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De Ruyter reiterates Eskom’s need to adapt to the changing energy landscape

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De Ruyter reiterates Eskom’s need to adapt to the changing energy landscape

Eskom CEO Andre de Ruyter
Photo by Creamer Media's Donna Slater
Eskom CEO Andre de Ruyter

8th October 2021

By: Marleny Arnoldi
Creamer Media Online Writer

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Eskom CEO André de Ruyter says there are significant efficiency gains to be made by embracing digitalisation at the State-owned power utility.

Speaking during the second day of the Joburg Indaba on October 7, he unpacked the changing energy provider landscape in South Africa.

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He said the previous notion of large power stations to get economies of scale and centralised operations was changing to a far more decentralised model that also applied to the corporate structures of utilities.

De Ruyter noted that the country was moving away from the monopoly power provider model to a multi-player model, which offered more opportunities for investors.

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Consumers were also changing in that they were becoming prosumers, with more choice as to how they used electricity.

De Ruyter unpacked the array of challenges that Eskom found itself in before being able to cater fully to a changing energy landscape.

Firstly, the enforcement of Minimum Emissions Standards legislation would result in Eskom needing to shut down 18 GW of capacity by 2025, and 32 GW by 2030, owing to noncompliance. Abatement technologies to solve the issue would cost more than R300-billion.

As of March, Eskom still had a debt burden of R401-billion, which the utility is only slowly making inroads with.

This while funders were moving away from coal assets and, with coal becoming more expensive to transport, primary energy costs would only increase, adding to the utility’s problems.

Moreover, the decision to increase the licence-exempton threshold for distributed generation to 100 MW, from 1 MW previously, would soon start reducing Eskom’s revenue base, despite offering some opportunities at the same time.

De Ruyter said South Africa was well positioned to leverage on renewable energy sources and take advantage of the changes in the external market.

“South Africa offers a lower risk profile compared with India, Venezuela, Indonesia and Vietnam, and is well endowed with solar and wind resources at competitive costs.”

With the current potential capacity gap in Integrated Resource Plan energy allocations, coupled with low interest rates, funding availability and market support for participation in renewable energy projects, it creates an opportunity for Eskom to pursue financially viable renewable energy prjects, De Ruyter said.

Eskom plans to decommission 11 GW of coal capacity by 2030.

De Ruyter warned that if Eskom did not participate in renewable energy projects and get up to speed with emissions compliance, its revenue base would decrease by 41% by 2025 and by 72% thereafter, which would impact on how the utility could service its debt, support communities and avoid energy supply risks to the country.

“The just energy transition presents a unique opportunity to pivot Eskom and South Africa into a sustainable energy industry. In the short term, Eskom needs to strengthen its balance sheet, improve its income statement, build a high performing culture, improve operations and drive restructuring.  

“We believe Eskom is well placed to maximise benefits presented by the just energy transition, given its role in the energy supply industry.”

He summarised Eskom’s main priorities as being: to reduce fossil fuel generation through the accelerated shutdown or repurposing of existing capacity, reaching greater efficiencies, implementing an unbundled tariff and establishing a market operator, moving away from conventional electricity planning and structures, embracing distributed generation, introducing an independent transmission system operator, establishing a distribution system operator, implementing a wheeling tariff, modernising the grid, using digital solutions to drive financial and operational improvements, and enabling energy consumers to make more informed decisions.

 

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