Ramaphosa announces plan to save Eskom and stop load-shedding

In his State of the Nation address on 11 February 2021, President Cyril Ramaphosa outlined a number of priorities for the government’s national recovery plan.

“This evening, we stand here not to make promises but to report on progress in the implementation of the recovery plan and the priority actions we must now take to restore growth and create jobs,” Ramaphosa said.

He said that since the launch of the plan, the government has focused on four priority interventions:

  • a massive rollout of infrastructure throughout the country
  • a massive increase in local production
  • an employment stimulus to create jobs and support livelihoods
  • the rapid expansion of our energy generation capacity.

Restoring Eskom to operational and financial health and accelerating its restructuring process is central to the latter objective, he said.

The plan to save Eskom

“Eskom has been restructured into three separate entities for generation, transmission and distribution,” Ramaphosa said.

He added that 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.”

Ramaphosa said that the government is working closely with Eskom to reduce its dependence on government funding and to improve its financial positions.

He added that this recovery will require a new tariff structure that will result in higher electricity prices.

“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.”

Buying from independent power producers

The government is taking extraordinary action to improve generation capacity in South Africa and supplement Eskom’s insufficient generation.

Ramaphosa said the Department of Mineral Resources and Energy will soon announce the successful bids for 2,000MW of emergency power to help curb load-shedding.

Independent power producers are also now able to sell electricity to local municipalities.

“The necessary regulations have been amended and the requirements clarified for municipalities to buy power from independent power producers,” Ramaphosa said.

“Systems are being put in place to support qualifying municipalities.”

In addition to these measures, the government will also soon procure an additional 11,800MW of power from renewable energy, natural gas, battery storage and coal, he said.

Preventing 5 more years of load-shedding

Ramaphosa said that despite the measures mentioned above, there will be an electricity supply shortfall of between 4,000 and 6,000 megawatts over the next 5 years, as old coal-fired power stations reach their end of life.

This would result in load-shedding in periods of high demand without intervention.

Ramaphosa said this will be addressed by a request for proposals for 2,600MW from wind and solar energy that will be issued in the coming weeks.

Regulation will also be amended to increase the licensing threshold for embedded generation to reduce strain on the national power grid.

“Recent analysis suggests that easing the licensing requirements for new embedded generation projects could unlock up to 5,000MW of additional capacity and help to ease the impact of load shedding,” Ramaphosa said.

“We will therefore amend Schedule 2 of the Electricity Regulation Act within the next three months to increase the licensing threshold for embedded generation.”

He added that Eskom has already started work to bring this additional capacity onto the grid “without undue delay”.

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Ramaphosa announces plan to save Eskom and stop load-shedding