Business

Renewables sector expects imminent signing of R58bn deals

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The outstanding 26 renewable energy projects include wind, solar photovoltaic and concentrated solar power.
The outstanding 26 renewable energy projects include wind, solar photovoltaic and concentrated solar power.

The South African Wind Energy Association (SAWEA), together with the broader renewable power sector, anticipates the conclusion of the 26 outstanding power purchase agreements (PPAs) in the first quarter of 2018.

This is despite Eskom reportedly facing cash flow problems and declining liquidity, mainly as a result of perceived poor governance at the power utility.

Last week, government appointed new board members at Eskom, as an immediate measure to strengthen governance and management at the parastatal.

Despite the challenges at Eskom, Brenda Martin, CEO of SAWEA, says the cost of PPAs is a complete through pass for Eskom, as allowed by energy regulator NERSA in the tariff allocation.

"In addition to this, Eskom has been allocated money for independent power producers in the last three tariff adjustments. Eskom's financial troubles are a separate matter," she points out.

According to SAWEA, the majority of the processes that precede the finalisation of the PPAs were fulfilled by the IPP office and the preferred bidders during mid-December.

It notes the minister of public enterprises is now required to provide her approval in terms of section 54(2) of the Public Finance Management Act, so that the Department of Energy (DOE) can conclude direct agreements with preferred bidders.

"With all previous steps completed, we now await the final step in the process: approval of the minister of public enterprises so that the DOE can finally enter into power purchase agreements with the preferred bidders identified through the due procurement process," says Martin.

The 26 renewable energy projects, which include wind, solar photovoltaic and concentrated solar power, remain hopeful that the country's Renewable Energy Procurement Programme (REI4P) will allow the industry to continue to contribute to the country's development and electricity mix.

SAWEA adds the bulk of the outstanding projects are earmarked to be constructed in the Northern Cape, which has over 60% of the preferred bid allocation, while the Eastern Cape has 19%. The remaining projects are to be located in the North West (10%), Western Cape (6%) and Mpumalanga (1%).

Following due procurement, the preferred bidders should have concluded signed PPAs from Eskom by mid-2016.

Instead, a delay now entering its third year has halted the associated R58 billion investment and the creation of 15 000 jobs at a time when the country desperately needs economic stimulus, says SAWEA.

"Beyond the direct effects of delayed investment in rural areas, the jobs that have not been realised, along with the loss of jobs throughout the renewable energy value chain, the cost of investor confidence lost, and citizen confidence in good governance, is worth considering as well," Martin adds.

The REI4P is widely regarded as one of the country's most successful public-private-partnerships, resulting in over R20 billion being committed to socio-economic development, the majority of which goes to empowering South Africa's rural communities.

"We continue to engage with government and hope to receive a formal notice from the minister of energy regarding the date for conclusion of outstanding PPAs, very soon," Martin concludes.

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