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What govt is really doing well in power sector

Jun 14 2015 13:29

Cape Town - In the fog of confusion caused by the chaos at Eskom, we lose sight of where the ANC government has done really well in the area of power generation, said investment director Rob Spanjaard.

He said the state-run renewable energy programme has won international awards for its efficiency and impact and its success could provide a model to help Eskom out of its difficulties which are currently dragging the whole economy down.

Spanjaard, the investment director and portfolio manager at Rezco Asset Management, said before the implementation of the state’s renewables programme, wind generation projects were about to be approved at a cost of 125 cents per kWh (kilowatt-hour).

“The government, under the auspices of the department of energy, then did some amazing work and developed the Renewable Energy Independent Power Producers programme. Companies and consortia were in 2009 invited to competitively bid around clearly constructed criteria.

"Round one bids were accepted at 115c/kWh, round two came in at 100c/kWh, round three at 74c/kWh, and by the time round four was reached in August 2014, the bid price had dropped to 62c/kWh. The same process caused solar power to be bid down from 275c/kWh in round one to 79c/kWh in round four.
“This should be compared to the expected cost of 128c/kWh of new coal power from Medupi. Coal-generated cost increases to 168c/kWh if the cost of infrastructure like dams is included. The final costs of nuclear power are forecast to be more expensive than coal. These renewable energy projects are very profitable to the bidders, so there are increasing numbers of groups bidding for the projects available. At the last round, only 20% of bidding projects were selected.”

The Renewable Energy IPP programme has already brought power and hope to communities who never had access to basic services.

The Duineveld township in the !Kheis Municipality in the Northern Cape is one such example, where 300 households benefited from the renewable energy programme.

The project, led by Acwa Power Southern Africa, won the African Community Project of the Year award at the African Utility Week on May 14 for connecting 300 homes through 75 watt PV solar systems and making it possible for children to do their homework at night.

The community project formed part of an IPP programme called Bokpoort Concentrated Solar Park, located in Groblershoop, Northern Cape. Once completed, the solar park will add 50 MW of clean energy to the national grid.

On April 16, the department of energy approved 13 more new renewable IPP bids, which means there will now be 79 IPP projects with 5 243 MW being added to a national grid desperately in need of power.

"The renewable programme is inspirational and visionary,” IPP bid-winner Andrzej Golebiowski of Scatec Solar told Fin24 at the time.

“It’s really big on a global scale. It’s over 4 000 MW they (the department of energy) are planning to award this year. It’s going to make it by far one of the biggest markets globally for renewables. That’s pretty impressive,” Golebiowski said after his company won three bids to produce solar energy in South Africa. His projects - Solar PV Sirius Solar PV Project One, Solar PV Dyason's Klip 1 and Solar PV Dyason's Klip 2 - will collectively add 225 MW to the grid.

Spanjaard said these investments in energy benefit the country in many different ways, over and above energy generation.

“In the process the country got an unbelievable bargain. Currently, 5 200 MW has been approved at a capital cost of R168bn. The project winners had to supply all their own capital. About 40% of the spend is now local content and thousands of jobs have been created.

"In addition, billions will be donated to community projects over the life of the projects, and all projects have to be BEE compliant.
“The projects take about 12 to 18 months to get up and running from the time of approval, as compared to 10 years at Medupi."

Referring to Eskom, he said the state gets to tax the projects instead of having to subsidise a loss-making state entity.

South Africa also gets to protect our environment and, finally, the country gets much needed cheap electricity, he said.

According to Spanjaard there are some basic lessons that can be learned from the department of energy’s renewable energy programme.

“The lessons have nothing to do with privatisation or even renewable energy. The state - anywhere in the world - works best when it regulates, takes the position as referee, forces groups to compete openly and transparently, and then taxes them.

"At the very least the government should analyse what has worked so spectacularly well for them in one area of power generation and apply these lessons to Eskom."

Quoting Winston Churchill, Spanjaard said his words can be applied equally well to South Africans: "South Africans (Churchill said Americans) can be always counted on to do the right thing after they have exhausted all the alternatives”.

electricity  |  ipps  |  renewable energy


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