Resolution to Eskom’s stand-off with renewable energy sector in SA sought

January 13th, 2017, Published in Articles: EE Publishers, Articles: Energize

 

Following an unseemly public standoff between Eskom and the renewable energy sector in South Africa, including suggestions made by Eskom’s acting CEO Matshela Koko that the country’s national, state-owned, scientific and industrial research, development and technology commercialisation body, CSIR, is a lobby group for renewable energy, it appears the utility may be ready to try and resolve the impasse. 

Matshela Koko said the power utility and government stakeholders are nearly ready to present a solution that will enable it to sign power purchase agreements linked to the new renewable energy build programme.

An impasse between Eskom and the private energy sector has seen tensions rising in the industry, after Eskom refused to issue final budget quotes to preferred bidders in Round 4 and the Round 4 extension of the Renewable Energy Independent Power Producer (IPP) Procurement Programme.

There are 26 preferred bidders across a range of technologies, none of which have reached financial close owing to Eskom’s refusal to sign further power purchase agreements, South African Renewable Energy Council (Sarec) chairperson Brenda Martin explained.

“These 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.

Over R200-billion has been invested in the renewable energy sector in the last few years, Finweek quoted Jesse Burton from the Energy Research Centre at the University of Cape Town as saying.

Eskom said it would not sign on more IPPs as there was a surplus of capacity and the added agreements would negatively affect the utility financially.

Eskom working on solution – Koko

However, in an exclusive interview with Fin24 on Thursday, Koko said Eskom has been working with the Department of Energy (DoE) and Treasury to find a solution.

“We have had very good and fruitful discussions with Treasury and the DoE,” Koko said. “We are getting to a point where we have a solution to present to all.

“This morning, I received a letter inviting me to talk to renewable IPP group,” he said. “We will do that through our shareholder ministry (the Department of Public Enterprises).

“If we take our own agendas aside and simply say what is the best way to roll out of renewable at pace and cost we can afford.”

Renewables have seen their costs come down dramatically due to the DoE’s successful procurement programme. Average wind prices went down from R1,51/kWh in bid window 1 in 2011 to the current R0,62/kWh. Average solar PV prices went down from R3,65/kWh in bid window 1 to the current R0,62/kWh.

Koko said he is prepared to sign all IPP bids that are at R0.62/kWh or below with immediate effect.

“Let us first sign the 62c/kWh bids,” he said. “We would sign 13 immediately. That would be a move in the right direction.

“Those that are more than 62c/kWh must sharpen their pencils.”

Eskom is not being fair – Sarec

Martin welcomed Eskom’s desire to sign the bid’s that were at the 62c mark or below. However, she said it was unfair to demand the other bids – whose prices range from above 62c to about 72c – bring down their prices.

“We have a formal procurement process that is legal and transparent and is accountable to the DoE and Treasury,” she told Fin24 on Friday. “It has been respected and trusted and is admired internationally. That process determined the prices.

“Eskom is not in a position to undermine what resulted from the procurement process,” she said.

“This is the kind of thing Eskom does. They act as if they are able to adjust what is legal and what is policy and that’s not fair.

“I support Eskom signing the 62c bids,” she said. “But, when they say others should sharpen their pencils, it is not correct as this undermines the due process with further negotiations.”

Graphs: Price trends in the solar PV and wind sector in SA (Source: IPP Office)

 

Sarec keen to keep matter out of court

Sarec director Mark Pickering told Fin24 in a studio interview recently that the renewable sector is considering two options: it can continue to talk to government, or it can go to the courts.

“The legal opinions we have are very clear,” he said. “Where we go to court, we would get an enforcement order that Eskom should sign these power purchase agreements.

“It’s not our first choice,” he said.

“We would prefer to resolve this through talking and that’s what we are doing. We are engaging with all the key stakeholders in government and with Eskom.”

“We have some sense of progress, but it’s slow and there’s the sense that there’s some elephant in the room that’s rather difficult to talk about.”

WATCH: Interview with Sarec’s Brenda Martin and Mark Pickering

Acknowledgement

This article was first published by Fin24

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