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Independent power producers are the future

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Our economy has been stagnant over the past 10 years. One key reason is the lack of reliable energy supply to our households.

The furore around the independent power producers (IPPs) and subsequent opposition and marches by some NGOs and the trade unions need to be put into context and interrogated.

The role of IPPs as part of the renewable energy mix needs to be discussed. The debate should be within the context of the country exploring other innovative sources of energy that will mitigate the current shortfall of the supply of energy. With the coal stockpile running low and the rainy season upon us, the debate is more urgent than ever.

One needs to ask a fundamental question: Where are we going to get reliable and cost-effective energy that will ignite and propel our economy? The supply of reliable energy and economic growth are inseparable.

Our economy has been stagnant over the past 10 years. One key reason is the lack of reliable energy supply to our households and to the industries that are supposed to perform optimally and profitably to create jobs and contribute to economic growth.

Failure to have a reliable energy supply will impact negatively on President Cyril Ramaphosa’s crusade to get $100billion (R1.3 trillion) into our country’s economy within five years to kick-start vital economic growth.

The White Paper on Renewable Energy Mix Strategy was adopted by our government in 2003. Key aims are:

Ensure that an equitable level of national resources were invested in renewable technology.

Direct public resources to the implementation of renewable energy technologies.

Introduce suitable fiscal incentives for renewable energy.

Create an investment climate for the development of the renewable energy sector.

Since then there has been debate from NGOs, and in particular the trade unions, about whether it is necessary for the country to engage in such projects.

The introduction of IPPs is in line with the dictates of the Integrated Resource Plan that is driven through the Department of Energy.

The IPPs form part of government efforts to curb carbon-based emissions, which are harmful to the health of our people and pose serious climate change risks.

For many years – a fact not widely known – Eskom has had an IPP agreement, normally referred to as a power purchase agreement, with Cahora Bassa, a hydroelectric installation in Mozambique. Eskom has had over 10 similar agreements in place since 2010.

On the issue of the cost, it must be noted that current IPP costs average about R2/kWh, recoverable in full in line with the National Energy Regulator’s regulatory framework.

The downside is that Eskom pays this cost almost upfront, and this is hurting Eskom, due to failure to collect debt from municipalities who owe billions of rand through non-payments.

This is an issue beyond Eskom. It will require our collective resolve and political will to deal with the culture of non-payment by residents of most of our municipalities.

Objectively, IPPs are good for the country, as they provide what can be described as clean energy. This is vital in light of increasing temperature around the globe. IPPs currently contribute about 4000MW to the grid, while Eskom’s capacity is around 45000MW. So the argument that IPPs will destroy jobs on a massive scale cannot be sustained. Coal will still contribute over 35000MW to the grid, and will continue to dominate the energy mix for the foreseeable future.

Mafika Siphiwe Mgcina is a member of the ANC caucus, Gauteng Legislature. He writes in his personal capacity.