South Africa: Renewable energy industry at risk

Thursday, January 26, 2017

The South African Renewable Energy Council (SAREC) believes that Eskom’s reluctance to signing additional Power Purchase Agreements (PPAs) with renewable energy Independent Power Producers (IPPs) will begin to worry gas, coal and cogeneration project developers and IPPs.

In July last year, the South African national power utility, Eskom, announced that it will not be signing any PPAs with private power producers once round 4.5 of government’s renewable power programme draws to a close.

A representative from the South African Independent Power Producers Association (SAIPPA), speaking on a condition of anonymity said: “This uncertainty in the nascent IPP sector not only affects new power projects being developed and bid into the department of energy procurement programmes, but also affects existing pioneer IPPs that have been contributing to the energy supply of South Africa over the past few years.”

“It appears likely that some of these early pioneering IPPs and cogenerators that contributed to grid stability and electricity supply over the past period of constrained Eskom electricity supply will be 'put out to pasture' in the near term.  Should the relevant Short Term Power Purchase Agreements not be renewed for these existing IPPs by the end of March 2017, it will be another blow to aspirant IPPs and this nascent but critical sector,” the SAIPPA representative said.

Unsigned PPAs threaten renewable energy industry

Brenda Martin, Chair of the SAREC, also commented: “Such non-compliance with duly undertaken power procurement has consequences beyond the renewable energy industry in that side-stepping policy introduces risk for other independent power producers currently preparing to bid for the department of energy’s already issued or forthcoming requests for proposals.”

However, Eskom’s decision has since been challenged by many renewable energy bodies and as a result, mounting pressure from the department of energy, national treasury and even the presidency has made the power utility to revise its initial statement.

Last week, power utility's current interim CEO, Matshele Koko, said: “Let us first sign the 62c/kWh bids. We would sign 13 immediately. That would be a move in the right direction.”

However, Koko gave conditions attached to the new decision, stating that: “Those that are more than 62c/kWh must sharpen their pencils.”

Source: ESI Africa