[November 19, 2009] Rendered Powerless By Eskom Tweet Johannesburg, Nov 19, 2009 (Business Day/All Africa Global Media via COMTEX) -- WITH the benefit of hindsight, the introduction of independent power producers (IPPs) in SA should not have hinged so much on Eskom. Everyone agrees that IPPs have an important role to play in the country's power generation. In fact, former Eskom CEO Jacob Maroga says IPPs can produce as much as 2189MW by the end of March 2013. But given its priorities in producing the much- needed base load capacity, it is tempting for Eskom to put IPPs on the back burner. Energy group CIC Energy, developers of a coal-fired station in Mmamabula, Botswana, has been pursuing Eskom for a power purchase agreement, with no success. In July, Eskom told CIC it could neither "accept nor reject" the offer for the purchase of electricity from Mmamabula until a funding model for Eskom's capital expansion programme had been finalised. But independent producers have put their hopes on the electricity regulations on new generation capacity that Energy Minister Dipuo Peters published in August this year. The regulations define how an IPP and an electricity buyer will enter into a power purchase agreement. In a move that has clipped Eskom's influence in the introduction of IPPs, the regulations stipulate that a system operator will be responsible for activities related to procurement. Peters says there has been an over-reliance on Eskom to get the IPP sector going and indications are that, with the independent systems operator, the government wants to reverse this. CIC president Greg Kinross says: "While the practical application of these (electricity) regulations is still being developed, (CIC's) understanding of the regulations is that government, and not Eskom, is now the decision maker with respect to the Mmamabula energy project. "CIC has an ongoing process of direct engagement with the relevant stakeholders in the government of SA, in the context of which the company has commenced discussions regarding the evaluation and approval process for the Mmamabula energy project under the regulations." Another IPP, the London- listed Ipsa group, is bitter about Eskom's handling of the development of power purchase agreements. The financially beleaguered Ipsa is fighting for its survival while its combined heat and power plant in Newcastle, KwaZulu-Natal - SA's first privately financed independent power unit -- stands idle because the company has been unable to sign a power purchase agreement with Eskom. While Ipsa has made a few investment decisions that have gone bad, the failure to secure a contract with Eskom has been a blow. To say the company is having a torrid time would be an understatement. Had it not been for the generosity of Independent Power Corporation, a company controlled by Ipsa CEO Peter Earl, the company would be deep in the financial doldrums. Ipsa chairman Stephen Hargrave does not have kind words for Eskom. "(Ipsa) shares the frustration of shareholders that the agreement has taken so long to materialise. "I can only assure shareholders that this is not the result of any lack of effort on the part of management, who have been working non-stop to finalise matters with Eskom; but it must be acknowledged that for Eskom, the Newcastle CHP project is much less important than it is for Ipsa," he said at the release of the group's interim results earlier this year. Frost & Sullivan energy analyst Marc Goldstein is optimistic about the prospects of independent power producers. They can build power plants cheaper than Eskom and operate them more efficiently than the power utility. And he says IPPs have better access to funding than Eskom. [ Back To TMCnet.com's Homepage ]