The Economic Reconstruction and Recovery Plan’s fourth priority is to rapidly expand energy generation capacity. Restoring Eskom to operational and financial health and accelerating its restructuring process is central to this objective.
Eskom has been restructured into three separate entities for generation, transmission and distribution. This will lay the foundations for an efficient, modern and competitive energy system.
Eskom is making substantial progress with its intensive maintenance and operational excellence programmes to improve the reliability of its coal fleet.
We are working closely with Eskom on proposals to improve its financial position, manage its debt and reduce its dependence on the fiscus. This requires a review of the tariff path to ensure that it reflects all reasonable costs and measures to resolve the problem of municipal debt.
In December 2020, the government and its social partners signed the historic Eskom Social Compact, which outlines the necessary actions we must take, collectively and as individual constituencies, to meet the country’s energy needs now and into the future.
Over the year running up to the February 2021 State of the Nation Address, we have taken action to urgently and substantially increase generation capacity in addition to what Eskom generates:
- The Department of Mineral Resources and Energy will soon be announcing the successful bids for 2 000MW of emergency power
- The necessary regulations have been amended and the requirements clarified for municipalities to buy power from independent power producers. Systems are being put in place to support qualifying municipalities.
- The government will soon be initiating the procurement of an additional 11 800MW of power from renewable energy, natural gas, battery storage and coal, in line with the Integrated Resource Plan 2019.
Despite this work, Eskom estimates that, without additional capacity, there will be an electricity supply shortfall of between 4 000MW and 6 000MW over the next five years, as old coal-fired power stations reach their end of life.
As part of the measures to address this shortfall, we will in the coming weeks issue a request for proposals for 2 600MW from wind and solar energy as part of Bid Window 5.
This will be followed by another bid window in August 2021. Recent analysis suggests that easing the licensing requirements for new embedded generation projects could unlock up to 5 000MW of additional capacity and help ease the impact of load-shedding. We will therefore amend Schedule 2 of the Electricity Regulation Act within the next three months to increase the licensing threshold for embedded generation.
This will include consultation among key stakeholders on the level at which the new threshold should be set and the finalisation of the necessary enabling frameworks. Eskom has already started work to expedite its commercial and technical processes to allow this additional capacity onto the grid without undue delay.
As we mobilise all of the resources at our disposal to support economic recovery, we cannot lose sight of the threat that climate change poses to our environmental health, socio-economic development and economic growth. We are therefore working to fulfil our commitments under the UN Framework Convention on Climate Change and its Paris Agreement, which include the reduction of greenhouse gas emissions.
Eskom, our largest greenhouse gas emitter, has committed in principle to net-zero emission by 2050 and to increase its renewable capacity. Eskom will be looking to partner with investors to repurpose and repower part of its coal fleet. This will be done in a way that stimulates investment, local economic activity and local manufacturing, as part of a just transition. Our work on climate change will be guided by the Presidential Coordinating Commission on Climate Change, which is meeting for the first time in February 2021. The commission will work on a plan for a just transition to a low-carbon economy and climate-resilient society.