Malmström raises EU’s concern over South Africa's stance towards renewables IPPs

17th October 2017 By: Terence Creamer - Creamer Media Editor

Malmström raises EU’s concern over South Africa's stance towards renewables IPPs

European Commissioner for Trade Cecilia Malmström confirmed on Tuesday that she had communicated the European Union’s (EU’s) unhappiness over Eskom’s refusal to enter into contracts with renewable-energy independent power producers (IPPs), some of which are European, directly with the South African government.

Malmström is in South Africa this week to promote opportunities associated with the recently concluded Economic Partnership Agreement (EPA) between the EU and six Southern African countries, including South Africa, Botswana, Lesotho, Mozambique, Namibia and Swaziland. The EU-Southern African Development Community EPA came into force just over a year ago on October 10, 2016.

However, Malmström also used the visit to raise Europe’s concern over areas of policy uncertainty in South Africa, including the prevailing uncertainty relating to the signing of power purchase agreements (PPAs) for renewable-energy projects legally procured by South Africa’s Department of Energy in late 2015.

The commissioner did not disclose details of her discussion with Trade and Industry Minister Dr Rob Davies, confirming only that the IPP issue had been raised as a particular area of concern. "Renewable-energy IPPs are worried, because investors want predictability,” she said.

On September 1, South Africa’s former Energy Minister Mmamoloko Kubayi, who was replaced by State Security Minister David Mahlobo in another surprise Cabinet reshuffle by President Jacob Zuma on Tuesday, said that PPAs for 26 outstanding renewable-energy projects would be signed by October 28.

However, Kubayi, who is now Communications Minister, also stipulated that all the projects would be subject to a 77c/kWh tariff cap, rather than the tariff procured during bid windows 3.5 and 4 of the Renewable Energy Independent Power Producer Procurement Programme.

While there was initial support for the breaking of the impasse, solar and wind IPPs had since grown reluctant to embrace what was held up as a compromise. It is believed that some IPPs are again considering their legal options.

A legal opinion secured by the South African Renewable Energy Council in 2017 stated that the IPPs “would be entitled to approach a court to enforce the signature of the PPAs”.