Small power IPPs: No small issue

Dominic Wills
Dominic Wills

The signing of 27 independent renewable energy agreements in early March is undoubtedly good news for the renewables industry, because it addresses almost three years' worth of questions around the South African government's commitment to the Renewable Energy Independent Power Producers Procurement (REIPPP) programme.

However, in order for the REIPPP to be truly successful, it must empower home-grown renewable developers and construction companies to compete with international firms.

To this end, the Department of Energy launched the Small Projects IPP Procurement Programme (SPP) in 2014, which was aimed at smaller scale projects of 5MW – with more local involvement and higher economic development targets. The procurement process favoured small companies, high black ownership, women empowerment, high job creation and local supply chains: exactly what the renewable sector in this country needs.

Many small and medium-sized enterprises committed their reserves and resources to winning projects in the SPP programme. The requirements of SPP included spend for environmental permits, re-zoning, lenders' commitment, legal fees, overheads, and training.

The first round of the SPP programme was awarded in November 2015, with the signatures of the relevant agreements to be signed six months after that. But what followed was a series of missed deadlines, resulting in several local companies being forced to backtrack and retrench staff.

So, in a renewables programme that is (rightly) receiving international praise, local companies that were committed to the government’s programme have essentially been sidelined with stagnant projects, whilst scrambling for answers.

The next two decades promise an energy landscape that is changing from centralised power to decentralised renewables storage and gas. Trillions of rand will be spent in this industry over the next 20 years, investing in new infrastructure that will electrify South Africa and Africa with accessible, affordable energy.

It’s crucial that skilled and committed local companies get the opportunity to scale up and reach the capacity required to participate in the larger programme. This will keep wealth within South Africa’s borders, create entrepreneurs and jobs, and upskill the workforce.

SPP is exactly the stepping stone required for many companies to reach this scale. Although it doesn’t initially reach the same low tariffs and scale as the 27 projects that have recently been signed, in the larger vision for South Africa, it could be the best investment decision the Department of Energy makes.

The economic development requirements in this round mean that SPP is not "small" at all: it is necessary for South African-owned companies to compete against large, foreign-owned conglomerates.

If the Department of Energy takes forward the Small IPP Projects programme, the government will truly be committing to renewable energy in a way that empowers and develops the local economy.

* Dominic Wills is CEO of SOLA Future Energy.

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