South Africa - International Franchise Association

electricity producers in the world. South Africa’s rapid economic growth in recent years
has resulted in electricity demand rising faster than anticipated. In 2009, however, the
global economic crisis meant the country’s power supply constraints were temporarily
eased, as demand for electricity fell on the back of declining global economic activity. As
the world emerged from the global crisis in 2010, and electricity demand in the country
started trending upwards again, it became apparent that the brief reprieve from the
global slowdown created a false sense of electricity supply security.
Electricity supply constraints are expected to remain a feature of South Africa’s social
and economic landscape for several years to come, and the introduction of additional
capacity will be required for at least the next 20 years.
To assist with the planning for this new capacity, government has produced The Policy-
Adjusted Integrated Resource Plan (IRP2010), approved in 2011, which will be
continuously revised and updated.
IRP2010 outlines the proposed electricity generation capacity mix for South Africa for the
period 2010 to 2030, and expects that this will be delivered through a range of projects
that will be implemented by Eskom and the public sector (accounting for 70% of the
capacity) and various independent power producers (IPPs) (accounting for the remaining
30% of the capacity). The plan also factors in demand savings over the period, to be
achieved through energy efficiency and demand side management (DSM) strategies.
Additional Generation Capacity
Eskom is to play a key role in achieving the objectives outlined in IRP2010 and the utility
is currently pursuing a suite of capacity-expansion projects valued in the range of $69.83
billion (R500-billion). These projects, which will bring more than 11 000 MW of additional
power on stream by 2020, form part of what the IRP2010 refers to as ‘committed build’.
Key among the projects currently under development by Eskom are the return to service
projects, which will bring previously decommissioned capacity back into production; the
Medupi and Kusile projects, which will introduce significant new coal-fired baseload
capacity to the country’s power system; and the Ingula pumped-storage project, which
will introduce additional peaking capacity.
There are also two renewable power projects currently under development by the utility
– the Sere wind power project and the Upington concentrating solar thermal power
project.
Funding
Securing funding has been challenging for the utility, and it was only in 2010, when
government announced its equity injection, that Eskom was confident that it would be
able to proceed as planned with all the projects and contracts to which it was committed.
The National Energy Regulator of South Africa (NERSA) approved Eskom’s tariff
increase application of 24.8% from April 1, 2010, and subsequent increases of 25.8%
and 25.9% for 2011/12 and 2012/13 respectively. Eskom’s finance director has indicated
that the utility could request two further increases in the range of 25% a year in 2013/14
and 2014/15.