Government will let municipalities procure power from IPPs

South African President Cyril Ramaphosa, has said that government will start the procurement of emergency power from projects that can deliver electricity into the grid within three to 12 months from approval, and would let municipalities buy their own power from independent power producers (IPPs).

The President made the announcement in his State of the Nation Address, which started about one and a half hours late because of disruptions from Members of Parliament from the Economic Freedom Fighters (EFF).

“We will put in place measures to enable municipalities in good financial standing to procure their own power from independent power producers,” he said.

Ramaphosa said over the next few months, government would implement measures to “fundamentally change the trajectory of energy generation in our country”.Load shedding would remain a possibility for the immediate future, he added.

While SA’s energy regulator would continue to register small-scale generation for own use of under 1 MW without the need for licences, the Head of State also promised the regulator would ensure that all applications by commercial and industrial users to produce electricity for own use above 1MW are processed within 120 days.

“It should be noted that there is now no limit to installed capacity above 1MW,” he said.

Eskom has about R450bn ($30bn) of debt and does not earn enough from electricity sales at current prices and volumes to pay off the interest on this debt without government aid.

In the lead up to SONA, a number of meetings took place between labour, government and business to discuss a proposal by trade union federation Cosatu to slash the utility’s debt by about R250bn ($16.7bn).

The President did not give specifics about what he termed the “social compact”, but pointed out that trade unions, business, community and government were “committed to mobilising funding to address Eskom’s financial crisis in a financially sustainable manner”.

“They would like to do this in a manner that does not put workers pensions at risk and that does not compromise the integrity of the financial system,” he said.