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IPPs drag Eskom to Nersa over contract delays

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Eskom is acting in direct contravention with government's policy to diversify the country's energy mix, says Johan van den Berg, CEO of SAWEA.
Eskom is acting in direct contravention with government's policy to diversify the country's energy mix, says Johan van den Berg, CEO of SAWEA.

The South African Wind Energy Association (SAWEA) has lodged an official complaint with the National Energy Regulator of SA (Nersa) over Eskom's failure to comply with ministerial determinations.

The complaint relates to Eskom's public refusal to enter into power purchase agreements with preferred bidders arising from government's Renewable Energy Independent Power Produce Procurement Programme (REIPPP).

In the event that Eskom is found guilty, SAWEA has requested that Nersa impose the maximum legislated penalty of 10% of Eskom's annual daily turnover for each day Eskom continues to delay the programme.

Although Eskom says it has not put the brakes on renewable energy, there have been uncertainties in the industry after the power utility wrote a letter to the Department of Energy asking for clarity or a dialogue regarding the next contracting phase of IPPs beyond bid window 4.5.

The credibility of the renewable energy programme, which received international acclaim, is being threatened by ongoing delays by Eskom in signing new contracts.

Besides the setbacks, government has reiterated commitment to the independent power purchase (IPP) programme. Jeff Radebe, minister in the presidency for performance monitoring and evaluation, recently said government had no intention to change the course of the IPP programme "midstream".

Mixing it up

Energy minister Tina Joemat-Pettersson also indicated SA is pursuing a diversified energy mix which includes IPPs and the nuclear new build programme in support of government's programme of economic growth and development.

"SAWEA believes Eskom is acting in direct contravention with government's policy to diversify the country's energy mix," says Johan van den Berg, CEO of SAWEA.

The complaint details Eskom's refusal to comply with the Electricity Regulation Act, ministerial determinations and Eskom's own transmission licence conditions.

"Eskom's current stance is incompatible with government policy, the law of the land, and its own licence conditions." adds Van den Berg.

SAWEA members say they are deeply concerned by Eskom's stance. The industry believes Eskom, which is by far the largest generator in the country, is abusing its position as the operator of the national grid in order to favour its own investment in new power plants, the organisation says.

It adds that unease over Eskom's motives leads SAWEA to believe the state-owned utility is pushing its own agenda and opposing government's energy policy. SAWEA considers recent statements issued by Eskom to be misleading and not in the best interest of the country.

According to SAWEA, decisions on new power generation are the sole preserve of the minister of energy, who has issued a series of determinations designed to stimulate competition, diversify the energy mix, and reduce the country's carbon emissions.

Cost-effective energy

Since 2011, the REIPPP programme has awarded 6 590MW of renewable energy capacity to 102 IPPs, of which at least 44 are already operational. In all, the programme will attract new private sector investment worth R194 billion in predominantly rural areas, says Van den Berg,

He adds that successive capacity bidding rounds have seen tariffs fall to the point that renewables are now the cheapest form of electricity generation available to the country.

Independent research by the CSIR has confirmed that wind and solar PV energy are, without a doubt, the lowest cost generation option for South Africa's future, he adds.

SAWEA says the REIPPPP will also lead to significant investments in social development in the communities surrounding these projects. Approximately R19.3 billion will be ploughed into social development and a further R6 billion will go into enterprise development over the 20-year lives of the projects. Local communities will earn a further R29.2 billion through their direct shareholding in the projects, it notes.

The REIPPPP is also stimulating local manufacturing and creating sustainable jobs. By March 2016, over R30 billion had been spent on local content and a further R65.7 billion is expected to be spent by projects that have yet to commence construction, it states.

Twelve new industrial facilities have been established as a direct result of the programme. Since 2013, the construction and operation of renewable energy projects has already created 111 835 job years for South African citizens, the association says.

"Given these facts, Eskom's refusal to sign any further power purchase agreements with renewable energy producers is quite inexplicable and clearly falls foul of the law," concludes Van den Berg.

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