Subscribe
  • Home
  • /
  • Green IT
  • /
  • Legal war looms amid renewable energy applause

Legal war looms amid renewable energy applause

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 19 Jan 2017
South Africa's independent power producers are world-class, says deputy president Cyril Ramaphosa.
South Africa's independent power producers are world-class, says deputy president Cyril Ramaphosa.

Deputy president Cyril Ramaphosa this week touted the successes made by the country's renewable energy industry at the World Economic Forum (WEF) in Davos.

Meanwhile, a legal showdown is brewing back at home as independent power producers (IPPs) look to lock horns with Eskom over its continued delays in signing new contracts.

Speaking during a panel discussion in Davos on Tuesday, Ramaphosa lauded SA's IPP programme as "world-class".

IPPs have welcomed the deputy president's comments. The South African Photovoltaic Industry Association (SAPVIA), a not-for-profit body consisting of active players in SA's photovoltaic market, says: "SAPVIA welcomes the recognition of the success of the Renewable Energy IPP Procurement Programme (REIPPP) by deputy president Cyril Ramaphosa at WEF 2016 in Davos, and of the potential contribution that the private sector can play in bringing price and cost-efficiencies into South Africa's electricity supply industry.

"We believe the innovation shown by the RE [renewable energy] sector is one that will assist in bringing tangible socio-economic benefits to South African residential, commercial and industrial users going forward."

Reckless behaviour

However, the organisation says: "The industry and the gains that have been achieved are currently under threat from the reckless behaviour of Eskom and its flagrant disregard to support South Africa's stated energy policy confirmed by the president and the minister of energy in recent months."

Besides renewable energy holding its own in the country's energy mix, Eskom has been accused of adopting a negative attitude towards it of late.

Among other issues, the parastatal has been accused of dragging its feet in signing new power purchase agreements (PPAs) with the industry.

Earlier this month, much to the ire of the renewable industry players, Eskom controversially stated renewable energy projects resulted in a net loss of R9 billion to the South African economy in 2016. This assertion has since been dismissed by the industry as a "blatant distortion" of facts.

As the impasse over the signing of new contracts rages on, the IPPs are not going down without a fight.

The South African Renewable Energy Council (SAREC) - an umbrella body to the various renewable energy technologies, such as wind, solar photovoltaic and hydro energy - has sought legal counsel over its claims the power utility has decided to sign "only some PPAs".

Law firm Webber Wentzel is representing SAREC's 37 IPPs that have been affected by PPA signature delay.

Ministerial determination

The organisation says a senior counsel at the Johannesburg Bar, instructed by Webber Wenztel, has provided issued a legal opinion letter, which confirms preferred bidders are entitled to approach a court to enforce Eskom's signature of PPAs.

"In our opinion, Eskom cannot sidestep the binding determination of the minister; they are bound by the ministerial determination, which includes signing the power purchase agreements," states advocate David Unterhalter SC.

"As an origin of state, Eskom cannot raise the reservation of rights in the RFP [request for proposal] to defeat a claim for substitutionary relief. Nor can it refuse to conclude a power purchase agreement," he points out.

"We are pleased that the legal opinion is so very clear in their opinion that Eskom has no such prerogative. This assures us of the strength of our legal position," says Brenda Martin, chairperson of SAREC.

According to the industry body, local and foreign investors have responded positively to the REIPPPP to date, partly because the rules have been clear and applied fairly and consistently. It points out the programme has secured nearly R200 billion in new investment.

Tampering with the rules at this stage can only damage confidence in both the programme and the country, it notes. It adds SAREC has, therefore, come out strongly against Eskom's attempt to bargain down the cost of energy after agreements are already in place, as it is a sure-fire route to destroying investor confidence and sabotaging South Africa's economic interests.

"Legal opinion on this also confirms ministerial determinations are binding on Eskom and that the utility has no discretion to impose further conditions on preferred bidders. What's more, Eskom certainly has no legal authority to negotiate tariffs with already selected bidders," adds Martin.

In conclusion, SAREC says it is calling on Eskom to comply with the law and act in the national interest.

"We will continue to engage through talking with Eskom and government stakeholders, but it is reassuring to know the legal opinion is very clear; were we to go to court, we would be likely to get an enforcement order that Eskom should sign all outstanding power purchase agreements," states Martin.

Share