Eskom Thinks Outside the Box on Regional Power Sourcing and Transmission

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Power shortages and problems obtaining funding for new power projects have caused South Africa's state-owned power utility Eskom (Johannesburg) to look at different options for sourcing additional generating capacity. These options include taking stakes in regional power generators outside South Africa's borders and signing up with independent power producers (IPPs) for existing and new projects.

Another motivation in widening the choice of power sources would be to improve Eskom's green generation credentials. Currently, the utility emits 225 million tons of CO2 annually, and its power supply is 85% reliant on coal feeds. Environmental groups have targeted Eskom's dirty emissions record at the COP 17 global climate conference currently taking place in Durban.

Eskom CEO Brian Dames said that the utility planned to reduce its dependence on coal in the energy mix to less than 50% within 30 years. The company is engaged in green energy projects, but these do not form any viable alternative to coal-fed base power generation at this stage.

In terms of regional possibilities Eskom is looking at prioritizing five projects in partnership with regional utilities. These would be for power generation and transmission and would form the nucleus of a secure energy system in which power could be moved between the component units and grids.

Direct equity investments in projects would be made though a new unit called Southern African Energy. The direct investment route is seen as being more effective than power purchase agreements and investment in transmission would take precedence over power station schemes.

These options are currently being put to the board. The move to regional investment and IPPs is a sea-change for the company, which had the culture of a dominant monopoly pre- and post-1994. The policy would also assist the viability of various regional major power schemes such as Grand Inga on the Congo River.

Eskom reported an interim profit of $1.6 billion for the first half of the fiscal year after tariff hikes pushed sales to nearly $8 billion. But the utility is currently carrying more than $22 billion of debt, and this could approach $50 billion in the next seven years as the utility's massive new-build program for additional power proceeds. South African demand is forecast to double through 2030 from the current 40,000 MW.

For related information see November 25, 2011, articles - Congo River's 40,000 Megawatt, $80 Billion Hydro Project Garners Bank Support and Central African Transmission Projects Integrate Power Markets.

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