The South African Solar Photovoltaic Industry Association (Sapvia) expressed confidence on Tuesday that the latest delay in the signing of power purchase agreements (PPAs) for 37 renewable-energy projects procured in 2015 would be “short-term” in nature. However, it urged newly appointed Energy Minister Mmamoloko Kubayi to urgently provide the industry with a revised signing date so as to reduce the prevailing uncertainty in the industry.
Sapvia was responding to confirmation that the April 11 deadline for the conclusion of the PPAs had been postponed to enable Kubayi to become fully informed on the progress made under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) and to ensure “concurrence” between herself and Public Enterprises Minister Lynne Brown.
As shareholder Minister responsible for Eskom, the single buyer of electricity arising from the independent power producers (IPPs), Brown has raised concerns that the PPAs could “put Eskom on the back foot financially”. For its part, Eskom, which refused to sign any new contracts during 2016, has indicated that it would be willing to sign once it had received assurances on the cost-recovery mechanism.
The April 11 deadline was set by former Energy Minister Tina Joemat-Pettersson, following the announcement by President Jacob Zuma in his February 9 State of the Nation address that “Eskom will sign the outstanding power purchase agreements for renewable energy in line with the procured rounds”. However, Kubayi replaced Joemat-Pettersson during the March 31 Cabinet reshuffle.
While acknowledging that the delay was a blow to those IPPs expecting to reach financial close on April 11, Sapvia nevertheless indicated that it regarded the move by Kubayi as a “positive sign”.
“We are fully in support of the new Minister using this opportunity to get up to speed on the renewable-energy programme. That said, there is urgency to get this resolved in the interest of the hundreds of jobs and investment that are hinging on getting these projects into construction.”
The 37 projects are said to carry a combined investment value of R58-billion and the potential to create 13 000 construction jobs. The REIPPPP has stimulated R194-billion in electricity investment since 2011 and created 26 790 jobs.
“We see this as a short-term delay and hope that the Ministers can reach concurrence and resolve these matters so that signing can still go ahead this month. It will go a long way towards reducing uncertainty in the industry if the Minister is able to provide the industry with a revised signing date.”
At the time of publication, Engineering News Online had been unable to secure comment from the Department of Energy (DoE) regarding a likely new date for the signing of the PPAs.
SAREC EXPRESSES CONCERN
Meanwhile, the South African Renewable Energy Council (Sarec) expressed “concern” about the missed deadline. Besides Sapvia, Sarec also comprises the South African Wind Energy Association (Sawea), the Southern Africa Solar Thermal and Electricity Association and the Sustainable Energy Society of Southern Africa.
“While we recognise the need for the new Minister to get up to speed on the issues, financial closure of duly procured renewable power for 37 PPAs now stands at almost two years,” Sarec chairperson Brenda Martin said in a statement. Martin is also CEO of Sawea.
“Over the past few weeks, since the previous Minister issued her instruction to Eskom, affected IPPs have been working with Eskom officials to ensure that the necessary paperwork is up to date, so that financial closure can be achieved and construction can begin,” Martin added.
Sarec added that, over the past few months, all of Eskom’s concerns in relation to PPAs had also been addressed by the National Treasury, The National Energy Regulator of South Africa (Nersa) and the DoE.
“It is clear that in policy, by signing PPAs with duly selected preferred bidders, Eskom is not at risk of any unforeseen financial exposure. It is understood that Eskom’s obligation to pay for power procured, will only kick in once power plants are built and power is generated by IPPs.”
However, Eskom spokesperson Khulu Phasiwe insisted that the cost-recovery mechanism had not been finalised. He told Engineering News Online that, owing to the legal uncertainty surrounding the application of the Regulatory Clearing Account (RCA), Eskom did not have certainty on how it would secure the revenue required to pay for the electricity arising from the renewables power stations.
The use of the RCA was thrown into question by the Gauteng High Court’s August 16 ruling, which determined the most recent RCA adjustment to be “irrational, unfair and unlawful”.
Nersa is appealing the judgment, but would not process further RCA applications until legal certainty had been established. Therefore, it had only granted Eskom a 2.2% tariff increase for 2017/18.
Eskom has written to the signatories of the Government Support Framework Agreement (GFSA) – which guarantees support for the State-owned utility in meeting its obligation to buy electricity from renewable-energy IPPs – to discuss a possible use of government support in light of the RCA uncertainty. However, the National Treasury stressed that there had been no triggering of the GSFA.