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Molefe softens stance after snubbing R58bn worth of IPPs

Cape Town – Eskom CEO Brian Molefe’s comment on Thursday that he will “go slow” in signing R58bn worth of power purchase agreements (PPAs) is a step in the right direction, according to President Jacob Zuma’s special energy advisor Silas Zimu.

Molefe – under siege after former Public Protector Thuli Madonsela’s state capture report - has defied government by refusing to sign the PPAs of 37 independent power producers (IPP).

The South African Wind Energy Association (SAWEA) has lodged an official complaint with energy regulator Nersa over what it believes is Eskom’s failure to comply with ministerial determinations.

The Department of Energy's IPP Office is also engaging with Eskom on the matter.

It was therefore a sense of mild relief that Molefe softened his stance on Thursday, even if he did not clear the way for the full roll-out of the renewable energy projects.

“Until storage capacity technology is resolved (for renewable energy), our view is to go slow,” he said during his interim report announcement on Thursday.

“We are not averse to people who can produce power,” he said. “We just don’t want technology that won’t be there at 19:00 tonight when we are alone in the operating room and we are running short – if at that time the wind is not blowing for instance. It is a practical problem and not an ideological problem.”

Beacon of hope

Zimu saw this as a beacon of hope. “It is good that Eskom is acknowledging the value of renewable energy and the improvement that energy storage will bring to renewables,” Zimu told Fin24 on Thursday.

He told the Windaba conference on Thursday that there are different engagements with Eskom to resolve the issue regarding the PPAs.

“No one must work against what government has committed to and they must sign for what has been agreed to,” he said. “No one will stop the investments that the IPPs have brought in.”  

Windaba and SAWEA chairperson Mark Pickering said it was a major concern that the projects had not been signed off. “Everything is in place and the shovels are ready to start construction,” he told delegates on Wednesday.

Finance Minister Pravin Gordhan told Parliament in his mini budget speech last week that “once Eskom has signed the offtake agreements, a further R58bn in investment and some 4 800 construction jobs will commence, bringing 2 354 MW of capacity to the electricity grid.”

Zimu also proposed that IPPs should approach municipalities to get PPAs. “Municipalities have same powers as Eskom,” he said. “It is something we need to look at. Big municipalities should be able to give you PPAs. Then you should deliver.”

He also suggested IPPs seek business in other sub-Saharan African countries like Zimbabwe and Zambia, but the audience of IPP owners quickly let him know that this was not a very attractive idea.

IPP owners are concerned that Eskom wants to cut IPPs to ensure the 9.6 GW nuclear deal can be approved. Many speculate that this deal will create space for massive corruption at a state level.

Going the legal route

Attorney Cormac Cullinan, who specialises in environmental law, told Windaba that IPPs would have to go the legal route to ensure they are not sidelined by Eskom or the Department of Energy.

Legal action in electricity sector can be used as a tool, he explained. IPPs can lodge complaints to regulators like Nersa and the Competition Commission; can seek public remedies through the high court, can seek private remedies through contractual agreements, and can lodge interdicts or Mandamus.

However, he said IPPs should not only see the legal route as their only option. “Legal action is best used as part of a wider strategy for social goals,” he warned. “You need alliances if you want to achieve your goal.”

“When we talk about legal action, it is important to understand wider issues like the nuclear procurement. This will take up a lot of space for renewables.”

“You want to build alliances,” he said. “This is fundamentally important. You want alliances with NGOs and communities. The social justice issues must come in. Renewables need to step up on social issues.”

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