Nersa announces Renewable Energy Feed-In Tariffs

Tuesday, March 31, 2009

Pretoria - The National Energy Regulator of South Africa (Nersa) on Monday announced the approved Renewable Energy Feed-In Tariff (Refit) guidelines.

"The tariffs comes as government set a target to meet 10 000 GWh as a contribution to final energy consumption by 2013, to be produced from wind, solar, small-scale hydro and landfill gas," said Chairperson of the electricity sub-committee, Thembani Bukula.

He said the Refit, which is an incentive structure aimed at encouraging the adoption of renewable energy through government legislation, is expected to stimulate large-scale investment in the sector.

Renewable energy would be utilised for power generation and non-electric technologies such as solar water heating and bio-fuels. This is approximately 4 percent (1667 MW) of the projected electricity demand for 2013 (41539 MW).

The tariff for wind technology will be R1.25c per kWh, small-scale hydro technology will be 94 cents per kWh, landfill gas 90 cents per KWh, while the tariff for concentrated solar will be R2.10 per KWh.

According to Nersa, Mr Bukula said, the Feed-in Tariffs (FITs) were based on the levelised cost of electricity and the term of the REFIT power Purchase Agreement will be twenty years.

The basic economic principle underpinning the FITs is the establishment of a tariff that covers the cost of generation plus a 'reasonable profit' to induce developers to invest.

Mr Bukula explained that the process leading to the final decision had included Nersa publishing a consultation paper and inviting public comments; holding public hearings, assessing the submissions received from stakeholders and the public and then extensive deliberations.

He said the tariffs would be reviewed every year for the first five-year period of implementation and every three years thereafter, adding that the resulting tariffs will apply only to new projects.

"The approved REFIT guidelines will create an enabling environment for achieving Government's 10 000 GWh renewable energy target by 2013 and sustaining growth beyond the target," he said.

He said Nersa had initially thought most renewable energy would come from hydro and solar, but the first mega watts would come from wind energy.

The Renewable Energy (RE) Power Purchase Agency (REPA) will be housed in Eskom's Single Buyer Office, where monitoring and verification will be responsible of the Single Buyer Office.

Nersa will facilitate the adoption of the Power Purchase Agreement (PPA). Mr Bukula said they were already evaluating licenses for the first week of April.