The legacy project Jacob Zuma did not intend to leave

2015-08-14 09:32

In September 2014, the controversial nuclear deal between Russia and South Africa broke in the media.  It was dubbed as one of Jacob Zuma’s “presidential legacy projects”.

More recently, the chairman of the parliamentary portfolio committee on energy announced that his committee would hold hearings to open up the nuclear build programme for rational debate.  However it is believed that these hearings could put the committee at odds with the executive and department of energy, both of which feel that there has been enough consultation on nuclear build programme.

Furthermore, the chairman of the committee Fikile Majola commented, that the subject of South Africa’s nuclear build programme has been shrouded in secrecy and that if it was opened for discussion it would not be so controversial.

The government will be ready to announce the successful bidders for this programme by the end of this year, but says it cannot yet put a price tag on the programme, which is expected to total about R1-trillion.

So while Mr Majola should be congratulated for a bold move.  Business Day columnist Songezo Zibi points that discussion or not, the bigger issue about government’s nuclear plans are twofold.  First, the entire cost of the project, and he challenges the government to prove that a minimum of R800bn in final costs is inaccurate, will be borne entirely by consumers and taxpayers.

He comments that there has been absolute thuggery that has characterised how the government has gone about this bad decision. These decisions are not supposed to be sucked out of thin air but taken after careful consideration of the facts and assessment of future risks, such as financial catastrophe.”

However, as Zibi termed it, government’s “misadventure” into nuclear power continues, behind this drama South Africa has become one of the leading destinations for renewable energy investment with an estimated R169 billion already committed.

The investment is the result of a renewable energy programme introduced by the government four years ago. Tariffs offered by the most recent renewable energy projects are now well below those that will come from the state energy utility Eskom’s future coal plants.

According to Rob Spanjaard the investment director and portfolio manager at Rezco Asset Management; "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. The final costs of nuclear power are forecast to be more expensive than coal.

Meanwhile, renewable power has been quietly piling on capacity. Tina Joemat-Pettersson, the South African minister of energy said in a recent speech that the country has added a total of 4,322MW of renewable energy capacity in less than four years.

Further to this, the DOE recently announced the preferred bidders for bidding window four of the Renewable Energy Independent Power Producer Procurement (REIPPP) programme. Thirteen more renewable energy IPPs totalling 1,121 MW will now attempt to reach financial close of their projects in the last quarter of the year.

This takes the number of privately developed utility scale renewable energy power plants to 79, representing a generation capacity of 5,443 MW and R169 billion of private investment.

Medupi, whenever it is finished, is designed to supply 4,764MW.

According to Ted Blom, former director of coal contracts at Eskom, who told a civil society conference on the electricity crisis in June that the final price tag on Medupi would have increased tenfold since the initial tender of R30-billion was awarded.

That renewables have almost surpassed the output of such a station in about half the time of its still-unfinished construction is hard to ignore.

Additionally renewables are funded privately therefore costing the tax payer nothing, whereas Medupi and the nuclear build programme will come at the expense of the tax payer.

The programme has been applauded internationally for its strong regulatory framework, tough qualification criteria and strong economic development and community ownership requirements.

However the stumbling block to properly exploiting renewable energy sources in South Africa is the grid capacity and availability of transmission lines.

An upgrade of the current grid is long overdue, as the grid could only handle a certain number of plants, and with further projects on the horizon there simply is not enough capacity in the current grid and the transmission lines need to be upgraded.

Despite this challenge it would appear that the sector remains optimistic that this hurdle will be overcome, and that renewables will continue to play an important part in South Africa’s energy mix.

As the energy debate looks set to continue and one hopes in the interests of the consumer and tax payer, we need to ask ourselves if our embattled president has actually achieved a lasting legacy in the form of the renewable energy.

Although President Zuma had hoped that history would remember him for being a people-centred president who championed the National Development Plan, his legacy as it stands now can only be defined by one shocking scandal after the other.

Despite this, he has at least achieved one of the goals set out in the National Development plan and has indeed left a “presidential legacy project”.in the form the renewable energy programme.  Although with another four years as president, one hopes that this legacy stays the course.

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