Eskom’s plan to lease land for private generation shows refreshing innovation with potential to generate up to 20GW

15/12/2021 | By Admin

BLSA fully supports the state power utility’s plans to rent out 36,000 hectares of Eskom-owned land in Mpumalanga to private sector companies that wish to develop their own power generation plants using renewable technologies. This approach was announced today by Public Enterprises Minister Pravin Gordhan as part of Eskom’s results announcement.

If the maximum take-up is utilised, this has the potential to add up to 20GW to our supply capacity. For example 400 plants of 50MW could be developed, or 200 plants of 100MW, mobilising enormous amounts of investment and substantially adding to electricity capacity in SA.

The aim of the programme is to provide relief to the constrained electricity system in as short a time as possible. Eskom land is generally close to the necessary grid infrastructure and has several regulatory approvals in place to ensure the time to begin development will be far quicker than other land.

In the midst of our energy supply crisis, this would support the rapid increase of the country’s generation capacity while simultaneously addressing issues raised by South Africa’s transition to a low-carbon economy.

As Eskom needs to retire its aged coal-fired generation plants, transforming the land use into private sector renewable energy plants will save jobs and maintain the economic core for surrounding communities.

Given Eskom’s constrained financial situation which makes access to capital expensive, this is an innovative way to add new capacity to the electricity system, including leveraging Eskom assets to incentivise the expedited establishment of generation capacity. These assets include access to land (with established environmental approvals) and proximity to grid connection points, among others.

Furthermore, such innovative thinking by a state-owned enterprise is refreshing and builds confidence locally and internationally in South Africa’s plans to transition to a low-carbon economy and build a secure energy supply for the future. Both elements are important foundations for the healthy, growing economy to which we all aspire.

The objective is for private power producers to generate and wheel electricity to their own sites and/or to multiple users and, further down the line, for them to also sell power to Eskom through a power purchase agreement. Minister Gordhan also announced that a tariff for wheeling will be introduced.

The minister also acknowledged the importance of expediting governmental approval processes for companies applying to generate electricity up to 100MW without a licence being required.

With much of the Eskom land in question in Mpumulanga, this project will also ease pressure on the Northern Cape grid where IPP plants have proliferated due to the conducive weather conditions. Mpumalanga has by far the most coal-fired plants with established transmission and distribution infrastructure which the IPPs will be able to utilise.