R58bn renewable energy investments stalled again

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 21 Jun 2017
Current "hardships" made it difficult for Eskom to sign new deals, says an inter-governmental task team.
Current "hardships" made it difficult for Eskom to sign new deals, says an inter-governmental task team.

An inter-governmental task team on SA's renewable energy programme has proposed further delays to the signing of R58 billion power purchase agreements (PPAs) with independent power producers (IPPs) to the end of August or February 2018.

The inter-governmental task team, led by deputy energy minister Thembisile Majola, yesterday briefed Parliament on Eskom's failure to sign power purchase agreements with the IPPs.

The team, made up of the departments of energy, public enterprises, planning and evaluation and National Treasury, as well as Nersa, said current "hardships", including oversupply, have made it difficult for the power utility to sign the PPAs.

Eskom and IPPs have been at a standstill over the signing of new PPAs for some years now. There have also been suspicions that the continuous delays in the signing of new deals was a deliberate ploy by the power utility to sign a nuclear deal which has so far been shrouded in secrecy. The nuclear deal will cost SA up to one trillion rand.

Following several delay tactics by Eskom in signing the new deals, the renewable energy industry was confident the power utility would finally sign the outstanding contracts in April.

Previous energy minister Tina Joemat-Pettersson had directed Eskom to sign the outstanding PPAs by no later than 11 April.

After president Jacob Zuma's Cabinet reshuffle, Joemat-Pettersson was replaced by Mmamoloko Kubayi, who also asked that the signing be delayed, saying this was in order to allow her to meet with public enterprises minister Lynne Brown on the issue.

Following yesterday's announcement, the South African Renewable Energy Council (SAREC) says it is deeply disappointed the Department of Energy and Eskom failed to provide any certainty for investors during yesterday's update to Parliament on Eskom's failure to sign PPAs.

The industry body believes these delays will have direct negative consequences for SA's renewables industry.

Growing numbers of companies, employees, graduates and communities are suffering the consequences of R58 billion stalled investment, with 13 000 lost construction jobs and billions of rands of local economic development spend foregone, says SAREC.

Brenda Martin, chairperson of SAREC.
Brenda Martin, chairperson of SAREC.

Before the renewables programme ground to a halt in 2015, it was trumpeted as a resounding success by both government and Eskom.

According to SAREC, bid tariffs had tumbled to the point where renewable energy had become the cheapest option for new generation capacity available to the country.

It notes that renewable plants are majority owned by South Africans and are typically built in rural areas where they bring unprecedented benefits to poor communities.

"The industry had already attracted a substantial eco-system of service industries and was beginning to leverage investment in heavy up-stream fabrication industries," says Brenda Martin, chairperson of SAREC.

She points out Eskom's apparent objections to signing agreements with preferred renewable bidders ignore these broad benefits and instead focus on the utility's selfish interests.

"This is from an entity that, over the past decade, has managed to stall economic growth through load-shedding, wasted tens of billions of rands on its new-build programme, further billions of rands on non-transparent coal procurement, and to top it all, quadrupled its retail tariffs," Martin says.

By comparison, SAREC says, the renewables industry has met and generally exceeded all policy objectives set by government.

"Very importantly, we have exceeded employment targets by 27%. More than 98% of renewable projects have been delivered on time. Any cost over-runs have been for the account of investors' rather than consumers. And all BEE and community ownership targets have been met.

"Should government wish to increase any of these economic development targets in future rounds, the renewable energy industry would welcome a discussion. However, it is clearly not feasible to shift the goal posts for bidding consortia that have already been awarded permits on the basis of the current bid rules."

Martin points out the continuation of the renewables programme will deliver all the developmental objectives required by government and continued delays will achieve the opposite.

"We call on the government to hold Eskom and the task team to account for the commitments made in Parliament today [yesterday], namely for final recommendations to be delivered to ministers by the end of June, and for all outstanding 'interventions' to be dealt with 'by August 2017'. Investors are watching this space with deep concern," Martin notes.