2. EIUG/Eskom Demand Stimulation Workshop

  • This workshop took place on 12 May 2017 between representatives from Eskom and the EIUG.
  • The purpose of the workshop was to identify opportunities and to understand the challenges faced by Eskom and EIUG members in relation to electricity demand and sales.

 

This workshop took place on 12 May 2017 between representatives from Eskom and the EIUG. The purpose of the workshop was to identify opportunities for demand growth and to understand the challenges faced by Eskom and EIUG members in relation to electricity demand and sales.

Eskom currently has a surplus of electricity capacity owing largely to reduced industrial demand. There are several contributing factors including international economic structural changes over recent years, commodity price fluctuations, closure of companies and/or downscaling of operations in South Africa and the implementation of energy efficiency practices.

The session was an information exchange and a sharing of ideas. Eskom presented the corporate plan, generation overview in changing times, system operation for medium to long term outlook / adequacy and the pricing strategy. Both parties shared information and assumptions on plans and committed to work together to ultimately grow South Africa’s economy.

Electricity price is one component that could address these challenges, but should not be viewed as the silver bullet as there are many challenges faced by industry and the economy. Rational, transparent pricing and price certainty would however, go a long way to restoring investor confidence in the country.

Some of the concerns raised by the EIUG include:

  • The future of nuclear generation related to the IRP Plan and closure of the three coal fired power stations needs to be evaluated in terms of future country load growth.
  • The credit downgrading of South Africa in relation to Eskom’s borrowings to fund the new build is viewed as a challenge by the EIUG.
  • The EIUG raised a concern that Eskom needs to conduct a fair evaluation of future load growth with the intention to defer building all the units at Kusile.
  • The impact of renewable load on the Eskom system displacing low cost coal generation, was raised as a concern.
  • COP 21/Climate Change and policy: concerns were raised that Eskom’s carbon footprint based on the coal generation might also affect Eskom’s borrowings in the international markets to raise funds as international investors may see Eskom’s high carbon emissions as a risk and withhold investment. Compliance with national carbon emission targets and air quality regulations and the cost of compliance is also an issue.
  • The cost to manage units being on cold reserve and being called upon to generate by the system operator, needs to be managed effectively to avoid any unnecessary startup costs.
  • Subsidies and levies in the tariff across all distributors need to be investigated and addressed.

 

It was also suggested that a joint committee, including wider business representation, be established to try influence at a government department and parliamentary level and to address policy and regulations. The EIUG is in discussions with other business associations, and Eskom and will keep members informed on progress.

The confidential presentation made by Eskom has been sent to EIUG members and is not to be shared with any third-party. If any member did not receive the presentation, please contact the PMO.