Alternative to Ramaphosa’s energy plan – including tax credits

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The Democratic Alliance (DA) has published its Energy and Electricity Policy – an alternative to the energy plan published last week by President Cyril Ramaphosa – aimed at accessing cheap electricity and ending tax shedding in South Africa

According to the DA, its policy differs from what the government has proposed in that it is actively “consumer-centric” and proposes to feed excess energy from customers back to the grid.

In particular, the new policy proposes incentives for personal solar installations through a one-time tax deduction to households that install them.

Broadly speaking, the main proposals are:

  • A tax credit for households installing solar energy;
  • Opening up alternative energy sources to meet the country’s basic requirements to end tax shedding;
  • Amnesty households with illegal connections to encourage the relocation of such connections;
  • End the state monopoly on power generation, supply and distribution;
  • Privatize and unbundle Eskom by selling end-of-life power plants to private owners.

“Commercially viable power plants must be sold to private owners and operated until the end of the plant’s remaining life. The intended end-state for generation is a diversified and competitive generation sector,” the DA said.

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The party argues that Eskom should be unbundled so that there are several completely separate companies that are not under a single holding company. These companies can then be bought by private owners to boost competition in the energy sector.

“The intended end-state for generation is a diversified and competitive generation sector.”

With production and distribution privatized, Eskom’s remaining transmission entity should become a national, state-owned, independent transmission system and market operator (ITSM), free of conflicts of interest, the DA said.

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

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

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

Opposing plans

The DA’s policy proposal comes after President Cyril Ramaphosa last week (July) presented his energy plan that aims to tackle the decades-long energy crisis by cutting bureaucracy and accelerating new energy capacity to bolster the country’s energy resources.

In terms of the president’s plan, the government plans to incentivize private rooftop solar installations through new rules and pricing structures — called a “feed-in” tariff. Under this proposed rate, commercial or personal entities that have installed solar panels can supply excess power to Eskom for credit on their accounts.

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

Ramaphosa’s plan includes finding alternative power sources to meet the country’s basic requirements to end tax shedding — including buying more power from independent producers, importing power from neighboring countries, and switching to gas power to save the day. to increase capacity.

However, the plans are ideologically opposed.

While the DA pushes for privatization and less state control in the sector, the stance of Ramaphosa and the wider ANC is to get more state involvement.

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Although the government is splitting Eskom into three distinct units — at least one of which competes in an open market — it has shot down the discussion about privatizing the electric utility. Meanwhile, the ANC is increasingly talking about a second state-owned company.

In general, the president’s interventions include:

  • Stimulate the recruitment of skilled workers at Eskom and tackle sabotage and theft at the utility company;
  • Improve logistics to ensure timely delivery of diesel-fired turbines;
  • Allow Eskom to buy excess power from private producers;
  • Import more power from countries in the region;
  • Implement a program to promote the efficient use of power to reduce demand by 600 megawatts;
  • Relaxation of local content requirements to allow renewable energy projects awarded in the so-called Bid Window 5 to proceed;
  • Increasing the size of the sixth bidding window and speeding up further rounds;
  • Announce a plan before October to settle Eskom’s debt.

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