SA working to include energy IPPs

22 August 2012

The government is working hard to ensure that the electricity regulatory regime is conducive to increasing private sector participation in South Africa’s energy mix, the Department of Energy said in Johannesburg on Tuesday.

“Partnerships are important; government alone cannot solve all the problems,” the department’s deputy director-general, Thandeka Zungu, said at the National Energy Regulator of SA’s first economic regulators’ conference.

South Africa had previously enjoyed low electricity tariffs, with reserve margins above 30%; but the picture was now changing, with reserve margins falling lower.

“It is critical that independent power producers complement Eskom,” said Zungu.

The country’s reserve margins needed to be improved to “constitute a comfortable supply of demand and supply”, and renewable power sources would help to achieve this.

The regulatory regime, said Zungu, continued to be revamped in a parallel process of the introduction of non-Eskom generation.

At the same time, there were constrictions regarding the level to which electricity tariffs could increase.

“The extent to which tariffs can continue to rise is constrained by considerations relating to affordability, competitiveness and economic impact,” said Zungu.

Grand Inga power project

Zungu told the conference that the government was working on tapping into the massive Grand Inga hydro-electric project in the Democratic Republic of Congo (DRC).

“The proposed treaty between the DRC and South Africa is now with Cabinet for approval, after which it will go to the DRC,” said Zungu.

Upon the project’s successful completion, the envisaged hydropower project, with an estimated capacity of 40 000MW, had a potential to change the African energy sector and would increase Africa generation capacity.

This would enhance energy access to clean and efficient energy across the continent and contribute significantly towards a low carbon economy and economic development.

Regulator ‘in a tight spot’

Member of the Petroleum and Natural Gas Regulatory Board of India, PK Bishnoi, said the two-day conference, which concludes on Wednesday, was being held at the right time given the economic slowdown experienced currently.

“Nations like South Africa need energy to fuel their economies and to fully harness their potential,” he said.

Nersa said the conference was being held to share knowledge and best practices. The regulator’s chairperson, Cecilia Khuzwayo, said that while they supported the development of infrastructure, the regulator found itself in a tight spot.

“While we support the development of infrastructure and adherence to policy development by government, we find ourselves in a very tight squeeze where we have to regulate the tariffs, where we have to come up with prices to support the utilities, and make sure the utilities survive; and yet, we have to come up with a tariff and a price that is affordable.

“That is a difficult task at the best of times. Therefore, talking among ourselves as regulators is going to be vital not only in South Africa but also internationally,” she said.

The government’s economic policy is led by an infrastructure thrust that, in the main, will be implanted by state-owned enterprises.