SAREC: Failure by DoE to solve PPA saga disappointing

June 26th, 2017, Published in Articles: Energize


Brenda Martin

The South African Renewable Energy Council (SAREC) is deeply disappointed that the Department of Energy (DoE) and Eskom failed to provide any certainty for investors during the recent update to parliament on Eskom’s failure to sign Power Purchase Agreements (PPAs) with Independent Power Producers (IPPs).

The inter-governmental task team has instead proposed further delays to the end of August if not to February 2018. These delays will have direct negative consequences for South Africa’s renewables industry. Growing numbers of companies, employees, graduates and communities are suffering the consequences of R58-billion stalled investment, 13 000 lost construction jobs and billions of rand of local economic development spend foregone.

Before the renewables programme ground to a halt in 2015 it was trumpeted as a resounding success by both government and Eskom. Bid tariffs had tumbled to the point where renewable energy has become the cheapest option for new generation capacity available to the country. 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.

Eskom’s apparent objections to signing PPAs with preferred renewable bidders ignore these broad benefits and instead focus the utility’s selfish interests. This from an entity that, over the past decade, has managed to stall economic growth through load shedding, waste tens of billions of rand on its’ new-build programme, yet further billions of rand on non-transparent coal procurement, and to top it all, quadrupled its’ retail tariffs.

By comparison the renewables industry has met and generally exceeded all policy objectives set by the government. Very importantly it has 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. Furthermore, all BEE and community ownership targets have been met.

Should the 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.

Continuation of the renewables programme will deliver all the developmental objectives required by government; continued delays will achieve the opposite.

The renewable energy industry calls on the government to hold Eskom and the task team to account for the commitments made in parliament, 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.

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