Virus leaves SA's green energy plans in disarray

Independent energy producers were finally making headway in their bid to persuade the government to revive long-stalled plans to buy more renewable power when they encountered a new obstacle: the coronavirus.

A five-week shutdown that was imposed in a bid to curb the spread of the disease has sent electricity usage through the floor and left Eskom, which supplies about 95% of the nation's power, with excess capacity. Economic growth and energy demand are likely to remain muted for several years, casting doubts over when additional plants will be needed.

Eskom, which was previously forced to implement rolling blackouts because its aging plants couldn't deliver sufficient output, has already declared force majeure with wind-energy producers because it doesn't need their output. And the government which pledged as recently as February to seek new bids from renewable suppliers has gone to ground on when that will happen.

Eskom's decision to renege on its contracts "really undermines the confidence and the trust that investors have" in the government's commitment to source additional renewable energy, said Paul Semple, joint head of unlisted credit at Futuregrowth Asset Management, the country's biggest specialist bond fund manager.

Funding costs

Investments in renewables projects are based on 20-year returns, and if those don't materialise as anticipated, the cost of funding for future projects will go up, according to Semple. Futuregrowth's Power Debt Fund has invested more than R8 billion in energy-related projects in South Africa.

The South African Wind Energy Association is banking on the government implementing its approved energy blueprint that determines the generating capacity it will buy over the next decade, according to Ntombifuthi Ntuli, its chief executive officer. She also expects President Cyril Ramaphosa's administration to formulate a plan to counteract the economic effects of the pandemic that will promote private generation.

Energy mix

"We are expecting that wind energy and other renewables will be part of that stimulus package, since it is infrastructure investment that government does not have to put capital investment in," she said. "Energy security will be a big part of helping the economy get back on track."

South Africa's power demand has plummeted by as much as 9 000 megawatts since the lockdown came into effect on March 27. Just days earlier, Eskom had issued a request for proposals to supply it with emergency power, with submissions due to close on April 30.

"Post the lockdown, Eskom expects demand for electricity to rise to more or less the same levels" as before, the utility said. "That means there will still be a need for increased independent power producer contribution into the grid."

The Department of Mineral Resources and Energy didn't immediately reply to emailed questions about when the next bid round for renewable projects will go ahead.

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24
USD/ZAR
14.39
(-0.9)
GBP/ZAR
19.82
(-0.7)
EUR/ZAR
17.24
(-0.6)
AUD/ZAR
11.11
(+0.2)
JPY/ZAR
0.13
(-0.7)
Gold
1,736.60
(-0.5)
Silver
25.43
(+0.3)
Platinum
1,174.03
(+1.2)
Brent Crude
63.67
(+0.6)
Palladium
2,679.39
(-0.6)
All Share
67,812
(+1.1)
Top 40
62,084
(+1.1)
Financial 15
12,163
(+0.1)
Industrial 25
88,847
(+1.0)
Resource 10
69,024
(+1.8)
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
Yes, and I've gotten it.
21% - 1267 votes
No, I did not.
52% - 3140 votes
My landlord refused
28% - 1688 votes
Vote