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New energy minister delays IPP signing amid protest from unions

Apr 11 2017 08:35
Matthew le Cordeur

Cape Town – New Energy Minister Mmamoloko Kubayi has delayed the signing off of Eskom's Power Purchase Agreements (PPAs) with key renewable energy independent power producers (IPPs) on Tuesday, a move that would have ended almost two years of delays.

“The SA Renewable Energy Council (Sarec) has noted, with concern, that the deadline set by the previous minister of energy for financial closure of outstanding PPAs … will not be met,” the organisation said in a statement on Monday.

“Sarec learned this weekend that when invited to attend the signing of contracts at the IPP office, the new minister’s office asked that the signing be delayed.

Sarec said this was to allow Kubayi to meet with Public Enterprises Minister Lynne Brown. “It has been indicated that once the two ministers have met, a new signature deadline will be set,” said Sarec.

TOO OPTIMISTIC? Eskom to sign IPP agreements shortly - Joemat-Pettersson

New concerns as Eskom blames IPPs for closing coal power stations

President Jacob Zuma directed Eskom in his 2017 State of the Nation Address to finalise the signing of the PPAs for these IPPs.

This changed Eskom's tune instantly, after it had blocked the signing of the new PPAs for almost two years over concerns that the costs were too high and that the utility didn't require additional power due to a surplus of supply.

However, Eskom then blamed its decision to speed up its decommissioning schedule of five coal power stations on the Renewable Energy Independent Power Producer Procurement (REIPPP) programme, which legally obliges it to buy all the power produced by private wind and solar plants.

In the process, Eskom has effectively enlisted unions at its operations as allies in its continuing campaign against private renewables, City Press reporter Dewald van Rensburg explained on Sunday.

The National Union of Metalworkers of SA, as well as the National Union of Mineworkers, has directed its anger at the REIPPP programme, saying it should not be allowed to cause the loss of about 20 000 jobs.

Whether these concerns could trigger a response from Kubayi is unknown.

The Department of Energy in a statement last Tuesday assured the new minister that it will "continue to work towards entrenching the implementation of the energy mix, which promotes the harnessing of all energy sources for enhanced broadened access, and will bolster the national effort towards radical economic transformation".

Kubayi said the change in ministers "should not  bring fear to any team Energy member because there will be synergy and swift transition in the Department of Energy".

However, Sarec chairperson Brenda Martin said that "while we recognise the need for the new minister to get up to speed on the issues, financial closure of duly procured renewable power for 37 Power Purchase Agreements now stands at almost two years".

IPPs have sorted out Eskom concerns - Sarec

IPPs have been working closely with Eskom officials to make sure the necessary paperwork is up to date, so that financial closure can be achieved and construction can begin, Sarec explained.

All of Eskom’s concerns in relation to PPA signatures have been addressed by Treasury, energy regulator Nersa and the Department of Energy, Sarec explained. “It is clear that in policy, by signing PPAs with duly selected preferred bidders, Eskom is not at risk of any unforeseen financial exposure.

“It is understood that Eskom’s obligation to pay for power procured, will only kick in once power plants are built and power is generated by IPPs,” said Martin.

Over 13 000 jobs will be created during the construction process, along with over 1 900 jobs created in the operational phase. A combined investor value of R58bn in investment will also be unlocked as soon as PPAs are signed. This will add to the R194bn already brought by the IPPs.

“We hope that Eskom will conclude its legal obligations to renewable power producers before embarking on plans relating to its proposed nuclear deal in June,” said Martin.

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