SA gets private power

These are the first agreements Eskom has entered into with private electricity providers, which will add 300MW of generation capacity to South Africa's electricity network by July. Another 100MW will be added by March.

After the electricity crisis in January 2008 government decided to introduce private electricity generation, but the struggle to establish a legal framework has so far held up the process.

The six contracts for the purchase of private electricity are being entered into in terms of a decision by the National Energy Regulator (Nersa) in February, when the medium-term tariff increases were announced.

Nersa determined that Eskom could spend R2.3bn on buying electricity from private producers this year, R4.3bn next year and R5.8bn in 2012.

This is a special measure to increase Eskom's generating capacity until a full regulatory framework for independent power producers can be established. The framework will eventually include an independent buyer and seller of electricity.

On Sunday the electricity giant's spokesperson Andrew Etzinger said that these six contracts formed part of the Medium-Term Power Purchase Programme (MTPPP), one of two categories of private power producers from which Eskom is permitted to buy electricity.

It could involve co-generation by large industrial consumers that sell electricity as a byproduct to Eskom, or fully-fledged producers which generate power from purchased sources of energy. Etzinger declined to say how the contractors' power would be generated.

Hopes for more power by July

Scaw Metals, an Anglo American subsidiary, recently published a tender for the construction of an electricity plant that, as an independent, would deliver electricity to Eskom.

Department of energy director general Nelisiwe Magubane said the two contracts concluded so far had been sent to Nersa for approval, after which the IPPs could proceed with their developments.

As soon as approval has been given, she said, the parties will start environmental impact studies as well as other pre-development work. Once this has been concluded, the providers should be able to supply electricity to South Africa within a few months.

The 400MW is being permitted in terms of government's integrated resource plan 1 (IRP1), which was announced in December last year. The IRP1 also provides for 1 025MW of electricity being bought from renewable energy sources by 2013.

The department of energy is still working on the IRP2. Certain amendments will be made to the IRP1 and these are expected to be finalised later this year. One possible amendment is that the IRP2 could set higher targets for IPPs, as well as for renewable energy.

It costs Eskom about 31c per kilowatt hour (kWh) to generate electricity. The utility has previously indicated that it expects to pay independent power producers 65c per kWh for the electricity they generate.

Eskom chief executive for planning Kannan Lakmeeharan said two contracts have already been drawn up for some of the four IPPs Eskom is still negotiating with. These just need to be signed.

As far as the last two of the six are concerned, a few issues need to be sorted out before their contracts can be signed. These terms are being negotiated.

Lakmeeharan said Eskom hopes to have access to about 300MW of the power that the IPPs can deliver by July 2010.

It hopes that the remaining 100MW will be ready by March 2011. These dates are of course dependent on approval from the IPPs as well as Nersa.

Lakmeeharan said Eskom estimates a further 1 000MW to 3 000MW of power could be obtained from IPPs.

- Sake24.com