Eskom Overhauls Grid Access for Renewables in a Bid to Bolster Power Supply

Johannesburg — In a significant policy shift, South Africa’s power giant Eskom is revising the rules of the game for Independent Power Producers (IPPs) to expedite the onboarding of new generation capacity, with an eye on bolstering the country’s ailing grid.

New Grid Access Rules Unveiled:

• Fast-Tracking IPPs: Eskom’s revamped Interim Grid Capacity Allocation Rules (IGCAR) aim to speed up the integration of IPPs into the national grid, moving away from a ‘first come, first served’ model to a more dynamic ‘first-ready, first served’ basis.
• Navigating Capacity Limits: The changes recognize the grid’s finite capacity and Eskom’s urgency to inject additional megawatts into the system amidst escalating renewable energy demand.

Progress and Backlog Clearance:

• Cape Provinces Take the Lead: Eskom has made strides in clearing the backlog of grid connection requests, especially in the Cape provinces, allocating 3.2 GW out of 5.1 GW across 32 compliant projects.
• Nationwide Review: Efforts are now focused on assessing pending applications in other regions, with 8 out of 44 projects meeting IGCAR compliance thus far.

Clarifications and Criteria:

• Stricter Evaluations: Eskom has provided detailed clarifications on IGCAR evaluations, encompassing environmental authorizations, aviation clearances, land rights, and other regulatory necessities.
• Guarantee Requirements: A significant new condition is a financial guarantee from IPPs for grid-tied projects over 1 MW, intended to cover economic losses from project delays or cancellations.

Understanding the Economic Guarantee:

• Costly Commitment: IPPs are now obligated to provide a guarantee of R200,000 per MW, reflecting the heavy economic toll of load shedding and energy displacement costs.
• Guarantee Conditions:
  • Must be approved by Eskom and issued by an accredited financial institution.
  • Required upon project readiness confirmation.
  • Covers all phases up to grid connection.
  • Drawdown occurs if grid capacity allocation is revoked due to non-compliance with timelines or conditions.
• Additional to Construction Guarantee: This grid capacity allocation guarantee is separate from any grid construction works guarantee.

Developer Concerns:

• Potential Liabilities: Developers have raised alarms about being penalized for scope changes in projects between initial cost estimates and final budget quotes, which could deter project advancement.

Eskom’s Assurance:

• Collaborative Scope Changes: Eskom asserts that project scopes will be altered only with mutual agreement, although there remains an area of liability risk for developers.

Finalization and Advice for IPPs:

• IGCAR Codification: The final IGCAR is undergoing a ‘codification’ process, signaling Eskom’s commitment to the new allocation regime.
• Call to Action for Developers: To avoid missing out on grid capacity, developers and IPPs are urged to thoroughly understand IGCAR and seek timely advice to ensure compliant and competitive submissions.

As Eskom fights to stabilize the power landscape in South Africa, these grid access changes mark a pivotal step towards leveraging renewable energy sources more efficiently, with the potential to power the nation’s future more sustainably.