Power Purchase Agreements to be signed by end of October

Friday, September 1, 2017

Power Purchase Agreements for bid windows 3.5 and 4 of the Renewable Energy Power Producer Procurement Programme (REIPPP) will be signed by the end of October 2017, Energy Minister Mmamoloko Kubayi said on Friday.

“The Department of Energy, through the Independent Power Producer (IPP) office, will engage with all affected parties for bid window 3.5 and 4 to renegotiate not above 77 cents per kilowatt hour,” Minister Kubayi told media at a briefing in Tshwane.

According to the Minister, the renegotiation will assist in reducing the requirements for additional government guarantees that would impact negatively on the current economic climate and constraints in the fiscus.

In May, government set up a technical team to help resolve the impasse on the signing of PPAs between IPPs for bid window 3.5 (which includes concentrated solar power technology) and 4 (which includes wind technology) and Eskom.

At Friday’s briefing, the Minister acknowledged that the matter remains complex and there are no easy solutions.

“However, it is our commitment as government to try to find a balanced solution in the interest of all parties involved,” said the Minister of the long outstanding PPAs for renewable energy projects procured from IPPs in 2015.

The technical team met and provided a report of its work this past Wednesday. At the meeting, it said that power utility Eskom has excess electricity generation capacity. With the current demand patterns, the situation is projected to remain this way until 2021.

The power utility has submitted a tariff application, which is under consideration by the National Energy Regulator of SA (Nersa). The Constitutional Court judgment, with regard to the Regulatory Clearance Account (RCA) in favour of Nersa, has also paved the way for Nersa to implement tariff adjustments in line with the approved RCA. 

Minister Kubayi said Eskom will ensure that all contracts are in place for signing on 28 October.

“We are dealing with bid window 3.5 and 4 only because they are the ones that remain to be signed. Anything outside of that we are not committing at the moment. These are approximately 26 projects that we are talking about. Other [bid windows] will have to be put on hold,” said the Minister.

She said government has put its own guarantees for the projects. “If Eskom does not pay, it means government must pay and that is a [concern] for government, especially in the fiscus trajectory. We need [fewer] guarantees that will burden the State.”

Review process

Deputy Minister Thembi Majola said after the conclusion of bid window 3.5 and 4, the department will embark on a review process.

“We do need to take time … [to look at] the long-time implications because it has been a subsidised programme that has had a direct impact in terms of affordability, so we will be reviewing,” she said.

Minister Kubayi said she will meet with all IPP participants in all bid windows to discuss issues of concern from IPPs. The meeting will be an opportunity for government to give feedback on concerns before the date of signing.

Given the current excess generating capacity, the department said the majority of projects in bid window 3.5 and 4 will be commissioned closer to 2021 and will therefore have minimal contribution to the over-capacity up to 2021.

Coal sector interdict

Minister Kubayi also spoke on the interdict by the coal sector and the Section 77 notice filed by the Congress of South African Trade Unions (Cosatu) at the National Economic Development and Labour Council (Nedlac).

Cosatu in April announced that it would oppose the planned closure of five coal-powered power stations, which could result in job losses by the involvement of IPPs.

“We are hoping that all parties will consider this position,” said the Minister.

With regards to transformation and local ownership in some of the IPP projects, Minister Kubayi said: “This has to be reconsidered and adequately addressed. Allocations of projects and the ownership structure must be in line with South African transformation policies.

“We further reiterate our position that transformation of the energy sector is long overdue and we can’t compromise on it any longer.”

The Department of Energy launched REIPPP in 2011, which called for 3 725MW of renewable energy technologies. – SAnews.gov.za

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