MTBPS23 – Private sector, Kusile, Reforms brighten electricity picture

By Alec Hogg

The February 2023 National Budget was mostly about Eskom. No surprise then that the state’s beleaguered former electricity monopoly is also a central player in the MTBPS.

Shortage of electricity is one of three reasons blamed for SA’s poor economic performance – freight rail and ports being the other two. And lots of attention was devoted to sharing plans on how to address this defect at SA’s economic core. 

Treasury documents say next steps in the unbundling of Eskom and legislation to de-monopolise the power grid are the major action points in the government’s reform agenda. 

The approach to date has been spearheaded by “making it easier” for private companies and households to generate their own power via renewable sources, primarily solar panels. 

Just two years ago, anyone but Eskom was effectively barred from producing electricity. Since those regulations were abolished, the private sector has already delivered enough electricity to remove four stages of load-shedding (see image below from Stanlib’s Kevin Lings).

The private sector’s contribution is evident in the fact that although total Eskom power cuts to end-September this year are already greater than the 2022 record, load-shedding hours are down by a quarter. Treasury’s numbers are more conservative than NERSA’s so its prediction of 2025’s more than doubled injection to over 6 000MW in 2025 from the Renewable Energy independent Power Producer Procurement Programme is heartening (see below).

Documentation distributed with the MTBPS says additional capacity of over 11 000MW from renewable sources is expected over the next three years “and this should sharply curtail power cuts”. Since legislation changed to remove the 1MW cap two years ago, private sector energy investments to generate 5 600MW have been registered with NERSA.   

Treasury notes that there is also progress within Eskom itself: Two units at Kusile delivering 1 600MW were recently returned to service with another two more (also 1 600MW) on target to be returned to the national grid before the end of this calendar year. Also, productivity is improving at last with the energy availability factor up from an average 53% in the first three months of the year to almost 60% at present. 

It adds that since February’s Budget, a fresh urgency has delivered an additional 150MW that will be connected to the grid this month; and nine additional projects in the Renewables Programme adding 1 000MW by 2025 and a further 1 000MW in the second phase. 

An amendment approved by president Cyril Ramaphosa’s cabinet in August aims to establish an independent electricity transmission system operator and a competitive electricity market. As part of the unbundling process, a National Transmission Company of SA has been granted licences by the regulator for transmission, trading and importing electricity.

MTBPS documents also point out that the R260bn in debt relief granted to Eskom in the February Budget contains strict conditions which, if unmet, will prevent the loan being converted into equity (ie being written off by the sole shareholder). As a further spur for Eskom’s management, the finance minister converted the loan from interest free to interest-bearing.  

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