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Government shines little light on its electricity policy

By unknown | Sep 07, 2007 | COMMENTS [ 0 ]

Zweli Mokgata

Zweli Mokgata

A little light was shone on government's muddled electricity policy yesterday. Cabinet has decided that making state-owned power utility Eskom the monopoly buyer of electricity will spur investment, spokesman Themba Maseko said.

The cabinet meeting coincided with the release of Statistics South Africa's July electricity data which shows the country's capacity crisis is getting more alarming.

July's cold weather saw electricity consumption leap nearly 6percent to a new record of 21785 gigawatt-hours.

According to yesterday's cabinet announcement, Eskom is to have a monopoly of nuclear power while half of this country's future thermal power stations will be private sector projects.

The country's growing capacity crisis has been blamed on government indecision. Additional generation capacity was originally meant to be created by relaxing Eskom's monopoly and allowing the private sector to grow to 30percent of the generation market.

How well South Africa has succeeded in attracting private investment into its electricity market is not clear.

This plan appears to have been kicked off in 2001 when Johannesburg City privatised Kelvin Power Station. It sold 95percent of the coal-fired station to US energy business AES Corporation with BEE partner Global African Power owning 5percent.

The sale agreement included an undertaking from AES to refurbish the power station to restore generating capacity which had declined considerably following years of under-investment in maintenance by the municipality.

A slump in energy stocks a year later saw AES withdraw from international markets. It sold its stake in Kelvin to Globaleq, a unit of the Commonwealth Development Corporation.

Last week, AES said it was returning to South Africa. It was named the preferred bidder to build a 760 megawatt plant in KwaZulu-Natal and a 342 megawatt plant in the Eastern Cape.


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