Dilly-dallying endangering SA's renewable programme

Johannesburg - South Africa’s successful renewable energy programme is in peril, the renewable industry warned on Tuesday.

This comes after an inter-governmental task team placed the programme in limbo, telling Parliament it would be difficult to sign any new contracts before next year.

Industry body the South African Renewable Energy Council (Sarec) said it is deeply disappointed that the Department of Energy and Eskom failed to provide any certainty for investors during the parliamentary update.

Sarec chair Brenda Martin said the renewable industry had hoped to resolve the impasse. “Instead, the team proposed further delays to the end of August if not to February 2018.”

These delays will have direct negative consequences for South Africa’s renewables industry, she added. “Investors are watching this space with deep concern.”

The inter-governmental task team led by Deputy Energy Minister Thembisile Majola briefed Parliament on Eskom’s failure to sign power purchase agreements with independent power producers (IPPs).

The team, made out of the Departments of Energy, Public Enterprises, Planning and Evaluation as well as National Treasury and Nersa, said that current "hardships", including oversupply, have made it difficult for the utility to sign the power purchase agreements.

Eskom needs to sign the power purchase agreements with the producers in order for them to start construction of their projects. The state utility has signed agreements with bid window one to three in the programme, but now has to sign off on bids four and 4.5. Also 4.5 still needs to be contracted.

"It's about signing the last two in the last two windows," Public Enterprises Minister Lynne Brown said.

But Eskom claims signing the new deals would create more economic hardship, saying current tariffs already signed, were putting strain on its finances.

Eskom had drawn up a timeline till February 2018, listing six steps it will have to complete before signing on the dotted line for the last two bid windows. First it will consult Nersa regarding its current financial standing and will also lobby National Treasury for "soft support" until the 2018 tariff adjustment.

Eskom also told Parliament that it hoped to review the pace and scale of the IPP rollout under current circumstances up to 2021, while trying to up the participation of black industrialists in the programme.

Department of Energy acting director general Tseliso Maqubela told Parliament there is a surplus of power available. "So we can't proceed (with) business as usual. We'll have to change pace going forward, so we can really respond to current realities."

Deputy director general Ompi Aphane said that at the time of the drafting of the plan in the late 2000s, Eskom had not anticipated that there would be an energy surplus in 2017.

But the DA's Gordon Mackay said Eskom's "sob story"  didn't add up, blaming years of mismanagement at Eskom for the current crisis.

Martin said while Eskom dallies a growing number of companies, employees, graduates and communities, are suffering the consequences of R58bn stalled investment. Before the renewables programme ground to a halt in 2015 it had attracted enviable foreign direct investments.

Tariffs had tumbled to the point where renewable energy has become the cheapest option for new generation capacity available to the country, Martin said.

“The industry had already attracted a substantial eco-system of service industries and was beginning to leverage investment in heavy up-stream fabrication industries,” she said.

“Eskom’s apparent objections to signing agreements with preferred renewable bidders ignore these broad benefits and instead focus the utility’s selfish interests.”

Martin said it is clearly not feasible to shift the goalposts for bidding consortia that have already been awarded permits on the basis of the current bid rules.

To save the programme the government should account for the commitments made in Parliament on Tuesday, said Martin.

Final recommendations have to be delivered to ministers by the end of June, and for all outstanding ‘interventions’ to be dealt with by August 2017.

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