Eskom procures 1,100MW from private companies

Eskom has managed to approve the procurement of more than 1,100MW from private companies, including mines, that have excess, existing generation capacity.

The power is being procured via the standard offer programme, which was launched in September 2022 as part of plans to bring more megawatts onto the grid to help end load-shedding. Once added to the grid, the 1,100MW will be enough to prevent one full stage of load-shedding.

Eskom’s target for the programme was to procure 1,000MW of immediately available electricity from large companies with their own generation capacities and from independent power producers (IPPs) that are able to supply more than 1MW to the grid.

The state-owned power company previously told Business Day that by end-August it had added 100MW to the grid through the standard offer programme and it was processing additional applications.

When it launched the programme Eskom said the standard offer approach would allow it to purchase electricity at an established price calculated at the avoided cost of its own generation, including long-term energy purchases from IPPs.

Electricity minister Kgosientsho Ramokgopa told journalists on Monday that procurement programmes such as the standard offer programme will help change the energy landscape in SA and reduce reliance on Eskom’s coal-fired power station fleet.

“[Eskom’s] coal fleet is an asset for the country, but we need to bring in new sources of generation,” he said.

The additional electricity supply that will be added by this programme as well as the government-backed IPP programmes will also reduce the need for making use of “expensive” electricity produced by the diesel-powered open cycle gas turbines (OCGT), Ramokgopa said.

Eskom has made provision to spend about R30bn on diesel to power OCGTs this financial year. In the financial year to end-March 2023, Eskom exceeded its diesel budget of R6.1bn, spending R21bn to run the OCGTs. During the first four months of the financial year from April 1 Eskom spent about R2.3bn on diesel per month on average.

Generation executive at Eskom Eric Shunmagum said the utility has already seen monthly spending on diesel start to decline in October, which could indicate that diesel spending for the year may come in under budget.

Ramokgopa said six more projects from the government’s emergency energy procurement round and bid window 5 of the Renewable Energy Independent Power Producer Procurement Programme (REIP4) are expected to reach financial close by the end of 2023. This will bring these projects, which will collectively add about 700MW of generation capacity, to their construction phase — which means they could start delivering megawatts to the grid towards the latter half of 2025.

The department of mineral resources & energy has yet to launch bid window 7 of the REIP4, which was set to go to market by July.

The national energy crisis committee (Necom) has said that bid window 7 would be launched before the end of July, but Ramokgopa later said that this was likely to happen during the fourth quarter of 2023. The aim is to procure at least 5,000MW of wind and solar generation projects.

Ramokgopa said on Monday that rooftop solar system installed by households and businesses has more than doubled since July 2022 to 4,500MW.

“We see generation from rooftop solar as a significant feature of the future energy landscape in the country.”

The government, he said, is actively encouraging households and businesses to invest in rooftop solar through incentives the Treasury has put in place. These only apply to the installation of solar panels, but Ramokgopa said his department is “actively advocating” to have the incentives extended to include batteries and inverters.

erasmusd@businesslive.co.za