Ramaphosa Heralds End to Private Power Generation Hiatus

After years of prevaricating, South Africa’s government is finally edging ahead with plans to buy more power from private producers, reduce the nation’s reliance on the behemoth state utility Eskom Holdings SOC Ltd. and ease crippling energy shortages.

“Government will soon be initiating the procurement of an additional 11,800 megawatts of power from renewable energy, natural gas, battery storage and coal,” President Cyril Ramaphosa said in his state-of-the-nation address to parliament in Cape Town on Thursday. That follows the publication in 2019 of the Integrated Resource Plan -- a blueprint for the state’s energy mix to be implemented as Eskom power plants are decommissioned.

The winners of contracts to supply 2,000 megawatts of emergency electricity to the national grid will be selected from a shortlist of 28 bidders soon, according to the president. Requests for proposals to supply another 2,600 megawatts from solar and wind plants will then be sought in the coming weeks, followed by a call for additional projects in August.

Ramaphosa also said that previously announced plans to make it easier for companies to produce their own power will be finalized within three months -- a move that could unlock 5,000 megawatts of additional supply. Generation licenses are currently required to produce more than 1 megawatt of electricity, a limit mining and manufacturing companies have lobbied to be increased or scrapped.

Rolling Blackouts

Africa’s most-industrialized economy has been dogged by outages since late 2005 because Eskom, which produces about 95% of the nation’s power, has been unable to keep pace with demand. The rolling blackouts have curbed output in the continent’s most industrialized economy, compounding the economic devastation caused by the coronavirus.

The government initiated one of the world’s most successful renewable-power programs starting in 2011, which garnered more than 200 billion rand ($13.7 billion) in investment from 112 producers. New projects have stalled since 2014, with former President Jacob Zuma’s administration favoring the construction of new nuclear plants that never got off the ground.

While Ramaphosa has been pledging to address the energy crisis since he succeeded Zuma in February 2018, scant progress has been made so far. The time lines in the keynote address are the clearest commitment yet to bring new capacity on line.

“We are delighted to hear the commitments regarding renewable energy supply” and to facilitate more private generation, said Wido Schnabel, chairman of the South African Photovoltaic Industry Association. “We heard this before, but if you listen between the lines, it is more concrete.”

The bidding rounds outlined by Ramaphosa will add capacity to the grid and support local industrialization efforts as well as attracting billions of rand in foreign and domestic investment, the South African Wind Energy Association said in a statement. The completion of projects, along with a so-called emergency procurement round, will help create continuity in the industry, it said.

Eskom Chief Executive Officer Andre de Ruyter has backed increased generation by private producers, with the utility set to decommission about a quarter of its coal-fired generation capacity in the next decade.

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