Johannesburg - This week marked a turning point for the development of large-scale renewable energy projects in South Africa, Frost & Sullivan (F&S) said on Thursday.

After a three-month period of consultation and deliberation with the key stakeholders, the National Energy Regulator of South Africa (Nersa) publicly announced its revised levels of commitment to the industry.

"The latest tariff announcements, which are the result of a consultation process, which began as early as 2004, have surpassed the expectations of even the most optimistic industry players," said Frost & Sullivan energy analyst Sipha Ndawande.

Despite the considerable potential that exists to produce electricity using renewable energy in southern Africa, projects have until now been largely limited to off-grid, small-scale applications with inadequate levels of government support and organisational barriers regarded as the chief culprits for the sluggish movement in the market.

Nersa's renewable energy feed-in tariffs, which settle the money to be paid to power producers, was released on Tuesday and has been welcomed as a landmark for South Africa.

"It will help reduce our carbon footprint even as we promote growth and reduce poverty. It opens the door to the fastest-growing industry in the world gaining a foothold on the African continent," said Ruth Rabinowitz, an Inkatha Freedom Party MP and head of a group of parliamentarians who are renewable energy activists.

The tariffs - guaranteed for 20 years - are: landfill gas, (90c/kWh) small-scale hydro, (94c/kWh) wind (1.25 rand/kWh) and concentrated solar thermal power (CSTP) (2.10 rand/kWh).

"The published tariffs - should entice investors to develop wind farms, mine landfill gas and produce mini-hydro power stations," Rabinowitz said.

And while tightening sources of global credit and more countries reporting negative economic growth rates have made private equity investment companies more selective and strategic about the sectors into which they invest capital, sustainable energy project portfolios have bulged to more than $1bn dedicated to financing renewable energy projects in Southern Africa.

"This is an indication that investors view renewable energy and energy efficiency projects in southern Africa as having favourable returns and representing a solid investment decision," said Ndawande.

Optimism

The South African government has announced a renewable energy target of 10 000GWh by 2013.

This target amounts to approximately 2% of the overall power mix in South Africa.

If we assume that 85% of the announced large-scale renewable energy projects are executed in the country, electricity produced from renewable energy will overshoot this target quite substantially.

"What is required is clarity on the 'rules of the game'. That is, the grid access rules," said Ndawande.

"This is a key piece of information for renewable energy stakeholders. Without guarantees that their 'clean' power will be bought, few companies will be willing to invest into the industry unless there is an opportunity to export the energy," Ndawande stressed.

Key industry stakeholders are nevertheless optimistic that these issues are likely to be resolved sooner rather than later, and clarity will be provided in the coming months.

For now, it is fair to say that there are certainly more positives than negatives in the outlook on renewable energy projects in South Africa.

"The industry is young, and will have the teething problems associated with a developing market. Government has taken a huge stride forward with the revised renewable energy tariffs," said Ndawande.

"Once the organisational barriers are resolved, this market with so much potential will finally be allowed to grow," he said.

- I-Net Bridge