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Eskom remains committed to renewables at a pace and cost the country can afford
Tuesday, 10 January 2017: Eskom acknowledges the positive role played by the renewable energy programme in the reduction of load shedding and in turn the benefit to the South African economy.
The Council for Scientific and Industrial Research (CSIR) has developed a methodology quantifying the net economic benefit of renewables (solar photo voltaic and wind). This is achieved by calculating the benefits of reduced unserved energy (load shedding), as well as cost savings to Eskom (avoided coal and diesel burn). These benefits are then offset against the total tariff paid to the renewable IPPs, resulting in a net economic benefit or loss.
For the first six months of 2015, Eskom purchased 2.0 Terawatt hours (TWh) of wind and solar PV. The CSIR calculated a total financial benefit of R8.2 billion. This was offset against the R4.3 billion renewable energy tariff cost, resulting in a net economic benefit of just under R4 billion.
From January to December 2016, Eskom purchased 6.0 TWh of renewable energy from solar PV and wind. Using the same methodology, Eskom calculated the total financial benefits, which amounted to R3.2 billion. This was offset against the renewable energy tariff cost of R12.2 billion, resulting in a net loss of R9.0 billion to the economy.
This net loss to the economy will continue for as long as there is surplus capacity. Eskom currently has surplus capacity until 2021 and can meet any increase in demand. Eskom has added a total of 5 568 MW, adding an additional 15% capacity to the grid in the last 2 years. Additional capacity was added by improving performance and the commissioning of new build plant. In the next 5 years, Eskom will add a further 8 304 MW capacity through the new build programme.
Further, it is vital to note the associated cost impact which has also been highlighted by rating agency Moody’s. On 20 September and 05 December 2016, Moody’s credit opinion stated that “the group’s financial ratios remain very weak as a result of rising operating costs primarily driven by higher primary energy costs and ongoing growth in power purchase agreements with Independent Power Producers (IPPs), as well as the continued roll out of its large capex programme”.
Eskom and the Government continue to work together determinedly to address all issues as highlighted in the Moody’s credit opinion reports of 2016 at a cost and pace that the country can afford.