Tag Archive | national grid

UCT says state should buy national grid from Eskom

The state should own South Africa’s national electricity transmission grid as an independent unit, as is common in many other countries, thus separating the grid from the operations of Eskom to in order to improve the perception in an investor’s mind of how the electricity generation industry was structured in this country. This was proposed by UCT’s Graduate School of Business (UGSB).

In a submission before the parliamentary portfolio committee on energy on the Independent System and Market Operator (ISMO) Bill, Joseph Kapika, on behalf of Prof. Anton Eberhard of UGSB, presented the case for the separation of the two structures – South Africa’s national transmission grid currently owned by Eskom, and that of Eskom itself as an operational generating body.

In complete contrast to an earlier Eskom proposal, which had mitigated for a slowing down of the process of allowing independent generating bodies proposed by the ISMO in order to preserve Eskom financial credibility, Kapika said that the reverse was needed and that the process of establishing ISMO should be speeded up in view of the dismal track record of Eskom over the last few years to run the system.

Furthermore, UGSB suggested that the minister of energy and thus Department DOE through ISMO, be given full responsibility for energy and electricity planning in South Africa.

He added that in the view of UGSB, Eskom would find itself totally unable and unqualified to deal with independent power producers (IPPS) and the hybrid power market in general. Similarly they were not the right people to handle procurement for independent power structures, whatever the type and route taken for the ISMO process.

In a radical suggestion which resonated well with a number of MPs, Kapika said that the entire grid should be bought by the state from Eskom in a simple transfer.  Costs, say it was R50bn he said, should be simply transferred as cash to Eskom in return to re-enforce their balance sheet and creditworthiness for such matters as power stations.

This would ensure a level playing field for investors, Kapika said, independents therefore establishing that the grid was free of encumbrances from Eskom and its track record.

MPs asked Joseph Kapika whether USGB felt this move would bring prices down or would such a move better control licensing of IPPs and bring security of choice to the system.   Kapika replied that whatever was said and done with ISMO, the process of establishing a level playing field for investment was the most important issue and affected both subjects.

He added that the fact that Eskom controlled 90% of the power generation and controlled also the grid gave the perception of unfairness and uncompetitiveness and therefore the perception that Eskom completely controlled the entire electricity market from start to finish was a sorry state affairs for any investor to consider.

When asked why there was only a 2% IPP input at present in the form of investors to the system, mainly solar, and what was causing the blockage, Kapika replied that it had much to do with the dominance of Eskom but UGSB had also looked to other countries “to see what had happened with their IPPs and ISMOs”.

They had found that there were many issues involved but it was quite clear that it was not just high prices that attracted IPPs to make an investment. The answer had to be that in South Africa there had to be better definitions of powers and ownership between what the ISMO does and cannot do and what Eskom owns and should not own.

This was urgent, Kapika said, and thought should be given to the idea of separation of control over the segments of the industry as soon as possible.

Posted in Education, Electricity, Energy, Land,Agriculture, Mining, beneficiation, Public utilities, Trade & Industry, Uncategorized0 Comments

First round of IPP producers named for grid supplies

In the first round of allocation of bidders in terms of the department of energy (DOE) renewable energy allocation procurement programme, 39% of the allocated 3625MW for independent power producers has been decided upon.

Parliamentarians were told that the number of “passing bids” was 66.5% of those submitted, resulting in a total capacity of 1415 MW of the 3725MW to be procured being taken up at this stage.

By far the greatest number of projects was solar energy projects, either solar voltaic or solar CSP, with slightly over 30% being wind projects. Twenty eight projects in all were found to be acceptable.

No biomass, biogas, landfill or small hydro projects were submitted in this round, or “window” as it is referred to by DOE.     All projects decided as acceptable were from Eastern, Western and Northern Cape. In all some 68 applications were received.

Ompi Aphane, acting deputy director, DOE, told the portfolio committee of energy that small 100MW projects would be handled separately, the original procurement documents for the bidders for larger scale projects having been released during August 2011 and the compulsory bidders conference held in September for these and for the second window now to be considered.

All documents have been treated as confidential by all parties and are still treated as such in view of the fact that the process is ongoing.

Evaluation of projects on the issue of land rights where, Aphane said, South African law “was antiquated and not clear”, have and might give difficulties. The same applied to municipal issues insofar as relationships and responsibility might be concerned, he said.

On the whole such issues would be the concern of the supplier to sort out but it had to be remembered, Aphane said, that at the same time all such problems were “everybody’s problems and it would serve South Africa best to sort them out at every level.”

On land matters as well, there might be problems in agricultural areas concerning projects that involved good arable farming land but very little in the way of problems were land was fallow had arisen so far or had been pointed out by the evaluators. Registration of leases or proof of land use application had to be shown in submissions.

Commercial legal issues, economic development priorities, financial oversight and technical issues had all been studied and a large evaluation team made up of international legal experts, well known local legal evaluation teams and technical consultants had been assembled. Financial evaluation had been undertaken by Ernst and Young and PricewaterhouseCoopers.

Under questioning by parliamentarians it became evident that all competitors had to be at least 40% South African owned. When asked if there were any landfill, biogas, and biomass projects that had become evident in early bidding under the second window period, Aphane said that such had not arisen at all, nor were they expected to be, mainly because they would be of a minor nature insofar as they would fall under projects providing 100MW or less.

Hydro projects had not arisen. He also commented that projects emanating from “fossilisation processes” were disallowed.

On whether the same extended and expensive evaluation process would be applied to the second and third round of bidding, Aphane said that “DOE had learnt much from the processes applied in the first round” and that the ground rules established by both experts, consultants and official bodies could be applied henceforth.

Questions on final pricing per unit of electricity arose and deputy director general Aphane said that this could not be discussed at this stage for reasons of security but in his mind as the bidding progressed he would expect to see the final price dropping.

DOE was working itself on a figure of something in the region of “R2.75 to R2.80 a unit” before bidding opened. This may go down, he said, but the final price had to apply to all involved in all bids.

Aphane confirmed in answer to questions that the “position with regard to legal difficulties on the licensing of independent operators with NERSA, the national energy regulator, had been resolved”.

Further questioning from parliamentarians resulted in Aphane confirming that the current IPP energy exercise was not in any way connected to the South African government overseas investment exercise with foreign companies on energy renewables, known as SARi.

On finance, once all bidding was completed, the three windows were closed and the final results were known and contracts granted, Aphane said, DOE was particularly aware of the problem of a sudden importation into South Africa of a large quantity of equipment from overseas and the effect this might have upon the rand.   Steps were in hand to counter this, probably by phasing in start dates.

Final questioning came from parliamentarians on the issue of land once again, particularly when the issue of litigation by present land owners arose either on matters of expropriation or proximity.

Aphane said that DOE could not be involved in such matters, which were the supplier’s problem.  However, broadly speaking, if any such problem arose in terms of it becoming a national problem, it would then naturally become a “South African problem as a whole” and this would have to be dealt with. DOE would monitor the situation.

The exercise regarding the “whole question of smaller 100MW or less, self-sustaining and possible minor contributions to the national grid” would be studied at a later date, he said.

Posted in Electricity, Energy, Finance, economic, Fuel,oil,renewables, Land,Agriculture, Mining, beneficiation, Public utilities, Trade & Industry, Uncategorized0 Comments


This website is Archival

If you want your publications as they come from Parliament please contact ParlyReportSA directly. All information on this site is posted two weeks after client alert reports sent out.

Upcoming Articles

  1. MPRDA : Shale gas developers not satisfied
  2. Environmental Bill changes EIAs
  3. Border Mangement Bill grinds through Parliament

Earlier Editorials

Earlier Stories

  • Anti Corruption Unit overwhelmed

    Focus on top down elements of patronage  ….editorial….As Parliament went into short recess, the Anti-Corruption Unit, the combined team made up of SARS, Hawks, the National Prosecuting Authority and Justice Department, divulged […]

  • PIC comes under pressure to disclose

    Unlisted investments of PIC queried…. When asked for information on how the Public Investment Corporation (PIC) had invested its funds, Dr  Daniel Matjila, Chief Executive Officer, told parliamentarians that the most […]

  • International Arbitration Bill to replace BITs

    Arbitration Bill gets SA in line with UNCTRAL ….. The tabling of the International Arbitration Bill in Parliament will see ‘normalisation’ on a number of issues regarding arbitration between foreign companies […]

  • Parliament rattled by Sizani departure

    Closed ranks on Sizani resignation….. As South Africa struggles with the backlash of having had three finance ministers rotated in four days and news echoes around the parliamentary precinct that […]

  • Protected Disclosures Bill: employer to be involved

    New Protected Disclosures Bill ups protection…. sent to clients 21 January……The Portfolio Committee on Justice and Constitutional Affairs will shortly be debating the recently tabled Protected Disclosures Amendment Bill which proposes a duty […]