Nersa rejects Eskom’s bid to reserve grid capacity for renewable energy projects

Eskom has failed in its bid to reserve grid capacity for renewable energy projects procured by the state after the National Energy Regulator SA (Nersa) ruled the state-owned power company’s application was unclear and vague.

Last year Eskom published new grid allocation rules that were based on the “first ready, first served” principle, giving preference to renewable energy projects, whether publicly or privately procured, which were ready to connect to the grid.

However, after the failure of bid window 6 of the government’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) — no bids were awarded for wind power projects due to a lack of grid access in some areas — and in anticipation of bid window 7, Eskom submitted an application to Nersa in May to reserve grid connection capacity in favour of independent power producers (IPPs) participating in the public procurement rounds.

Nhlanhla Gumede, Nersa’s full-time regulator member for electricity and a member of the subcommittee, said Eskom had failed to “identify a specific customer group or class of customers which it intends to discriminate against”.

The electricity subcommittee believed Eskom had not shown “objectively justifiable and identifiable differences between public IPPs and private IPPs which necessitate the approval of discrimination”.

The company had also not provided clarity on the specific areas that would be affected and for how long they wanted to reserve grid capacity, Gumede said.

Eskom argued in its application that the liberalisation of SA’s electricity sector has increased competition for limited grid capacity between private IPPs and IPPs participating in the government-backed REIPPPP. Private IPPs that do not have to go through “a moribund [government] energy procurement process” can move at a much faster pace to secure grid connection capacity and bring new generation capacity online than public IPPs, it said.

“Without any form of protection, public procurement programmes remain incapable of competing with the much more agile and well-funded private sector energy procurement programmes. Therefore, without grid preservation/reservation in favour of the public energy procurement programmes, these programmes are likely to continue failing as evidenced by the recent failure of bid window 6 of the REIPPPP.”

In addition, said Eskom, the failure of public procurement programmes eroded investor confidence and undermined the government’s efforts to attract foreign direct investment in the energy sector.

Minister of electricity & energy Kgosientsho Ramokgopa said during a press conference on Monday that the state’s primary concern had to be solving the energy crisis. That implied preference should be given to any IPP, whether publicly or privately procured, that could add new generation capacity to the grid quickly.

“[We] need to be clear about what problem needs to be solved. Is it the credibility of the public procurement process, or are we solving an energy deficit problem? Does it mean that for us to give credence to the public procurement process, we are prepared to delay the onboarding of new generation capacity? My view is that whoever is ready to give us megawatts must come on board,” said Ramokgopa.

erasmusd@businesslive.co.za