Alternative to Ramaphosa’s energy plan – including tax rebates

 ·3 Aug 2022

The Democratic Alliance (DA) has published its Energy and Electricity Policy – an alternative to the energy plan published by president Cyril Ramaphosa last week – focusing on access to cheap electricity and ending load shedding in South Africa

According to the DA, its policy differs from what the government has put forward in that it is actively ‘consumer-centric’ and proposes to facilitate feeding surplus energy from customers into the grid.

Notably, the new policy proposes incentives for personal solar installations by granting a once-off tax rebate to households that install them.

Broadly, the key proposal are:

  • A tax rebate for households installing solar;
  • Opening up alternative sources of power supply to meet the country’s basic requirements to end load shedding;
  • Provide amnesty to households with illegal connections to incentivise the move away from such connections;
  • End the state’s monopoly on energy generation, supply and distribution;
  • Privatise and unbundle Eskom by selling power stations to private owners until their end of life.

“Commercially viable power stations should be sold to private owners and operated until the end of the remaining life of the station. The envisioned end state for generation is of a diversified and competitive generation sector,” said the DA.

The party argues that Eskom should be unbundled so that there are multiple entirely separate enterprises that do not fall under a holding company. These companies can then be purchased by private owners to drive competition in the energy sector.

“The envisioned end state for generation is of a diversified and competitive generation sector.”

With generation and distribution privatised, the remaining transmission entity of Eskom, free from conflicts of interest, should become a national, state-owned Independent Transmission System and Market Operator (ITSM), said the DA.

This state-owned transmission system should be allocated with power planning, procurement, contracting, grid system and electricity market operation functions, said the DA.

“South Africa needs a competitive energy market where the state does not have a monopoly on energy generation, supply, and distribution. There should be a multiplicity of private suppliers competing with one another to provide the best service and lowest price. This requires making it easier for energy suppliers to enter and participate in energy markets.”

The DA’s alternative energy plan can be read here.

Opposite plans

The DA’s policy proposal comes after president Cyril Ramaphosa’s presented his energy plan last week (July) which aims to tackle the decades-long energy crisis by reducing red tape and fast-tracking new energy capacity to bolster the country’s energy sources.

In terms of the president’s plan, the government intends to incentivise private rooftop solar installation through new rules and pricing structures – called a ‘feed-in’ tariff. Under this proposed tariff, commercial or personal entities that have installed solar panels could feed surplus power to Eskom for credit on their bills.

Similarities between the DA’s policy and Ramaphosa’s plan are present.

Ramaphosa’s plan includes finding alternative sources of power supply to meet the country’s basic requirements to end load shedding – including buying more power from independent producers, importing power from neighbouring countries, and turning to gas power to boost capacity.

However, the plans are ideologically opposed.

While the DA is pushing for privatisation and less control in the sector by the state, Ramaphosa and the wider ANC’s standpoint is to get more state involvement.

Even though the government is unbundling Eskom into three different units – with at least one competing in an open market – it has shot down talk of privatising the power utility. Meanwhile, the ANC is increasingly talking up a second state-owned power utility.

Broadly, the president’s interventions include:

  • Boost the recruitment of skilled workers at Eskom and address sabotage and theft at the utility;
  • Improve logistics to ensure that diesel-fired turbines are supplied in a timely fashion;
  • Allow Eskom to buy excess power from private producers;
  • Import more power from countries in the region;
  • Implement a programme to incentivise the efficient use of power to cut demand by 600 megawatts;
  • Easing local content requirements so that renewable-power projects awarded in the so-called Bid Window 5 can go ahead;
  • Boosting the size of the sixth bid window and expediting further rounds;
  • Announce a plan to deal with Eskom’s debt before October.

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