Cape Town – The standoff between Eskom and the renewable energy sector is concerning and has effectively crippled the momentum of an industry that generated high foreign investment and put South Africa at the forefront of renewable energy uptake.
This was the view of financial risk consultancy JCRA in partnership with the Centre for Economic and Business Research (CEBR), which released a paper on Tuesday in which it measures the cost of Eskom’s rebuff of renewables to the South African economy.
In July 2016, Eskom’s former CEO Brian Molefe announced that it would not sign any independent power producers onto the South African grid, citing the high costs of renewable energy and its unreliability in terms of base load energy as reasons for its decision.
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“South Africa has favourable solar and wind resources, with few land constraints, and as the per-unit costs of various renewable energy types continue to fall, Eskom’s choice to delay the uptake of renewable energy makes little economic sense,” said JCRA Director Lionel Kruger in a statement.
Eskom’s earlier statement that they “remain committed to renewables at a pace and cost the country can afford” seems at odds with its patent lack of commitment to such projects, stalling renewable uptake as these sources become ever cheaper compared to non-renewables, he added.
At a media briefing at Koeberg power station outside Cape Town, Eskom interim CEO Matshela Koko reiterated the power utility's stance that the country cannot rely on renewables to provide base load power and that nuclear power would fulfil this function along with coal-fired power stations.
Public Enterprises Minister Lynne Brown supported Koko’s position, adding that pointing out that renewable energy, such as solar and wind power, as these sources of energy “don’t perform” between 17:00 and 07:00.
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JCRA acknowledged in its study that renewable energy sources can be variable and need to be complemented with more constant power sources, such as gas or hydroelectricity. “On favourable days, renewables can produce large amounts of energy, but a constant flow of energy cannot always be guaranteed. A mixed energy generation system however can offer numerous price and environmental advantages.”
The consultancy in its study pointed out that n South Africa, the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) attracted R196bn of investment from 2011 to 2016 and aimed to attract another R550bn by 2020.
Future investments, however, will be significantly reduced if progress is delayed, Kruger said.
Although former energy minister Tina Joemat-Pettersson and even President Jacob Zuma in this year’s State of the Nation Address pledged support for the REIPPP and renewable energy as part of South Africa’s power generation mix, Kruger said the standoff with Eskom is “a concern”.
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“By controlling the means by which new suppliers can enter, Eskom is essentially in control of the market in which it operates,” reckoned Kruger. “If their targets are ever at odds with policy planners, then more deadlocks in the future seem highly likely.”Read Fin24's top stories trending on Twitter: