Question NW2772 to the Minister of Public Enterprises
04 October 2023 - NW2772
Herron, Mr BN to ask the Minister of Public Enterprises
(1) With reference to the reply of the Minister of Mineral Resources and Energy, Mr S G Mantashe, to question 2266 on 30 June 2023, that the grid capacity constraints has no linkage with Karpowership and in view of Eskom’s Generation Connection Capacity Assessment of the 2024 Transmission Network that a total of 1220MW is being reserved for Karpowership (details furnished), furthermore considering that there is an urgent need to end load shedding and noting that although during Bid Window 6 of the Renewable Independent Power Producer Programme, only 1000MW out of 4200MW was procured and the rest were rejected in the Eastern and Western Cape, due to insufficient grid space, the grid space remains reserved since 2021 for Karpowership in the Eastern Cape, Western Cape and Richards Bay, and given that Karpowership’s environmental authorisations remain refused and the current court cases on its generation licences could take many years to resolve, (a) what is the justification for the prioritisation of the Karpowership deal over adding new capacity through wind and solar energy and (b) by what date will the portion of the grid reserved for the Karpowership be released; (2) whether, given that Karpowership is holding up the grid space and the urgency to end the loadshedding, there will be a limit to the extension that is being given to Karpowership to reach the commercial and financial deadline; if not, what is the position in this regard; if so, what is the (a) current and (b) final commercial and financial close deadline for Karpowership; (3) given the grid constraints, what laws, policy and/or factors does Eskom rely on in its decision to (a) reserve the grid for independent power producers (IPPs) before commercial and financial close deadline and (b) release the grid that is reserved for a particular IPP?
Reply:
According to the information received from Eskom
1. (a)
The Karpowership projects are three of 11 preferred bidders selected under the Risk Mitigation IPP Programme (RMIPPP), which have applied for and been provided Budget Quotations in line with the procurement process and the associated grid application process. There is therefore no prioritisation of these projects over others.
1 (b)
Please see answer 2 below.
2. (a) and (b)
It is acknowledged that the Risk Mitigation IPP Programme has faced delays due to the changes in global economic conditions which have impacted these projects’ ability to reach commercial close. As a result, the Department of Mineral Resources and Energy (DMRE) as procurer, has communicated a long stop date for the RMIPPP of 31 December 2023, by which time the projects under this programme will have to achieve legal close. Accordingly, the Budget Quotations issued to all the remaining preferred bidders under the Risk Mitigation IPP Programme have been extended to 31 December 2023, to enable these projects to achieve legal close.
3 (a)
It is to be noted that Eskom has not concluded on the issue of reservation of capacity, thus there is no policy that defines reservation of capacity. However, in terms of section 22(2) of the Electricity Regulatory Authority (ERA), the licence holder is permitted, with the concurrence of NERSA, to discriminate for objectively justifiable and identifiable reasons. The purpose of the reservation of capacity, to the extent that it is approved by the relevant stakeholders including the Regulator, will be to secure an orderly allocation of access to the grid.
The context is that currently there is saturation of the grid by private parties. Often, private parties request access to the grid without shovel-ready projects and this prejudices those projects that can demonstrate readiness, including the government section 34 programme, which ought to go through, among others, regulatory and other approvals (e.g., PFMA), whereas private parties are not subjected to these onerous processes.
The formal IPP programmes are initiated following the section 34 determinations issued by the Minister of Mineral Resources and Energy in terms of the Electricity Regulation Act and concurred to by NERSA, which are administrative actions. The preferred bidders to these programmes therefore apply for and are provided with Budget Quotations. Any extensions to the Budget Quotation validity for the section 34 IPP preferred bidder projects are taken in line with a request from the preferred bidder and having due consideration of the time required for the attainment of certain approvals (required by either the Procurer or the Buyer) and the associated legal and financial commercial close dates as communicated by the Department of Mineral Resources and Energy.
3 (b)
Please see the response under Question 2.
Remarks: Approved / Not Approved
Jacky Molisane PJ Gordhan, MP
Acting Director-General Minister
Date: Date: