As the Eskom tariff hearings continue to be the main discussion surrounding South Africa’s power struggle, consulting company Frost & Sullivan believes that the country’s government and Eskom are in a position to face challenges and create an integrated energy policy. “One of the most critical issues for the government to address is the current lack of an integrated energy policy for the country over the next decade,” says Frost & Sullivan energy analyst Marc Goldstein. “Without a clear understanding of Eskom’s guiding principles, confusion will remain over Eskom’s responsibilities in ensuring our security of supply.”
More incentives should be enacted in order to lure independent power producers (IPPs) as currently under-priced tariffs have made the IPP market uncompetitive. “The role of IPPs in the country will be critical and this issue affects many of the challenges that need to be dealt with in 2010,” Goldstein remarks. “The government has failed to clearly outline whether Eskom is to remain the single generator or whether it will become part of a competitive market in which it will compete to sell electricity. There is a clear conflict of interest in asking Eskom to sign power purchase agreements (PPAs) with competitors.”
And yet another major challenge needs to be addressed. According to Goldstein, restructuring South Africa’s electricity supply industry will be pivotal to meeting energy demands efficiently and effectively. “The most positive piece of news we can take from 2009, is that the government has committed itself to ring fencing the Systems Operator and Single Buyer, and will eventually separate them from Eskom,” he says. “Frost & Sullivan believes that we will view 2009 as the turning point when the government began to put in place the pieces necessary to secure our long term electricity investment. By creating an independent system operator and buyer, the government will essentially be creating the structures to allow third parties to supply electricity to our grid.”
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