Interview: Brian Dames
How will the required funding to support an expansion drive be secured?
BRIAN DAMES: The National Energy Regulator of South Africa (NERSA) has granted us permission to increase tariffs by 8% for each of the next five years, equating to revenue of R862bn ($105.1bn), which results in an estimated shortfall of R225bn ($27.4bn). Our response is being finalised through an integrated delivery programme which we will continue to implement towards finding further efficiencies for a committed savings of R30bn ($3.7bn). However, without appropriate intervention and additional support or assistance, the NERSA decision will impact our build programme, as the shortfall cannot be made up with efficiencies alone.
Should there be much concern about the long-term security of domestic coal supply?
DAMES: It is critical that we source and procure sufficient and quality primary energy resources – be they coal, water, uranium, sorbent and biomass – on time and at minimum cost for our power stations to operate. Long-term coal supply is threatened by international competition for South Africa’s coal reserves and the influence this has on the coal price. New specifications for the acceptable quality of coal are also having an influence on supply. We have a coal stockpile of over 47 days – up from 44 days at the end of September 2012 when we finished our interim integrated report.
To what extent does Eskom participate in cross-border electricity projects?
DAMES: Eskom has engaged in cross-border trading for many years. As interconnection between South Africa and its neighbouring countries increased, the need to formalise regional electricity trading was recognised. This resulted in the establishment of the Southern African Power Pool (SAPP), which the South African Development Community (SADC) formed under the leadership of the various energy ministers in 1995. Eskom and the other SADC national utilities were the initial members, but membership has also recently been opened to independent power producers (IPPs) and transmission companies. In the early years of the SAPP, Eskom had significant surplus energy available and a number of countries came to depend on us rather than building their own generation capacity, resulting in cross-border sales exceeding cross-border purchases.
Although we remain a net exporter of electricity, the net volume exported represents only 1.36% of the total energy available in South Africa. During the mid- to late 2000s the pending regional electricity constraints were anticipated and some of the regional utilities initiated new generation projects. The SADC region has an abundance of renewable and other primary energy sources and could, in time, play a significant role in meeting South Africa’s electricity requirements and in enhancing the energy mix to improve our environmental performance. To ensure that South Africa benefits from these potential power projects, a dedicated unit has been established called Southern African Energy, with the mandate of pursuing the development and execution of business opportunities in the SADC region to increase imports, strengthen transmission systems, access strategic resources and grow Eskom’s market share. A number of projects are already being advanced in several countries. The primary focus is on strengthening hydro, natural gas resources and transmission.
How effective are IPPs in meeting overall demand and what role will they play over the long term?
DAMES: Eskom is committed to facilitating the entry of IPPs and is pursuing private sector participation as a strategic imperative. We have signed power purchase agreements with non-Eskom generators and IPPs with a total contracted capacity of 1008 MW. We have also supported the Department of Energy in finalising its request for proposal documents and power purchase agreements for the renewable energy IPP programme.
The request for proposal document calls for 3725 MW of renewable energy technologies by mid-2014 to 2016.
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