Minister Radebe remarks on IRP and Eskom unbundling

South Africa’s energy minister Jeff Radebe.

South Africa’s energy minister Jeff Radebe reflected on the devastating effects of Cyclone Idai, which affected Eskom’s ability to guarantee electricity supply to consumers.

Speaking at the recent DLO Africa Power Roundtable 2019, the minister noted that South Africans endured extended load shedding because one of the exacerbating circumstances related to damaged power lines from Cahora Bassa hydropower plant in Mozambique, as a consequence of Cyclone Idai.

Radebe pointed out that the “new reality is that adverse climatic conditions will become a recurring feature of our existence, and as Africans we must prepare our systems to be resilient in the face of the risks posed by this reality.”

Giving an update on the draft Integrated Resource Plan (IRP), Radebe assured attendees that the energy department is currently engaging with the social partners at National Economic Development and Labour Council (NEDLAC).

“Cabinet approval of the IRP for South Africa will define a tangible plan for energy security that also secures the participation of Independent Power Producers (IPP) side by side with Eskom and municipalities,” he said.

He added: “It is clear that Eskom alone cannot meet our power capacity requirements, because we estimate that the capacity extension under the IRP will cost in excess of R1 trillion in the period up to 2030, including the new power plants, plus the requisite transmission and distribution infrastructure.”

Unbundling of Eskom

Minister Radebe reflected that President Cyril Ramaphosa previously pronounced the need to unbundle Eskom into the generation, transmission and distribution functions. He said work is unfolding in that regard.

“This matter has been in the making for years, yet it didn’t get anywhere and created a lot of uncertainty regarding the future electricity supply industry structure. It is a fact that the financing of new power infrastructure has become very challenging given Eskom’s current structure.”

According to Radebe, financial institutions have become increasingly averse to pumping funds into an Eskom that is based on the vertically integrated utility model.

He further noted that the difficulty of financing power infrastructure projects in Africa generally, and in South Africa specifically, has some of its reasons anchored in policy uncertainty and poor regulatory environment.

“I have to be very clear as well, and indicate that we are not talking about the privatisation of Eskom, but rather it’s unbundling into the functional areas of generation, transmission and distribution,” Minister Radebe stated.

In the meantime, the minister called for increased energy efficiency practices in hopes of balancing electricity supply and demand.

“It is a fact that a successful energy efficiency programme results in the reduction of municipal revenues and we would be doing municipalities a disservice if we did not confront this problem,” he added.