Replicating renewables

There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported.

However, South Africa is performing relatively well in one key infrastructure area – the renewable-energy sector.

Since 2012, government has successfully procured 5 243 MW of renewable-energy capacity across 92 individual projects.

Thirty-eight of these facilities are delivering electricity into the grid, with the majority of the projects having been delivered either on or ahead of time, and within budget.

South Africa’s internationally acclaimed Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) has also resulted in investment commitments of R193-billion, making it the most successful public–private partnership programme undertaken in South Africa.

The Independent Power Producer Office, comprising officials from the Department of Energy and the National Treasury, supported by a strong team of technical, legal and financial advisers, oversees the programme.

Despite some delays and periods of frustration, there is broad consensus that the REIPPPP has been run efficiently and, importantly, reputably.

In addition, the tariffs bid have fallen markedly during the four bid windows. Prices associated with wind projects in the last round (bid-window four) have dropped by more than 70%, compared with those of the first bid window. Similarly, solar photovoltaic tariffs had declined by about 60% over the period.

Such is government’s confidence in the programme that it will now also proceed with a so-called ‘expedited’ procurement process, whereby projects that narrowly missed selection during the first four bidding rounds will be given a second opportunity to bid – the intention is to procure a further 1 800 MW before the end 2015.

The competitive-bidding model is also being extended to other sources of supply, including baseload coal and cogeneration capacity, with tenders out for both solutions. Gas-to-power is also likely to be added to the mix.

Given this success and the importance of infrastructure in helping to restimulate growth in South Africa, it might be well worth considering the feasibility of replicating this successful renewables public–private partnership template to other revenue-generating infrastructure areas. These include the automotive, construction, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.

These sectors do not only feature in this edition of Creamer Media’s Real Economy Year Book, but are also presented as individual reports under the banner Real Economy Insight.