Eskom Seeks South Africa Talks to Review Independent Power

  • Utility won’t sign new agreements with independent producers
  • Consumers will bear costs of new sign-ups, Phasiwe says

South Africa’s Eskom Holdings SOC Ltd. wants to meet the Department of Energy to re-evaluate the need for independent power producers before signing further agreements, including one for a solar project that was due to be finalized on Aug. 24.

“We’re saying, ‘let’s have a discussion’ before we sign”’ the power-purchase agreement with Redstone, Eskom spokesman Khulu Phasiwe said by phone on Monday, referring to a supply deal with ACWA Power International for a $900 million, 100-megawatt solar power plant, planned for the Northern Cape province. “Obviously the consumer will be the one bearing the brunt of these decisions that we are taking.”

Chief Executive Officer Brian Molefe refused to sign the agreement with ACWA Power, even though it’s already been accepted by the government, Business Day reported on Monday, without saying where it got the information. The cost of the project, which includes a 20-year supply arrangement, had risen to 62 billion rand ($4.3 billion) from 50 billion rand, Phasiwe said. “For Eskom to commit to 62 billion rand for something that we don’t need? In any other company that would be called a wasteful expenditure.”

Generation Capacity

The utility said it has enough generation capacity to meet demand and shouldn’t be bound to buying more expensive renewable energy from independent producers, while backers of the Department of Energy’s program to diversify the country’s power mix have criticized the company for delaying investment in alternatives to coal-fired plants.

ACWA Power and the Department of Energy didn’t immediately respond to phone calls and e-mails seeking comment.

South Africa has attracted 194 billion rand of investment in energy infrastructure through its program to obtain power from independent producers of the renewable variety. It also plans to get electricity from non-state operators using coal and gas.

The government pushed to diversify its sources of electricity as Eskom, which provides about 90 percent of the nation’s power, had to ration supply after decades of underinvestment in aging plants and delays in the startup of new ones. Business and consumers in the continent’s biggest economy endured almost-daily scheduled power cuts in the first half of last year.

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