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May 26, 2011

First Refit capacity to be procured by year-end, Peters asserts

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Despite the National Energy Regulator of South Africa’s (Nersa’s) announcement this week that the outcome of its renewable energy feed-in tariff (Refit) review would be delayed until mid-June, Energy Minister Dipuo Peters told lawmakers on Thursday that the procurement programme should begin before the end of June and that transactions for the first 1 000 MW of Refit capacity should be concluded by year-end.

“We hope to conclude at least 1 000 MW of renewable energy transactions by December this year, in time for showcasing as we host COP 17 in Durban,” she said in her Budget vote speech to Parliament. South Africa will host the 17th Conference of the Parties of the United Nations Framework Convention on Climate Change, or COP17, in Durban from November 28 to December 9.

“Apart from the showcasing, this programme is aligned to the New Growth Path and will substantially contribute to President [Jacob] Zuma’s vision on job creation.”

However, Nersa’s proposed reduction of the Refit rates had caused some concern among potential renewables project developers, with some warning that projects could be made marginal by the cuts.

But during the media briefing ahead of Peters’ speech, Department of Energy officials argued that Nersa’s review was in line with its policy for yearly reassessments of the rates, while the proposed cuts were reflective of changes that had taken place globally with regard to the capital on operating costs for wind and solar projects.

Officials also indicated that the appetite for the first 1 000 MW under Refit had been extremely strong and that there should still be sufficient uptake under a revised regime.

When asked to clarify the future procurement process, the department said that Eskom would be the ultimate buyer, while Nersa would govern the process and its timing.

After the next Nersa board meeting at the end of May, a final decision would be made on how the Refit procurement process would proceed. The department said it was hopeful that the programme would be in a position to be launched by June.

What was somewhat unclear was whether government might favour a competitive bidding process for the first round. Developers have warned that such an approach, which was likely to find support in the early stages, might lower the overall appetite for the South African renewables market in the longer term.

Edited by: Terence Creamer
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