The South African Wind Energy Association (Sawea) has lodged an official complaint with the National Energy Regulator of South Africa (Nersa) over Eskom’s refusal to enter into power purchase agreements (PPAs) with preferred bidders selected under the country’s highly regarded Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).
The association argues the State-owned electricity utility’s actions amount to a failure to comply with the Electricity Regulation Act, stated government policy, as well as with the Ministerial determinations that provide the framework for the procurement of generation capacity from independent power producers (IPPs). It has, thus, requested the regulator to impose the maximum legislated penalty of 10% of Eskom’s annual daily turnover for each day that Eskom continues to delay the programme.
In 2015/16, Eskom reported revenues of R163.4-billion.
“Sawea believes that Eskom is acting in direct contravention with government’s policy to diversify the country’s energy mix.” CEO Johan van den Berg said in a statement. “Eskom’s current stance is incompatible with government policy, the law of the land, and its own licence conditions.”
In July, Eskom sent shockwaves through the nascent IPP community when it emerged that it had sent a letter to Energy Minister Tina Joemat-Pettersson stating that it was unwilling to sign further PPAs beyond the preferred projects selected under bid widow 4.5 of the REIPPPP.
Despite the fact that Eskom’s stance has been rejected by Cabinet, which has stated that government rather than the utility make policy, there is still much uncertainty in the market, which intensified when Eskom postponed the signing of a 20-year PPA for the 100 MW Redstone solar thermal power project, in the Northern Cape.
Van den Berg said Sawea members were “deeply concerned” by Eskom’s stance. “The industry believes that Eskom, which is by far the largest generator in the country, is abusing its position as the operator of the national grid in order to favour its own investment in new power plants.”
There is also concern about recent statements issued by Eskom regarding IPPs, which Sawea describes as “misleading and not in the best interest of the country”.
Eskom has raised questions about the cost of the capacity it is buying from IPPs, while expressing strong support for the proposed nuclear new build programme, which it argues can supply stable power at lower costs.
Spokesperson Khulu Phasiwe tells Engineering News Online that the utility had not yet has sight of the Sawea complaint and it is, thus, premature to comment on how Eskom will respond. However, he stresses that Eskom’s letter arose as a direct result of a changed supply/demand dynamic in the country, which has resulted in Eskom having surplus capacity.
Borrowing a now common phrase from government, which insists that any new nuclear build proceed at “a pace and scale” that the country can afford, Phasiwe indicates that Eskom, likewise, wants the IPP programmes to proceed at a pace and scale that is aligned with South Africa’s more stable supply and lower demand outlook.
He also stresses that, while IPP contracts are treated as a ‘pass though’ under the multiyear price determination model used to set Eskom’s tariff, the utility will ultimately still need to justify any increases associated with these projects to Nersa and the South African public.
However, a new Council for Scientific and Industrial Research Energy Centre comparative analysis of the cost of electricity generated from various supply sources in South Africa shows new solar photovoltaic (PV) and onshore wind to be 40% cheaper than the costs associated with new baseload coal-fired power stations and the assumed cost of new nuclear capacity.
The study reports that solar PV and wind prices bid as part of the yet-to-be-announced ‘expedited round’ of the REIPPPP fell to 62c/kWh, which is lower than the 103c/kWh associated with the first two coal IPP projects and well below the 117c/kWh to 130c/kWh assumed for new nuclear. However, Eskom has indicated that it is targeting a levelised cost of less than 100c/kWh for any new nuclear capacity.
Sawea argues that the tariffs associated with the REIPPPP have fallen with each successive bid window, with 6 590 MW of IPP capacity also stimulating R194-billion of private investment across 102 projects sites. In addition, these projects are predominantly located in rural area. At least 44 of these renewables plants are now operational.
“Decisions on new power generation are the sole preserve of the Minister of Energy who has issued a series of determinations designed to stimulate competition, diversify the energy mix, and reduce the country’s carbon emissions,” Van den Berg states, noting that Cabinet and President Jacob Zuma recently reaffirmed government support for the REIPPPP.
“Given these facts, Eskom’s refusal to sign any further power purchase agreements with renewable energy producers is quite inexplicable and clearly falls foul of the law.”