Independent energy producers were finally making headway in their bid to persuade South Africa’s government to revive long-stalled plans to buy more renewable power when they encountered a new obstacle: the coronavirus.
A five-week shutdown that was imposed in a bid to curb the spread of the disease has sent electricity usage through the floor and left Eskom Holdings SOC Ltd., which supplies about 95% of the nation’s power, with excess capacity. Economic growth and energy demand are likely to remain muted for several years, casting doubts over when additional plants will be needed.
Eskom, which was previously forced to implement rolling blackouts because its aging plants couldn’t deliver sufficient output, has already declared force majeure with wind-energy producers because it doesn’t need their output. And the government which pledged as recently as February to seek new bids from renewable suppliers has gone to ground on when that will happen.
Eskom’s decision to renege on its contracts “really undermines the confidence and the trust that investors have” in the government’s commitment to source additional renewable energy, said Paul Semple, joint head of unlisted credit at Futuregrowth Asset Management, the country’s biggest specialist bond fund manager.
