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South Africa to open up power generation to tackle energy crisis

by Atlanta Business Journal

The South African government has enlisted the private sector in an emergency plan to tackle the worst ever rolling blackouts in Africa’s most industrialised economy, by scrapping controls on companies generating their own power outside the broken Eskom monopoly.

President Cyril Ramaphosa said on Monday that a wave of new private generation was needed to rescue the country’s grid after recent power cuts of unprecedented intensity “disrupted all of our lives and caused immense damage to our economy”.

A cascade of breakdowns and illegal strike action at Eskom’s fleet of ageing coal stations have plunged South Africans into darkness for up to 12 hours a day this winter, accelerating the utility’s long decline and adding to pressure on the ruling African National Congress.

South Africa will also double its procurement of renewable energy this year to more than 5,000 megawatts and create incentives for those with rooftop solar panels to sell power to Eskom, under expedited policies to alleviate so-called load-shedding.

After a decade of unstable power supplies, “South Africans are justifiably frustrated, and they are also angry”, Ramaphosa said. “The shortage of electricity is a huge constraint on economic growth and job creation.”

Removal of limits for generation licences will ease the process for mines and other businesses to set up their own projects, such as solar farms, and sell the excess power to Eskom.

The licence threshold was already raised from 1MW to 100MW last year, a barometer of Ramaphosa’s increasing resort to private sector supplies as Eskom’s decline has accelerated.

“South Africa has not even begun to exhaust its renewable energy potential, and this is a big step towards that end,” Greenpeace Africa said.

But even without the need for licensing, investors have warned that the paperwork for setting up generation is still too wrapped in red tape and they say projects will take years to come online.

Ramaphosa is dealing with the legacy of years of failure to invest in new supply, forcing Eskom to keep decades-old plants running without proper maintenance in order to keep the lights on.

That has left Eskom with as little as 26,000MW of capacity to meet national demand that peaks at 32,000MW in winter — forcing it to cut off up to 6,000MW from the grid at a time.

Despite the crisis the ANC, whose heartlands include the coal-producing regions that supply Eskom, has been internally divided over taking power generation out of state hands. South Africa’s last complete procurement of independent renewable power was in 2016.

South African cities under opposition control such as Cape Town are already racing to procure their own power away from Eskom.

The government will also develop a plan by October to deal with Eskom’s debt of nearly R400bn ($24bn), Ramaphosa said.

“These actions are directed at fundamentally transforming the electricity sector and positioning it for future sustainability,” he added.

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