R200bn in renewable energy investments in jeopardy

The renewable energy
manufacturing sector is on the
“brink of collapse” as power
parastatal Eskom takes a hard
line on the signing of power
purchase agreements (PPAs),
placing investment of up to
R200bn in renewable energy
projects in jeopardy.
Eskom’s previous CEO,
Brian Molefe,
and the current
interim CEO,
Matshele Koko,
have both
refused to sign
PPAs with
37 preferred
renewable
power
bidders. These
agreements fall
within the preconstruction
phase of the
Department of
Energy-led renewable energy
independent power producer
procurement programme
(REIPPPP).
South African Renewable
Energy Council (Sarec)
chairperson, Brenda Martin,
told FTW that local and foreign
investors had responded very
positively to the REIPPPP
to date, noting that the
programme had secured
nearly R200 billion in new
investments.
“This was partly because
the rules were clear and
applied fairly and consistently.
Tampering with the rules at
this stage can only damage
confidence in both the
programme and the country,”
she said.
Martin warned that noncompliance
by Eskom to follow
government’s due process
around power procurement
would have consequences
beyond the renewable energy
industry. “Side-stepping policy
introduces risk for other
independent power producers
currently preparing to bid for
the Department of Energy’s
(DoE) requests for proposals,”
she said.
Sarec has obtained legal
opinion on
this issue
which states
that Eskom
is legally
obligated to
purchase the
power that has
been allocated
to winning
bidders
through the
government’s
due policy
process. “Doing
so sooner
rather than later would go a
long way to salvaging global
investor and broader power
producer confidence in South
Africa,” Martin pointed out.
Senior counsel at law firm
Webber Wenztel, David
Unterhalter, said that preferred
bidders were entitled to
approach a court to enforce
Eskom’s signature on PPAs.
“In our opinion Eskom
cannot sidestep the binding
determination of government.
They are bound by the higher
power of the DoE Ministerial
determination, which includes
signing the power purchase
agreement.”
Garth Strachan, deputy
director general for Industrial
Policy at the Department
of Trade and Industry (dti),
said at a University of the
Witwatersrand Business
School event last month:
“The renewable energy
manufacturing sector is
in danger of collapsing,
with several component
manufacturers on the brink of
closing shop because Eskom’s
tough stance on connecting
more providers to the national
grid is creating uncertainty.”
DCD Wind Towers – which
invested in a more than R400-
million production facility
within the Eastern Cape’s
Coega Industrial Development
Zone – is facing closure by
April this year if no new wind
farm projects are authorised.
The company, which supplies
wind tower components to
wind farms in South Africa,
has been relying on Eskom’s
authorisation of 26 renewable
energy projects as it was to
have secured a significant
portion of work arising from
the new projects.
Eskom spokesman, Khulu
Phasiwe, said: “Eskom spent
R9bn last year purchasing
electricity from approved
projects. With the power
system now stable and
producing excess capacity, the
company will procure both
renewable and nuclear energy
at a pace and scale it can
afford.”
INSERT AND CAPTION
Tampering with the
rules at this stage
can only damage
confidence in both
the programme and
the country.
– Brenda Martin