This report dated April 2016 was produced by Genesis Analytics for Trade and Industry Policy Strategies (TIPS) for Business Leadership South Africa (BLSA), and is made available by EE Publishers in the public and the industry interest. The introduction to the Genesis report is given below.
From 2007 until August 2015, South Africa faced an unprecedented supply crunch in the electricity sector with Eskom, the state-owned vertically-integrated electricity company, at times unable to meet peak electricity demand resulting in recurrent load shedding. This situation had been precipitated by a number of causes, including delays in the construction and commissioning of coal-fired power stations Medupi and Kusile; Eskom’s strained financial position; unplanned outages; and maintenance requirements of ageing generation plants.
The Government of South Africa, in response to recurring electricity supply interruptions, established an Electricity War Room in late 2014 to facilitate a coordinated response between relevant Government departments and Eskom to restore electricity supply security. The War Room reports to the Deputy President, who also established an Advisory Panel on Electricity, chaired by Prof. Anton Eberhard.
While the War Room has focused primarily on short-term measures, Government is also considering longer term measures to ensure sustainability of the electricity sector. In this context, a report was commissioned by Trade and Industrial Policy Strategies (TIPS) and Business Leadership South Africa (BLSA) for the Electricity War Room. It was guided by a steering committee comprising Malcolm Simpson, Dolly Mokgatle, Dr. Laurain Lotter and Gaylor Montmasson-Clair, and chaired by Prof. Anton Eberhard.
This report provides an assessment of the various approaches that can be taken to reorganise state-owned electricity assets in order to address the challenges faced by the electricity supply industry (ESI). In particular, alternative approaches to the organisation of Eskom’s electricity assets will be reviewed, aimed at identifying ways to enable enhanced operational efficiencies and investment in the sector so that an adequate and reliable electricity service can be provided in a sustainable manner in the medium to long term.
The problem statement of this exercise is as follows:
In order to secure an adequate, reliable and competitively-priced electricity supply, through a financially-sustainable electricity sector with improved operational efficiencies; lower costs; and increased investment, what are the optimal institutional arrangements for the sector, including possible restructuring of state-owned electricity assets, as well as the planning and procurement of new power infrastructure?
The report is aimed at identifying and analysing appropriate organisational structures and the accompanying governance arrangements that would enable the State, Eskom and the private sector to provide sufficient, reliable and efficiently-priced electricity. Results from a parallel study on the impact of alternative industry reforms on Eskom’s costs, its creditworthiness and ultimately the long-term tariff path, provides empirical underpinning and is incorporated where appropriate.
The report begins with an evaluation of the current electricity sector landscape in South Africa. This includes a discussion of previous reforms, the current structure of the industry, drivers for restructuring and a brief look at the reform agenda. The report examines reform drivers and international models that could be applied; providing an evaluation of alternative international approaches and case precedent. Section 4 considers possible restructuring alternatives for South Africa against a set of evaluation criteria to compare the alternatives in the South African context.
The introduction to this report, which was produced by Genesis Analytics for Trade and Industry Policy Strategies (TIPS) for Business Leadership South Africa (BLSA) is made available by EE Publishers in the public and the industry interest.
Contact Ethèl Teljeur, Genesis Analytics, email@example.com
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