Despite government issuing an official notice on 25 March 2020, classifying electricity production, supply and maintenance as essential services, Eskom is proposing to curtail operational wind farms citing reduced demand in relation to COVID-19, claiming Force Majeure.
This comes as a surprise to the 22 operational wind farms, who have a combined installed capacity of 1980 MW’s, as the power utility failed to alert or warn the Independent Power Producers (IPPs) of such action, prior to issuing the notices. In fact, Eskom’s Single Buyer Office sent a letter to all operating IPPs last week (25 March 2020), to confirm that the categorisation of essential services applies to facilities currently in operation.
“It is concerning that wind energy power producers have not been given an opportunity to engage on this matter with Eskom, despite both Eskom and Government confirming that operational IPP’s are in fact an essential service, just five days ago. The industry will be approaching Eskom with a view to finding a constructive resolution that does not prejudice the country nor the power producers,” explained Ntombifuthi Ntuli, CEO of the South African Wind Energy Association (SAWEA).
It is the opinion of energy specialists that should power curtailment be required, the Wind sector is able to curtail on short notice and in precise increments. However, according to the agreements in place, energy producers must be paid a deemed energy fee in line with the philosophy that all power that would have been generated is paid for.
The industry is seeking legal counsel on whether the reduced electricity demand as a result of COVID-19 does in fact constitute Force Majeure, as declared by Eskom, as some experts deem reduced demand as a normal system event, which would therefore not imply a Force Majeure event. Additionally, experts raise the point that South Africa is in actual fact not currently facing a structural oversupply and the fact that Eskom is still struggling to keep the system stable, despite shift in demand patterns.
“Eskom has indicated in their letter to IPPs that they will make provision for the extension of the Power Purchase Agreement period to make up for the curtailment period, however, we are concerned about the immediate impact this will have on shareholders, particularly, BBBEE partners and community trusts, who have loans to repay,” added Ntuli.
The 12 wind farms, currently under construction across the country, went into lockdown, with a confirmation that delays, directly related to the lockdown period, will not attract any penalties.