To ensure its survival and sustainability, Eskom is planning to unbundle its generation, transmission and distribution operations, which will become distinct legal entities by December 2022.
This was according to the new policy roadmap announced by the Minister of Public Enterprises, Pravin Gordhan, at a media briefing in Pretoria on Tuesday.
The new policy roadmap laid out a five- to 10-year plan for South Africa’s electricity sector, which he said should be read in conjunction with the Integrated Resource Plan, which was published recently.
The three entities would be operational by around June 2021, but would still fall under an Eskom holding company.
Gordhan said Eskom’s expenses were substantially higher than the revenue earned from the sale of electricity, and revising its cost structure was therefore imperative.
He said South Africa currently generated power from a number of power stations, but lacked competition, which meant it did not necessarily offer the best pricing.
“Tariffs have increased 500% over the past decade without an associated boost in generation capacity, [and] has put the economy under strain; [this] is not sustainable,” he said.
According to Dr Thulisizwe Mkhabela, group executive for impact and partnerships at the Agricultural Research Council (ARC), the unreliability of the country’s electricity supply along with the escalating cost was affecting farming in several ways, such as planning of operations, spoiling of produce, and erratic irrigation schedules.
“The unbundling of Eskom, if it delivers on the intended efficiency growth, could boost agriculture in South Africa and could also lead to sustainability. In order for the electricity supply to be more environmentally sustainable and benefit the farming community, the grid should allow the sale of electricity generated elsewhere,” he said.
Dr Requier Wait, head of economics and trade at Agri SA, said the proposed roadmap was at least a starting point to resolve the electricity sector’s constraints. Unfortunately, there was no quick fix to Eskom’s problems.
“Both the technical and financial constraints need to be mitigated and ultimately resolved. Effective implementation will be a key factor to achieve success. The detail of how Eskom’s debt liability will be resolved must still be addressed,” he said.
“A successful turnaround and broader private sector participation could help to make electricity tariffs more affordable. However, this will also take time. Ultimately, lower tariffs would be welcomed by energy-intensive producers,” said Wait.
He added that farmers in South Africa had, for a while now, indicated their willingness and readiness to generate their own power to supply to the national grid. There were already farmers who were collaborating with Eskom on small-scale solar photovoltaic (PV) installations.
“However, the administrative process can still be time-consuming. Hopefully, the new unbundled structure will help to speed up these processes,” he added.