

So far, PPIs have not been formally asked to renegotiate their contracts, said Brenda Martin, CEO of the South African Wind Energy Association.

But South Africa’s renewable energy industry, once seen as the exemplary result of a well-run auction process, is clearly worried about the fallout from a crumbling Eskom. In recent days, the fate of the huge public service has become a political hot potato.

South Africa’s main opposition party, the Democratic Alliance, unveiled a poster campaign this month claiming that the ruling African National Congress had ‘turned off the lights’, a reference to the resulting prolonged blackouts. load shedding in Eskom.

South African newspapers, meanwhile, reported blackouts hitting small businesses ranging from pottery to restaurants. “The load shedding is killing small businesses,” the community news agency GroundUp said.

The cause of the blackouts is coal, which in most other markets would be considered a stable but disorderly form of basic production. Eskom’s two most recent coal-fired power plants, Medupi and Kusile, “were poorly designed and poorly constructed and are not operating at optimal levels,” Gordhan admitted.

Other sources said the factories, which by some estimates cost around three times their original budget, are only 40 percent reliable. In the 10 months until the end of January, Medupi went offline 66 times and Kusile 18 more.

With the rest of Eskom’s aging coal fleet also subject to frequent unplanned outages, the South African grid simply cannot keep up with demand. Even ending Medupi and Kusile’s troubles probably won’t fix the situation.

In a saga that rivals Pacific Gas & Electric’s wildland fire responsibilities and resulting bankruptcy, Eskom has been on the brink for years due to the corruption and mismanagement that even led to the ouster of South African President Jacob Zuma a year ago.

At that time, Eskom was on the verge of bankruptcy. A hastily installed new management team was rushing to mount a bailout. But it wasn’t until early this month that President Cyril Ramaphosa finally revealed the details.

Eskom will be divided into separate production, distribution and transmission activities under a state-owned holding company, he said. It remains to be seen whether this strategy will work.

“While the dismantling of Eskom may make it easier to manage and improve its operational performance, it will not immediately solve its financial problems, as the company has a debt of 419 billion rand ($ 31 billion),” he said. Bloomberg said.

In addition, the proposed unbundling means job losses pitting Ramaphosa against powerful union interests, which the president needs to be sure of winning the May elections.

Chris Ahlfeldt, energy specialist at Cape Town consultancy Blue Horizon, said Eskom’s split would at least give PPIs a more level playing field to sell their supplies.

Until now, the state-owned company has tended to prefer power from its own generation assets, resulting in an embarrassing delay in signing IPP power purchase agreements last year.

Another revolving benefit of Eskom’s woes is that regular blackouts force wealthier energy customers to seek alternatives to the grid. “There are a lot of customers looking to upgrade their battery systems and install solar power on the roof,” Ahlfeldt said.

It seems that bringing more renewable energy into the system can only be a good thing. Ahlfeldt said the REIPPPP has already added 4 gigawatts of potential generating power, spread over 65 IPPs.

More could be in the cards as part of an integrated resource plan that is expected in the coming weeks. But while Eskom, the country’s only major buyer, remains mired in debt and management disputes, it’s hard to see what difference other supply cycles will make.