Jun 29, 2011
Developers call for sustainable form of renewable energy procurementBack
Engineering|Africa|Eskom|Renewable Energy|Renewable-Energy|Sustainable|System|Systems|Africa|Building|Energy|Systems|Wind Energy|Infrastructure|Power
© Reuse this
This comes as concern mounts that government may decide to proceed on a basis of competitive bidding, rather than the renewable energy feed-in tariff (Refit) programme, to procure the first round of renewable energy from independent power producers (IPPs).
Energy Minister Dipuo Peters will reportedly announce a multiple phase bidding process this week.
South African Wind Energy Association CEO Johan van den Berg said at a briefing in Johannesburg that price-competitive tender process could breach the trust on which potential wind developers have invested some R400-million, and could tarnish the country’s credibility.
He said that shifting away from the Refit programme could be illegal and that it would stall the renewable energy drive and stifle economic growth.
The National Energy Regulator of South Africa (Nersa) is still believed to favour the Refit model, while the Department of Energy and the National Treasury questioned the legality of the programme and Nersa’s authority to set upfront tariffs.
Under the Refit programme, Nersa sets tariffs at which IPPs can sell electricity to a buyer, which is currently Eskom. The IPPs would have to apply to Nersa for a licence to sell electricity at the predetermined tariff.
In a joint statement, the wind, solar photovoltaic and concentrated solar power associations said that they had received legal option on the legality of Refit.
The associations said that the opinion stated that the Refit programme was legal, as long as Nersa retained some discretion for itself, should circumstances at the time of issuing a licence require the tariff to be amended.
“The implication is that any procurement process launched now, other that Refit, would be illegal unless Nersa, as the independent regulator, has approved it.”
Van den Berg said that industry would consider its position once the final shape of the procurement drive was known. “I am deeply concerned that it only takes a single stakeholder legally challenging the process to cause extremely long delays and a general loss of momentum,” he added.
South African Photovoltaic Industry Association chairperson Dr Chris Haw said that government had to “urgently” engage with the renewable energy industry, if it planned to change its method of procurement.
Van den Berg said that the Refit would be a strong enabler to fund added benefits, such as job creation, skills transfer and local content in a nascent industry. He added that, by the time the price discussion arose again, the industry should be large enough to succeed irrespective of new price determinations.
In March, Nersa surprised the market with its proposed downward adjustments to the tariffs, on the basis of technological and price developments internationally.
A Nersa spokesperson confirmed to Engineering News Online that the outcome of the Refit review, which was initially expected by mid-June, would be announced next week.
The review has been a frustration for relevant stakeholders, but Van den Bergh said that it was key to “get it right”.
“If it takes another month to see how the procurement process will work and ensure it meets the requirements of what investors have been promised – it is a month well spent. The current delay is not the issue, as there is a lot of positive momentum towards the procurement process. We need to ensure that extra time is allocated to make sure the Refit is sustainable,” he told Engineering News Online.
Meridian Economics, an infrastructure development and regulation firm, partner Mark Pickering said that the uncertainty surrounding the Refit was a reflection of South Africa adapting to how to incorporate renewable energy power.
“Feed-in tariffs have worked well internationally, where producers were guaranteed a price that could work. In those countries, there is a power market, which can absorb different prices and is used to having different prices. But, in South Africa, there is a regulated system, in which the regulator determines the prices [with a reasonable return]. This is a different paradigm.
“The challenge is that the two systems are not fitting well together and what government is trying to do is to establish how to make it work. The result is going to be that we end up with a form of competitive bidding on the price for renewables, which leads to a more standard rate-of-return,” he explained.
Pickering said it was necessary for South Africa to engage in discussion on whether to open up a wholesale power market, as well as on the implementation of such a possibility, and that country needed to move away from the simple regulative-return approach.
In moving forward with the Refit, it was necessary to prevent a hasty, half-informed, unilateral decision, to continue to engage the authorities with a view towards collaborative problem solving and building the broader consensus among renewable energy players, and keeping an open mind, said Van den Berg.
Edited by: Mariaan Webb© Reuse this Comment Guidelines (150 word limit)
Other Regulation News
More than half CEOs surveyed as part of the latest Merchantec CEO Confidence Index, said load-shedding was negatively impacting businesses, as it lowered productivity and raised costs. The index, released on Wednesday, showed that 76.2% of CEOs felt that...
Energy Minister Tina Joemat-Pettersson has set up a task team to investigate allegations against the South African Nuclear Energy Corporation (Necsa) and the National Radioactive Waste Disposal Institute (NRWDI) boards. The investigation was prompted by numerous...
Updated 3 hours ago Oger Telecom is looking at the possibility of selling its majority stake in Cell C, South Africa's third-largest mobile telecoms network operator, the chairman of the Middle Eastern firm told Reuters on Thursday. Goldman Sachs has been appointed by Oger Telecom to...
Updated 3 hours ago South Africa’s national oil company PetroSA, through its subisidiary PetroSA Ghana, has secured a seven-year $150-million reserve-based lending credit facility with a consortium of banks. PetroSA CFO Lindiwe Bakoro said the company was pleased to close this...
Updated 3 hours ago The $200-million ‘loop line 1’ project to expand the capacity of the gas pipeline from Mozambique to South Africa has been completed, the Republic of Mozambique Pipeline Investments Company (Rompco) has confirmed. Rompco is the gas transport joint venture set up in...
Recent Research Reports
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
This Week's Magazine
Eqstra Holdings was going to reduce its exposure to contract mining, but it was not yet ready to sell the troubled business, said CEO Walter Hill on Tuesday. He said Eqstra would not sell its contract mining business in a “depressed market”. He said it would be...
Subscribe to Engineering News and Mining Weekly for two years, but only pay for the first year. The weekly editions of Engineering News and Mining Weekly will be posted to your preferred postal address and also gain access to:
National flag carrier South African Airways (SAA) is in an advanced stage of renegotiating its deal with European airliner manufacturer Airbus to acquire A320 single-aisle (or narrow body) aircraft. The aim is to replace ten of the aircraft still on order with five...
Worldwide, the main thrust in the ports industry over the past decade or more has been to increase efficiency. Traditionally, ports have been run by engineers and mariners and, in the past, increasing a port’s capacity was achieved by expanding the harbour. “That has...
What do you do when an elephant has a toothache? You call Dr Gerhard Steenkamp from the University of Pretoria’s (UP’s) faculty of veterinary science, Onderstepoort, one of only two elephant ‘dentists’ in the world.