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Renewable deal still to be 'discussed'

Mar 11 2018 06:14
Dewald Van Rensburg And Justin Brown

Eskom has committed to signing long-outstanding agreements with 27 renewable energy projects involving R56bn in capital expenditure – but the details do not seem to have been settled.

Eskom’s new chairperson Jabu Mabuza “will soon have discussions with the energy department in relation to the details of the announcement”, said spokesperson Khulu Phasiwe when he was asked by City Press if the power utility would honour the original tariffs agreed to.

On Thursday new Energy Minister Jeff Radebe announced that the 27 projects would sign their agreements with Eskom this coming week.

The projects would add 2 305 megawatts of local electricity capacity and are expected to enter into commercial operation in 2020.

“These projects will provide 61 600 full-time jobs, of which 95% will be for South Africans, mostly during plant construction,” Radebe said.

“Northern Cape will have 59% of the created jobs, followed by Eastern Cape with 15% and North West with 13%.”

Radebe announced that 20 projects under the small renewable programme, projects between 1MW and 5MW, would also be signed.

“This will immediately ensure a R2.7bn investment in this part of the economy,” he said.

Terence Govender, chairperson of the SA Renewable Energy Council, said it was “a very good signal”.

There had been “no substantive changes” to the terms originally agreed to by the independent power producers (IPPs) as far back as 2015, he said.

Last year the government tried to force IPPs to lower their tariffs.

Once deals with Eskom were signed it would take between two and five months for the projects to achieve financial closure and put shovels in the ground, Govender told City Press.

The Renewable Energy Independent Power Producer Procurement is South Africa’s model public-private partnership and has been responsible for more than R200bn in private power investments in the country since 2011.

It has proceeded through “bidding windows”, in which IPP developers bid against one another to build power projects at predetermined tariffs.

The preferred bidders in each round get 20-year power purchase agreements (PPAs) with Eskom, which are fully backed by Treasury.

However, after the fourth bidding window in 2015, Eskom started refusing to sign any more PPAs, which the industry said was illegal as the bidding process effectively amounted to awarding a tender.

The SA Wind Energy Association said this week that in the past two years people in the renewable industry chain had been retrenched and many local firms “face significant financial losses due to the delay”.

Last year former energy minister Mmamoloko Kubayi stunned the IPP developers and their significant financial backers by announcing that all the tariffs had to be reduced to 77c per kilowatt-hour – a level that would be impossible for some projects and far less profitable than previously agreed tariffs for most.

A renegotiation did not happen and City Press understands the industry has threatened legal action.

Kubayi was briefly replaced by David Mahlobo in former president Jacob Zuma’s last Cabinet reshuffle last year.

He also stunned the industry by convening a hasty energy “indaba” and casually announcing that the long-awaited integrated resource plan (IRP) had been finalised and that it called for far less renewables – and more nuclear power – than the least cost scenario endorsed by the industry.

Govender told City Press the industry still had not seen the new IRP.

Radebe said he would like to see two projects under the coal IPP programme signed, as well as 19 projects procured under the renewable energy expedited bid window, which would be announced in due course.

“Together this will achieve a further R103bn of investment in the economy with substantial foreign direct investment,” he said.

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eskom  |  renewable energy
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