On 25 July, President Cyril Ramaphosa announced his highly anticipated emergency plan to address what he recognised to be a national crisis, but a crisis that could be used as an opportunity for a just transition also through a revival of economic growth and job creation.

Whereas South Africa has installed capacity to produce approximately 46 000MW of electricity, only 60% of installed capacity is available at any given time, resulting in a current shortage of around 6 000MW. The Presidential approach to addressing these capacity constraints and stabilising baseload can be summarised as fast-track measures designed to achieve:

• Stabilising Eskom and improving Eskom’s existing fleet of power stations and grid infrastructure.
• Accelerating procurement of new generation capacity.
• Increasing private sector investment in generation capacity.
• Enabling businesses and households to invest in rooftop solar. 
• Fundamentally transforming the electricity sector and positioning it for energy security and future sustainability.

Starting with proposals for the private sector in partnership with Eskom (which will continue as the mainstay of the country’s energy sector, but in an enhanced form being “to big to fail” but co-existing with private generation capacity), the President promises great strides toward the urgent procurement of new capacity from renewables, gas and battery storage. In this spirit:

• The licencing threshold for embedded generation (currently 100MW) “will be removed completely” to enable private investment to increase. All generators will still have to register with NERSA and comply with the technical requirements for grid connection and environmental legislation.

• Despite recent attacks on Andre de Reuter and his team at Eskom, the President endorsed them as a “capable and effective management team” after years of gruelling state capture and mismanagement. In the context of a heavy emphasis on fixing Eskom and increasing the performance of Eskom’s generation fleet through an increased critical maintenance budget over the next 12 months and the slashing of red tape to enable Eskom to procure what is needed for maintenance repairs to the national grid infrastructure, skilled personnel, such as former senior Eskom plant managers and engineers from the private sector will be appointed.

• Building on the successes attributed to the “revival” of the REIPPP Programme (but without any references to the Risk Mitigation IPP Procurement Programme):

• The amount of new generation capacity to be procured through Bid Window 6 for wind and solar power will be doubled from 2 600MW to 5 200MW.

• The RFPs for Bid Window 7 and beyond will be released “on an expedited basis”. Government will also release RFPs for battery storage by September 2022 and for gas power as soon as possible thereafter.

• Government departments will work together to ensure that all renewable energy projects from Bid Window 5 onward can start construction on schedule. This includes taking a “pragmatic approach” to local content requirements to prioritise construction of new capacity as quickly as possible. The Department of Trade Industry and Competition, together with the IPP Office, will provide further details about these relaxed requirements in the coming days. 

• “One of the greatest challenges” in adding capacity to the grid is the time it takes for IPPs to receive approvals and start construction. This is currently around 1 000 days due to lengthy regulatory processes and red tape. In the current crisis, special legislation will be tabled in Parliament on an expedited basis to address legal and regulatory obstacles for a limited period. While the Parliamentary process runs its course, certain regulatory requirements will be waived or streamlined where possible within the current legislative process. This includes reducing regulatory requirements for solar projects in areas of low and medium environmental sensitivity, and it should also mean that Eskom can expand power lines and substations in these areas and the strategic electricity corridors, without needing to get environmental authorisation.

• The Presidency also plans to put in place a “single point of entry” for all energy project applications, to ensure coordination across government. Government departments are instructed to review all existing timeframes and to ensure that all applications are processed on an urgent basis. This approach according to the President is preferable to declaring a state of emergency or a national state of disaster as some have called for. 

• Eskom will start buying electricity from existing IPPs with surplus capacity in the next three months. Eskom will also start to buy power from existing private generators such as mines, paper mills, shopping centres and other private entities that have surplus power.

• Businesses and households will be encouraged to install rooftop solar and to connect this power to grid. To incentivise greater uptake of rooftop solar, Eskom will develop rules and a feed-in tariff for all commercial and residential installations on its network. Nothing was said about the issue of Eskom’s revised tariff structure, “penalising” solar users.

The balance of the additional measures announced by the President focus on Eskom’s ability to accelerate procurement of new generation capacity, without any mention at all of Eskom 2.0:

• Eskom will import power from Botswana and Zambia, which have more electricity capacity than they require for their economies.

• To address Eskom’s debt burden of almost R400 billion, which serves as a material drag on Eskom’s ability to address its challenges, National Treasury is working on a sustainable solution which will be announced by the Minister of Finance at the medium-term budget later this year. The only details provided are that climate funding made available through the Just Energy Transition Partnership will be used to invest in the grid and to repurpose power plants that have reached the end of life, and carry out maintenance and investment programmes.

• Eskom will be constructing its first solar and battery storage projects at Komati, Majuba, Lethabo and several other power stations. These will result in over 500MW being added to the system. Eskom will also use interim power solutions, such as mobile generators, to supplement current generation capacity for a limited period.

• The South African Police Service has set up a special law enforcement team to help Eskom in confronting the scourge of state capture, fraud, crime and corruption. Indeed in the last couple of weeks arrests have been made and prosecutions launched around illicit Eskom contracts.

• The Integrated Resource Plan 2019 will be revived / reviewed to ensure effective planning to reflect the need for capacity and to address our climate change commitments.

Finally, the proposed liberalisation of the South African energy sector is going full steam ahead:

• The process of splitting Eskom into three separate entities, generation, transmission and distribution, is apparently on track, with Eskom having established a transmission company and separate generation and distribution companies to be established by the end of 2022. Appointments to boards of the transmission and generation entities will be made soon. The President did make it clear that the grid will remain state owned.

• Broader reforms to establish a competitive energy sector will be created through the Electricity Regulation Amendment Bill in accordance with the practices adopted by various countries to improve security of supply.

The Presidency has also undertaken to form a National Energy Crisis Committee to implement all of these changes in a coordinated and managed manner. The NECC will be chaired by the DG in the Presidency, Phindile Baleni, with the central mandate of bringing together all government departments and entities involved in the provision of electricity.

Here’s to hoping this will start the fixing the problem …