Eskom CEO Andre de Ruyter has revealed that Eskom is forced to buy solar panels from one local supplier that charges a premium and cannot produce enough panels to satisfy demand.
Speaking to David Ansara, De Ruyter said it is necessary to streamline procurement processes to cost-effectively overcome South Africa’s energy problems.
“If you impose additional costs on the electricity industry, those costs are baked into the price of electricity in perpetuity,” he said.
De Ruyter illustrated the problem with government procurement policies by highlighting the impact of local content requirements on Eskom.
South Africa only has one solar panel manufacturer that enjoyed “very strong protection” under the country’s trade policy.
“All government procured solar panels have to be bought from this one supplier,” De Ruyter said.
In practice, this means that the government and Eskom pay 15% to 20% more for solar panels than the market price.
Another problem is that the manufacturer has limited capacity. “They can only produce around 300MW of solar panels per year,” he said.
“If we need 6,000 MW, it will take us 20 years to meet the requirement because we give preference to one local supplier that employs a few hundred people.”
The greater good, De Ruyter argued, is not to give preference to a single company to the detriment of the country’s electricity supply.
“The greater good, surely, is to have the lowest cost electricity available as soon as possible in the most reliable manner,” he said.
Bring more capacity online, fast
De Ruyter added that he favours bringing more generation capacity online as quickly as possible.
He does not see the need to cap license exemptions for embedded generation projects to 100MW.
“If a private investor is up to take the risk, it is up to him. If he can find a site and utilities, he can build a factory as large as he wants to,” the Eskom CEO said.
“The cap of a 100MW is arbitrary. It could be a 1,000MW. I don’t care either way. What I care about is the rapid deployment of additional resources.”
De Ruyter also bemoaned the onerous requirements of the National Energy Regulator of South Africa (Nersa) to launch new generation projects.
“The current Nersa process for registration is nearly identical to the licensing process,” he said.
He said it is a bad idea to say we are liberalising the industry and then use a process which is nearly identical to the initial process, which caused the frustration.
Some consolation is that the presidency is keen to engage with Nersa to make it easier to launch new electricity generation plants.