Sarec too raises IPP delay concerns

The South African Renewable Energy Council (Sarec) has become the latest organisation to raise concerns over State-owned power utility Eskom’s repeated delays in signing off on new power purchase agreements (PPAs) with independent power producers (IPPs).

In a response statement to the disclosures emerging from the Public Protector’s 'State of Capture' report, Sarec chairperson and South African Wind Energy Association CEO Brenda Martin said Eskom’s hesitation could not be economically-motivated, owing to the number of benefits the development of the renewable-energy industry brought.

“Over the past several months, Eskom has repeatedly avoided signing PPAs with renewable energy IPPs and has failed to provide valid reasons for doing so,” she said, calling for Ministerial intervention.

Eskom earlier this year had unwittingly voiced its own concerns in a leaked letter, which outlined its disapprobation over the exorbitant costs associated with its current contracts under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) and noted its reluctance to pursue further IPP contracts until it had received guidance from government.

Martin condemned Eskom’s resistance in complying with the prevailing Ministerial determination on renewable energy, claiming it undermined the renewable-energy industry’s efforts to bring much-needed foreign investment into South Africa and hindered local manufacturing opportunities.

The renewables industry had, since the REIPPPP kicked off in 2011, attracted more than $14-billion in foreign direct investment, created more than 20 000 jobs in construction and 35 000 operational jobs.

“These [latest-round] projects represent a combined value of R50-billion in investment into the country that has been put on hold, which is ludicrous when considering our current economic climate,” she said.

Currently, the round 4 and 4.5 bid windows of the programme has some 26 preferred bidders across a range of technologies, which are expected to create over 13 000 jobs during the construction period, with jobs during the operational phase expected to reach 1 909 a year over a 20-year period.

“[However,] none of [the projects have] reached financial close due to Eskom’s refusal to sign further PPAs,” Martin commented.

Last week, Engineering News reported Eskom CEO Brian Molefe as saying he was merely raising a concern over the financial sustainability of the renewables programme and highlighting a 37% rise in costs associated with renewable energy IPPs, despite an overall primary energy cost decrease of 1.5%.

Further, he had pointed out that Eskom was paying an average of 218c/kWh for renewables, which was significantly higher than Eskom’s blended tariff of 83c/kWh.

Martin dismissed these claims, noting that the REIPPPP had brought about a “dramatic drop” in renewable-energy tariffs.

“So much so that new-build renewable energy is now significantly cheaper than new-build coal or nuclear power,” she claimed, adding that the solar photovoltaic and wind energy tariffs had decreased from R3.65/kWh and R1.15/kWh respectively in round one to 62c/kWh in round four.

“This price is significantly lower than the tariff prices for coal from IPPs of R1.03/kWh, Eskom coal [at between] R1.05/kWh to R1.16/kWh and nuclear power, which is estimated at between R1.17/kWh to R1.30/kWh,” she said.

“We, therefore, urge Energy Minister Tina Joemat-Pettersson and Public Enterprises Minister Lynne Brown to take coordinated action and ensure that policy and procedure are adhered to without further delay,” concluded Martin.