Johannesburg - Deputy President Cyril Ramaphosa boasted at the World Economic Forum (WEF) about South Africa’s renewable energy independent power producer procurement programme as renewable energy companies prepared for a court battle with Eskom to protect their R58 billion investment.
The looming court battle stems from Eskom’s alleged reluctance to sign power purchase agreements with 37 independent power producers (IPPs). The South African Renewable Energy Council (Sarec) said Eskom’s stance put investments of about R58 billion at risk. Eskom is the designated buyer of the power from IPPs.
It is required to sign 20-year power purchase agreements with them.
Speaking at the WEF annual meeting in Davos on Tuesday, Ramaphosa held up the successes of the renewable energy programme to back up the government’s optimism about government and private sector partnerships.
While the programme has so far resulted in investments of about R194 billion, relations between Eskom and the renewable energy industry have recently soured.
Sarec, which is representing the 37 IPPs affected by the delay in the signing of the agreements, said yesterday that it had obtained legal opinion that confirmed preferred bidders were entitled to approach a court to enforce Eskom’s signature of the power purchase agreements.
“In our opinion Eskom cannot sidestep the binding determination of the minister; they are bound by the ministerial determination, which includes signing the power purchase agreements,” said David Unterhalter, a senior counsel at Webber Wentzel.
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Sarec chairperson Brenda Martin said: “We are pleased the legal opinion was so very clear in their opinion that Eskom has no such prerogative. This assures us of the strength of our legal position.”
Sarec said local and foreign investors had responded positively to the renewable energy independent power producer procurement programme to date, partly because the rules had been clear and applied fairly and consistently.
“Tampering with the rules at this stage can only damage confidence in both the programme and the country.”
Eskom has bemoaned the rising costs of electricity from the IPPS.
In the six months ended September 30 last year, the portion of IPP costs in Eskom’s primary energy costs increased, compared with the period ended September 30, 2015.
Legal opinion
Eskom spokesperson Khulu Phasiwe said Sarec was within its rights to seek legal opinion.
“We must also not be reckless in how we spend money. We cannot spend money on projects that will put Eskom in financial constraints,” Phasiwe said.
The South African Photovoltaic Industry Association (Sapvia) said that it welcomed Ramaphosa’s comments about the renewable energy IPP programme, but the association indicated the renewable energy industry was under threat from Eskom’s reckless behaviour and flagrant disregard to support South Africa’s stated energy policy.
“We believe that the innovation shown by the renewable energy sector is one that will assist in bringing tangible socio-economic benefits to South African residential, commercial and industrial users going forward. Sapvia will highlight many of those good news stories and innovative ideas over the next weeks and months,” Sapvia said.