July 23, 2017

South Africa’s renewable energy body condemns government’s procurement delay

The South African Renewable Energy Council (SAREC) says it is deeply disappointed that the Department of Energy and Eskom failed to provide any certainty for investors during today’s update to parliament on Eskom’s failure to sign Power Purchase Agreements with Independent Power Producers.

“The inter-governmental task team has instead proposed further delays to the end of August if not to February 2018. These delays will have direct negative consequences for South Africa’s renewables industry. Growing numbers of companies, employees, graduates and communities are suffering the consequences of R58 billion stalled investment, 13 000 lost construction jobs and billions of Rands of local economic development spend foregone,” says the organisation in a press release sent to African Mining Brief.

SAREC says it finds the delay baffling, as before the renewables programme ground to a halt in 2015 it was trumpeted as a resounding success by both government and Eskom. Bid tariffs had tumbled to the point where renewable energy has become the cheapest option for new generation capacity available to the country. Also, Renewable plants are majority owned by South Africans and are typically built in rural areas where they bring unprecedented benefits to poor communities. “The industry had already attracted a substantial eco-system of service industries and was beginning to leverage investment in heavy up-stream fabrication industries,” explains Brenda Martin, Chair of SAREC.

The organisation says it sees Eskom’s apparent objections to signing agreements with preferred renewable bidders ignore these broad benefits as a move as the utility’s attempts to focus on selfish interests. “This from an entity that, over the past decade, has managed to stall economic growth through load shedding, waste tens of billions of Rands on its’ new-build programme, yet further billions of Rands on non-transparent coal procurement, and to top it all, quadrupled its’ retail tariffs,” notes Martins.

By comparison the renewables industry has met and generally exceeded all policy objectives set by government, argues the organisation. “Very importantly we have exceeded employment targets by 27%. More than 98% of renewable projects have been delivered on time. Any cost over-runs have been for the account of investors’ rather than consumers. And all BEE and community ownership targets have been met.”

SAREC believes all is not lost, though.

Should government wish to increase any of these economic development targets in future rounds, the renewable energy industry would welcome a discussion.

However, SAREC adds: “It is clearly not feasible to shift the goal posts for bidding consortia that have already been awarded permits on the basis of the current bid rules. Continuation of the renewables programme will deliver all the developmental objectives required by government. Continued delays will achieve the opposite”

Martin says: “We call on the government to hold Eskom and the task team to account for the commitments made in parliament today, namely for final recommendations to be delivered to ministers by the end of June, and for all outstanding ‘interventions’ to be dealt with ‘by August 2017’.  Investors are watching this space with deep concern”.

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