DMRE says it has no knowledge of Eskom’s standard offer to secure power from private generators

The Department of Mineral Resources and Energy (DMRE) says it is unaware of Eskom’s ‘standard offer’ instrument, through which the utility claims it could potentially secure an immediate 500 MW from private generators with surplus electricity.

Eskom CEO André de Ruyter listed the standard offer among several short-term interventions that should be enabled immediately to ease pressure on the country’s load-shedding-prone grid.

He said that the mechanism had been approved by the Eskom board in August and that, once authorised by government and the regulator, it would enable Eskom to issue a request for bids from small private generators to sell electricity into the grid under three-year contracts.

However, for the standard offer to be activated, Eskom indicated that it would require a Section 34 determination under the Electricity Regulation Act to enable it to buy the electricity, as well as an exemption from some of the requirements of the Preferential Procurement Policy Framework Act.

In addition, the utility would require the concurrence of the National Energy Regulator of South Africa (Nersa), as well as the regulator’s assurance that it could recover the costs through the tariff.

However, in a subsequent interview with Engineering News, DMRE deputy director-general Jacob Mbele indicated that the department was not aware of the proposal and questioned whether it had ever been tabled during one of its monthly meetings with the utility.

“Actually, I picked it up for the first time in the media and this is something that has not been presented to us,” Mbele said, while confirming that he was the official appointed to engage directly with Eskom.

He noted that the DMRE had supported Eskom in its preparations for the short-term power purchase programme (STPPP) by publishing a Section 34 determination.

Eskom decided to abandon the STPPP, however, after Nersa refused to approve a cost-recovery mechanism through the tariff for the purchase of about 120 MW from eight generators.

Engineering News requested Eskom to provide details of its communications with the DMRE on the standard offer and the utility responded saying that a formal request for a Ministerial determination was made to the DMRE on January 6, 2022.

“Eskom is following up on the correspondence as we have not had a response so far.”

Nevertheless, Mbele stressed that the department was more than willing to assist in ensuring the injection of much-needed electricity, even though the immediate opportunities were limited.

It was, thus, focusing on completing the various bidding processes under way for new electricity, including the risk mitigation procurement programme and bid windows five and six of the renewables procurement programme.

However, it was factoring in about 160 MW from existing renewables independent power producers (IPPs) into its plans; capacity also referred to by De Ruyter as an immediate supply option.

Eskom estimates that about 200 MW could be secured from these generators once the IPP Office approved the sale of electricity to Eskom above their current contractual limits.

Mbele indicated that it had been agreed that this electricity should be sold at the wholesale electricity price and denied that either the DMRE or the IPP Office were standing in the way of implementation.

The department was also willing to work with Eskom and the IPP Office to facilitate a proposal that the IPP plants be enhanced to inject a further 200 MW in the near term.

Mbele also questioned suggestions that Nersa registration was the main and only impediment to distributed generators taking advantage of the recent reform enabling sub-100 MW projects to proceed without a licence, even in those instances where electricity is wheeled through the grid and sold to third parties.

He said many of the projects remained “conceptual” and required various other approvals, including grid connection quotations from Eskom, before they could proceed.

Eskom group executive for distribution Monde Bala confirmed that work was under way to improve the functioning of the utility’s grid-access unit in light of an expectation of an “avalanche of applications” aligned with the 100-MW dispensation.

“We are aware that our grid-access unit needs to move to expedite applications and we are streamlining those processes,” Bala says, while still underlining the ongoing constraints associated with Nersa registration.

Mbele indicates that the department is taking an active role in discussions being overseen by Operation Vulindlela to ease the red tape associated with registration, including a stipulation that any registration be accompanied by long-term power purchase agreements.