FROM THE DESK OF THE PRESIDENT
25 April 2022
Dear Fellow South African,
Last week much of the country experienced load shedding as breakdowns at several of Eskom’s power stations resulted in the loss of substantial generation capacity.
Load shedding costs our economy dearly. It causes great frustration among all South Africans and creates hardship for households and businesses.
A stable and reliable supply of electricity is essential for almost every aspect of our daily lives and a necessary condition for economic growth. That is why we are focused on achieving energy security as one of our foremost priorities.
The country has been experiencing power shortages on and off for more than a decade. However, we are determined that this should not continue to be a part of our lives into the future. Even as we continue to experience crippling load-shedding, the reality is that much progress has been made towards ending our energy supply challenges.
To solve this intractable problem, we need to understand its roots.
South Africa’s fleet of coal-fired power stations are old and their performance is deteriorating. Despite warnings from energy experts about impending energy shortages nearly two decades ago, there was a delay in commissioning new generation capacity. When construction began on Medupi power station in Limpopo in 2007 it was the first power station to be built by Eskom in more than 20 years. Medupi has subsequently been beset by delays, costs overruns and breakdowns due to design problems, with many of these challenges linked to allegations of corruption.
For years, the existing power stations were not maintained properly, particularly as these plants were made to ‘run harder’ to meet the country’s energy needs. There was insufficient investment in the technical skills needed to operate and maintain power plants.
This situation was made worse by the devastating impact of state capture. Billions of Rands were diverted from critical operational requirements at Eskom into private pockets.
Eskom’s huge debt burden, including more than R36 billion of outstanding municipal debt, undermines Eskom’s ability to improve its maintenance, infrastructure build and other operations.
In short, the load shedding we experience now is the result of policy missteps and the impact of state capture over many years. This is the situation that we have confronted since the start of this administration and that we are all working to fix.
In doing so, we owe the board and management of Eskom our full support as they work to turn the utility around. They have to keep the lights on while rebuilding Eskom as a viable entity that fulfils its developmental mandate as a state owned enterprise, and positioning it for a just energy transition.
We also owe our full support to the many hardworking employees of Eskom, including power plant workers. Despite many challenges, they are doing their best to keep our ageing plants running and supply the electricity the country needs.
It may be difficult to imagine a future without load shedding, but the steps we are taking now will ensure that we get there.
The process of structural reform this administration embarked on in 2018 will have a far-reaching impact on the South African energy landscape, even if the changes will take time to bear fruit.
In 2018, we revived the Renewable Energy Independent Power Producers Procurement Programme that had been stalled since 2015. This enabled 2,205 MW from Bid Window 4 to proceed to construction, most of which has now been connected to the grid.
A further 5,200 MW of solar and wind power is being procured through Bid Windows 5 and 6. This additional generation capacity is due to connect to the grid from late 2023. The Integrated Resource Plan 2019 provides for a further 3,000 MW of gas and 500 MW of battery storage to be procured from independent power producers.
In June 2021, I announced that the licensing threshold for new generation projects would be raised from 1 MW to 100 MW. This means that private investors do not require a license to build generation facilities up to this size and can produce their own power or sell it across the grid to other buyers.
A joint task team comprising all relevant government departments and the private sector is working to accelerate investments in new generation projects under 100 MW. There is a pipeline of 58 projects under development with a combined capacity of 4,500 MW, many of which will commence construction this year. The task team is working to speed up environmental authorisation and other approvals.
South Africa’s energy security can only be assured if we reduce reliance on a single utility for power and unlock private investment in generation capacity. This is one of the most important reforms contained in the draft Electricity Regulation Amendment Bill that was gazetted for public comment in February.
The Bill provides for the establishment of an independent transmission and system operator. This means that while the national grid will remain owned and controlled by the state, there will be competition among multiple generators selling power to distributors and customers.
The introduction of a competitive electricity market will unleash new investment in generation capacity and will be a key driver of economic growth.
This reform process has already begun with the establishment of a separate transmission subsidiary by Eskom in December 2021, with the unbundling of Eskom on track to be completed by December 2022.
For its part, Eskom is forging ahead with its maintenance programme and with correcting design defects in its plants at Medupi and Kusile. It is also decommissioning old power stations that have reached the end of their design life and repurposing others to use cleaner energy sources. Eskom is also bringing in additional skills to assist with maintenance, including former employees and experienced plant managers.
It is difficult to expect the millions of South Africans grappling with the inconvenience and hardship caused by intermittent power outages to remain patient as we resolve these longstanding challenges. It is difficult to convince them, as they sit in the dark, that we are making progress towards a secure and reliable supply of electricity.
But the reality is that the energy landscape is being transformed, the problems at Eskom are steadily being addressed and substantial new energy generation capacity is being built.
It is difficult and unacceptable for South Africans to endure load-shedding. But we are doing everything in our means to ensure that, like state capture, it soon becomes a thing of the past.
With best regards,
Cyril Ramaphosa
