By Jason van der Poel, Partner, Mzukisi Kota, Partner, Hielien Venter, Partner, Aviva Hoekstra, Associate & Emma Bleeker, Trainee Attorney from Webber Wentzel
Following President Cyril Ramaphosa’s announcement regarding Government’s intention to implement new strategies to end loadshedding once and for all, there has been some debate as to whether these interventions will provide the solutions SA so desperately needs.
In the third and final part of this article series, the topics to be covered include the incentives government will provide for households and businesses to generate their own solar power, how Eskom’s existing power supply will be expanded and finally how the national energy grid will be restructured to allow for a more competitive electricity market in SA.
INCENTIVISING INVESTMENT IN ROOFTOP SOLAR THROUGH FEED-IN TARIFFS
Government has acknowledged the potential for households and businesses to install rooftop solar solutions and to connect this power to the grid. To incentivise greater uptake of rooftop solar, Eskom will develop rules and a pricing structure, known as a “feed-in tariff”, for all commercial and residential installations on its This means that those who have installed solar panels in their homes or businesses will be able to sell surplus power to Eskom. There are some complexities here as most of these installations occur within municipal distribution systems rather than Eskom’s transmission systems. It is unclear at this point the extent to which municipalities have bought into this regime and it will be interesting to see what proposals are made to deal with issues of net metering and billing within the municipal system.
IMPROVING THE PERFORMANCE OF ESKOM’S EXISTING POWER STATIONS
To address the red tape around buying spares and equipment to effect critical repairs at power stations, it was announced that Eskom’s budget for critical maintenance will be increased over the next 12 months. Eskom is actively recruiting skilled personnel, who will work towards reinstating world-class operating and maintenance procedures.
We suspect Eskom will be relying on emergency procurement procedures which allow deviation from the ordinary requirements to have to go through a competitive tender process in order to buy spares and equipment on an urgent basis. This is something which is self-evidently open to abuse and has the potential to be a vehicle for corruption and looting of this increased budget allocation. It remains to be seen what structural mechanisms will be put in place to ensure that the by-passing of the ordinary processes, with their associated protections, does not result in abuse.
THE FUNDAMENTAL TRANSFORMATION OF THE ELECTRICITY SECTOR AND POSITIONING IT FOR FUTURE SUSTAINABILITY
National Treasury is finalising a sustainable solution to Eskom’s ZAR 400 billion debt, and the Minister of Finance will outline how this matter will be dealt with in the October Medium-Term Budget Policy Statement. Government will use climate funding provided through the Just Energy Transition Partnership to invest in the grid and will also repurpose power stations that have reached the end of their lives.
Government has previously announced that the restructuring of Eskom will result in the establishments of three entities, namely an electricity generation entity, an electricity transmission entity and an electricity distribution entity. Eskom has already established an independent transmission company and is on track to separate its generation and distribution businesses by the end of 2022. It will soon be appointing boards for the transmission and generation entities. The grid will remain state owned, despite these interventions. The unbundling of Eskom and the broader reforms to establish a competitive electricity market will allow more generators, both private and state-owned, to compete on an equal footing.
Broader reforms to establish a competitive electricity market will be expedited through the finalisation of the amendment of ERA to promote private sector investment. The second amendment Bill to ERA was published in February 2022 and the DMRE has been engaging with various stakeholders to incorporate comments and release an amended Bill later in 2022. To ensure that these measures are implemented in a co-ordinated manner, President Ramaphosa has established a National Energy Crisis Committee (NECC) which is chaired by the Director-General in the Presidency and brings together all the departments and entities involved in the provision of electricity.
CONCLUSION
The Government interventions proposed by President Ramaphosa to address South Africa’s electricity supply crisis are very positive and long overdue. The implementation of these measures will be critical to rescue South Africans and their economy from the ravages of the ongoing load shedding and lead them towards sustainable economic growth and well-being.