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Green power fights back

Jan 22 2017 05:59
Dewald Van Rensburg

Johannesburg - The renewable energy lobby is preparing for its inevitable showdown with Eskom this year.

The power utility has sent out an unambiguous message that it will persist with its plan to pause South Africa’s enormous renewable energy independent power producer procurement programme (REIPPPP) midway, leaving 37 different renewable projects in limbo.

Eskom has refused to sign power purchase agreements (PPAs) with 37 projects chosen as “preferred bidders” in the REIPPPP.

This week, the SA Renewable Energy Council (Sarec) publicised a legal opinion it commissioned on Eskom’s behaviour, signalling it might well take the issue to court.

The opinion is from David Unterhalter, a well-known senior counsel at Webber Wentzel. He says Sarec has a good chance of forcing Eskom to sign the 20-year PPAs if it does take the legal route.

Responding to City Press queries, Sarec spokesperson Tina Meier said she hoped matters did not come to that.

“Sarec can now operate from an informed position. It continues to hope that all parties who are able to influence this process will assist in ensuring that South Africa’s renewable energy investment is fully realised,” Meier said via email.

Unterhalter’s opinion reads: “It is clear that Eskom has no choice – once Energy Minister Tina Joemat-Pettersson, has made a determination, as she has – but to purchase renewable energy from IPPs.”

Equally important is Unterhalter’s opinion on Eskom’s current tactic, which appears to be to delay signing the PPAs indefinitely. He says Eskom cannot, by law, delay signing them for an unreasonable time period.

The definition of “reasonable delay”, he adds, can be based on the amount of time – in this case, about a year – it took Eskom to seal the deal on the first wave of REIPPP projects.

The 37 awaiting projects have been in limbo for as long as two years.

The last crucial question is whether Eskom can force the renewable projects to lower the tariffs they had offered when they became preferred bidders.

Last week, Eskom’s new acting CEO, Matshela Koko, reportedly said he was willing to sign off on projects that cost less than 62c per kilowatt, but that those with higher tariffs must “sharpen their pencils”.

According to Unterhalter’s opinion, Eskom cannot renegotiate the tariffs already agreed to in the REIPPPP bidding process.

Meier said Koko’s statement required legal certainty about whether he could renegotiate the tariffs.

The objective of Sarec is to promote the renewable energy sector in South Africa by acting as an umbrella body to industry associations representing specific renewable energy technologies such as wind and solar.

Late last year, one of its members, the SA Wind Energy Association, took a complaint against Eskom to the National Energy Regulator of SA (Nersa).

Meier said this complaint was still being considered by Nersa. “The Wind Energy Association is currently following up on this issue with Nersa’s newly appointed CEO, Christopher Forlee.”

R9 billion ‘economic loss’

Eskom started the year with another broadside aimed at the renewable energy lobby – asserting that the independent renewable power producers caused an “economic loss” of R9 billion in 2016.

Eskom came to this amount by repeating an exercise conducted by one of the country’s foremost proponents of renewable energy, Tobias Bischof-Niemz, head of the energy centre at the CSIR.

The original CSIR estimates in 2014 and 2015 were meant to show how enormously beneficial renewables had been.

Bischof-Niemz is furious at Eskom’s apparently selective repurposing of his model to turn it against renewables.

The reason renewables saved money before 2016 was because Eskom was still load shedding and burning huge amounts of diesel in its open cycle gas turbines as an emergency stopgap.

Bischof-Niemz’s calculation illustrated that even the expensive first waves of renewables were far cheaper than diesel. They were also cheaper than the estimated economic damage caused by load shedding.

For the past year, South Africa’s electricity supply has been stable and its reserves sufficient. Now, Eskom is pointing out that the first waves of renewables cost more per kilowatt-hour than the electricity it currently generates with its fleet of coal stations.

Although this is true, Bischof-Niemz says Eskom misses the point.

The existing coal fleet is cheaper than any conceivable new power source because it has been almost completely depreciated, he pointed out in a lengthy response to Eskom.

Bischof-Niemz used the analogy of replacing an old car with a new one.

The new car is probably more fuel efficient, but comes with instalments. The old one – like Eskom’s coal stations – uses more fuel, but is paid off already.

Using the same logic, Eskom’s Kusile and Medupi coal-fired power plants, as well as any potential nuclear station, could also be shown to cause economic loss.

Asked about this, Eskom told City Press that “Medupi and Kusile are an entirely different matter. The purpose of the opinion piece was about the impact of renewables on the economy.”

Eskom said it was trying to point out that extra renewables were not needed until 2021, when the system was projected to run out of excess capacity again.

In reality, any expenditure on additional power would be a loss, unless the power was actually
needed.

In a fighting mood

Koko is entering the public fray on a number of touchy issues.

In addition to Eskom’s running battle with the promoters of renewable energy, Koko has launched a blitz of scheduled disconnections against municipalities which have defaulted on their payments to the tune of billions of rands.

And, in December, Koko sparked another public row after mining company Exxaro announced that its black shareholding would fall from 50% to 30%.

Koko publically attacked Exxaro after the announcement.

In 2012, Eskom adopted an in-house policy that its coal suppliers must “target” majority black ownership.

Exxaro had been the only major supplier that actually met this target.

Despite indicating it would answer questions about the efficacy of this policy a week ago, Eskom failed to answer City Press’ queries.

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