Eskom bemoans the cost of renewable energy

January 12th, 2017, Published in Articles: EE Publishers, Articles: Energize


Eskom says that while it acknowledges the positive role played by the renewable energy programme in the reduction of load shedding to the benefit to the South African economy, the cost of this programme amounted to R9-billion in 2016.

Click here to read the CSIR’s response to the claims made by Eskom
Click here to read a response from SAREC to the claims made by Eskom

The Council for Scientific and Industrial Research (CSIR) has developed a methodology quantifying the net economic benefit of renewables (solar photo voltaic and wind). This is achieved by calculating the benefits of reduced unserved energy (load shedding), as well as cost savings to Eskom (avoided coal and diesel burn). These benefits are then offset against the total tariff paid to the renewable IPPs, resulting in a net economic benefit or loss.

The CSIR showed that for the first six months of 2015, Eskom purchased 20 TWh of wind and solar PV, and calculated a total financial benefit of R8,2-billion. This was offset against the R4,3-billion renewable energy tariff cost, resulting in a net economic benefit of just under R4-billion.

From January to December 2016, Eskom says it purchased 6 TWh of renewable energy from solar PV and wind, and using the same methodology, Eskom calculates the total financial benefits, which amounted to R3,2-billion. This was offset against the renewable energy tariff cost of R12,2-billion, resulting in a net loss of R9-billion to the economy.

The power utility says this net loss to the economy will continue for as long as there is surplus capacity. Eskom currently has surplus capacity until 2021 and can meet any increase in demand. Eskom has added a total of 5568 MW, adding an additional 15% capacity to the grid in the last two years. Additional capacity was added by improving performance and the commissioning of new generating plant. In the next five years, Eskom says, a further 8304 MW capacity will be added through the new build programme.

Further, Eskom says it is vital to note the associated cost impact which has also been highlighted by rating agency Moody’s. On 20 September and 5 December 2016, Moody’s credit opinion stated that “the group’s financial ratios remain very weak as a result of rising operating costs primarily driven by higher primary energy costs and ongoing growth in power purchase agreements with Independent Power Producers (IPPs), as well as the continued roll out of its large capex programme”.

Eskom says it, together with government assistance, will continue to work to address all issues as highlighted in the Moody’s credit opinion reports of 2016 at a cost and pace that the country can afford.

Click here to read the CSIR’s response to the claims made by Eskom
Click here to read a response from SAREC to the claims made by Eskom

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