- The government is seeking to discuss with independent power producers to reduce the price of electricity for Eskom.
- The move comes as the state-owned electric utility company struggles to overcome a financial crisis.
The government of South Africa is reportedly seeking to speak with the region’s independent power producers (IPPs) to get them to lower the price of the electricity Eskom purchases from their older renewable-energy projects.
Reports cite, the move comes as the state-owned electric utility company is struggling to come out of a severe financial crisis. The company supplies over 90% of the nation’s power, yet, it is drowning in massive debt following a decade of decline.
According to a report by
Reuters, the utility consecutively carried out power cuts over a five-day period last week due to breakdowns at its ageing fleet of primarily coal-fired power plants. Some conservative factions of the nation’s ruling African National Congress along with labor unions are blaming the company’s financial woes on 20-year power purchase agreement to acquire power from renewable-energy projects that were launched in 2011 & 2012.
The price the company pays for purchasing power from later renewable energy projects is lower by a considerable margin as the finance & technology cost across the renewable energy sector fell prior to the signing of its agreements.
South Africa’s Public Enterprises Minister, Pravin Gordhan stated that these discussions are not about scrapping the contract, rather they are about exploring the various possibilities that were created by the sharp fall in costs the renewable sector experienced, whether it is wind or solar. Gordhan further stated that there are certain players in the industry that have shown willingness to talk.
The President of South Africa, Cyril Ramaphosa, who is attempting to appease his critics prior to the upcoming parliamentary election, has reassured that he would be supporting Eskom’s balance-sheet & split the firm to make it more efficient.
However, according to some analysts, the government would need to take more bold steps to rescue the utility.