They could destroy the burgeoning market for 'wheeling projects'
It must be unimaginably difficult to run Eskom. A shortage of generation capacity, a heavy load of debt, internal and external mafia intent on lining their pockets at all costs ...
On October 27, the National Energy Regulator of SA will hold public hearings on Eskom’s tariff restructuring proposals . These proposals have not attracted much interest yet, but if approved will all but destroy the burgeoning market for “wheeling projects” so recently created by the president’s new energy plan.
The customer receives a credit from Eskom for energy injected by the IPP it has contracted with, but at the wholesale electricity pricing system rate, which is lower than the rate Eskom charges customers for power. The financial incentive for customers to sign these long-term commitments arises from the saving they make on the variable energy charges.
We agree that over time Eskom’s price structure should be adjusted to reflect the different parts of the value chain, especially if generation is to be separated from transmission in the Eskom structure. But this needs to be done gradually, predictably and with careful consideration of the effect on load-shedding. It must be managed in a way that does not kill the wheeling market, because that simply reduces supply of new energy at a time when we all desperately need it.
Second, Eskom should incentivise customers and IPPs to build larger projects by agreeing to buy the surplus energy they generate at times of abundant wind or sunshine. This can be done through the existing “standard offer” mechanism — but the offer should be made clear, should be long-term, and should be set at a cost-reflective level such as the Weps rate. The current offer is unclear and set well below even the lowest cost of generation.