- Energy minister Gwede Mantashe said he wants to follow the Dutch electricity model when allowing private producers into the national grid.
- The Dutch model saw the state sell off its generation capabilities, but retained control of the transmission company.
- Since 2008, electricity prices declined by almost 10% in the Netherlands while it increased by 300% in South Africa.
- For more stories go to www.BusinessInsider.co.za.
Mineral resources and energy minister Gwede Mantashe on Monday punted the Dutch electricity model as a solution for South Africa’s ongoing electricity crisis.
The Dutch model would see the state open up the electricity generation market and sell its generation capacity but retain control of the transmission network.
The model saw electricity prices decline by as much as 10% in the Netherlands since 2008.
Speaking on the sidelines of the Investing in African Mining Indaba in Cape Town, Mantashe said he would like to emulate the Dutch model when the state allows private producers into the electricity market.
In line with the model, he said he hoped to create an entity distinct from Eskom to generate power bases which would either be publically or privately owned.
He was, however, unable to provide additional detail about the scope of the new entity, but said the entity would depend, in part, "on the appetite of investors", Fin24 reported.
"By this time next year we hope we can say we have a site for energy generation outside of Eskom. We want people to sell energy through transmission. We want to take the pressure off of Eskom," Mantashe said.
The Dutch model, as punted by Mantashe, would see the state open up the electricity generation market for private competition, while the state only owns the main transmission lines.
The Netherlands opened up its electricity generation in 2004, two years after allowing industrial consumers to generate their own power. Mantashe said South Africa is planning to allow industrial consumers to produce their own power this year.
Independent power producers (IPPs) were fully responsible for the electricity generation in the Netherlands by 2012, while the state controls the transmission company, TenneT.
TenneT manages the high-voltage grid in the Netherlands, while 8 smaller utility companies, some partly state-owned, are responsible for the lower voltage regional grid and distribution of electricity.
The entire electrical system is regulated by the Dutch’s Authority for consumers and markets, comparable to the National Energy Regulator of South Africa (Nersa) which sets electricity prices.
The Dutch system is similar to the state’s proposed division of Eskom into three companies - a generation, transmission, and distribution company - to allow IPPs to compete in the market.
However, unlike the Dutch, the South African government has repeatedly said it does not plan to sell Eskom’s generation arm, but will allow private entities to compete in the market.
A report by consultancy firm Deloitte noted that electricity prices declined by almost 10% in the Netherlands since 2008, while South Africa saw prices increases of roughly 300% during the same period.
At the Mining Indaba, Mantashe said the Dutch model should increase competition in the South African electricity market and help drive down energy prices.
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