Eskom back-out could cause R150-billion backfire

Chris Yelland, energy analyst and MD of EE Business Intelligence, said extending the life of Eskom’s coal-fired power stations could unwind the $8.5 billion (R154 billion) of funding made available to South Africa for its “Just Energy Transition”.

Speaking at a special cabinet meeting on Wednesday, electricity minister Kgosientsho Ramokgopa reportedly said extending the life of the Eskom coal-fired generation fleet would be crucial to ending load-shedding.

Yelland told Bruce Whitfield on 702’s The Money Show that this does not match well with existing policy. He said that government policy on Eskom “is currently made on the hoof”.

He said this could have significant consequences. For one, billions in funding pledged funding for South Africa’s Just Energy Transition is contingent on Eskom accelerating its transition away from coal-fired power generation.

So if South Africa makes no effort to decarbonise, it can’t rely on these loans still being available, said Yelland.

“Nobody is forcing South Africa to accept these loans. South Africa will do so by itself and if it thinks it’s in its interests.

“But, if South Africa thinks it’s going to get this kind of finance without decarbonisation, I think they will be sad to learn that kind of funding will not be available.”

He said that this policy flip-flopping could also put the bailout of Eskom by Treasury at risk.

The decision by the Treasury to take on R254 billion of Eskom debt over the next few years is contingent on Eskom and the municipalities that owe it money meeting certain conditions.

These include a commitment to prioritise capital expenditure in transmission and distribution and to prioritise the maintenance of its existing fleet to improve the energy availability factor of power stations.

A lesser covered condition that Yelland noted was the commissioning of a German consortium of specialists to visit power stations and develop options on the way forward.

Five German companies were appointed and are expected to complete their assessments of the power stations by the middle of the year, Daily Maverick reported.

Yelland said that the plan to extend the life of the coal power stations could be preempting the findings of the German consortium.

Policy flip-flopping

Yelland said that he thinks there has been a sudden re-think of these policies as an “act of desperation.”

Many different policies for electricity have been made as the energy crisis has been drawn out over many years and has prompted a wide array of policy responses.

Backing out of existing energy policy without properly considering the consequences is unwise, he said.

“I think it’s not clearly thought through. The consequences are not clearly thought through in terms of what it involves. It’s in contradiction with statements by our finance minister and by our president. It really throws the cat amongst the pigeons.”

Yelland said it is also unclear that extending the life of power stations is a cheap and quick solution to current energy challenges.

“I don’t think that this life extension of a coal-fired power station is a short-term option.”

He said that extending the life of Camden, Hendrina, and Komati took many years and cost a lot of money.

Read Now: Electricity minister’s plan for stage 7 load-shedding and beyond

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Eskom back-out could cause R150-billion backfire