Bethlehem Hydro, an independent power producer (IPP) and subsidiary of Renewable Energy Holdings (REH), has entered into a contract under which the full output from its 4 MW Merino hydropower plant, near Clarens, in the Free State, will be sold to electricity trader PowerX.
REH and Bethlehem Hydro CEO Anton-Louis Olivier said the transaction made commercial sense in the context of the current uncertainty in the power market in South Africa.
“The Merino power plant generates more than 25 GWh/y of electricity,” said Olivier, adding that this was one of the first of its kind transactions in the country.
Initially, the Merino plant sold its output to Eskom under a short-term supply programme. However, earlier this year, the parastatal stopped its purchasing power under this programme.
“Not only was PowerX able to offer us an attractive tariff, but also a long-term contract with the necessary guarantees that such a transaction requires,” Olivier highlighted.
For PowerX, securing the Merino power plant’s stable and predictable supply enabled it to meet the demand from private customers for electricity from a renewable energy source.
“We believe that, thanks to the efforts of the Department of Energy and the Renewable Energy Independent Power Producer Office, the electricity market has matured to such an extent that the private sector can now carry the flag and relieve government of the heavy burden of providing National Treasury guarantees [for] renewable energy projects, while still achieving the benefits of local economic development and direct investment which the country so desperately needs,” said PowerX CEO Thembani Bukula.
Olivier added that, to date, power purchase agreements (PPAs) on a utility scale have only been possible if the IPP contracts were with Eskom. “Eskom is, however, constrained in its ability to enter into such PPAs outside its strict procurement regulations, and this has limited the growth of IPPs in the South African market.
“The power trading market that PowerX is creating will go a long way to easing this constraint and enabling more IPPs to come on line. We, therefore, have high hopes of the expansion of this willing buyer/willing seller market, not just in South Africa, but also in the rest of the interconnected Southern African Power Pool.”