Johannesburg - Eskom’s reluctance to enter into new power purchase agreements beyond the bid window 3.5 of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) has resulted in the country falling out of the Fieldstone Africa renewable index leaders, after occupying the top position just four months ago.
The index, released three times a year, ranks markets on current suitability for investment in renewable projects.
In a statement yesterday, Fieldstone said Eskom’s letter earlier this year asking the Energy Department for clarity on the next contracting phase of independent power producers (IPPs) had rattled investors. “Subsequently, Eskom applied selective figures and suspect technology issues to claim that any future renewable energy will be prohibitively expensive,” it said.
Eskom has previously said tariffs from REIPPPP bid windows 1 to 3.5 were exorbitant and required a revised funding model that did not prejudice the consumer.
Eskom said it supported the role that the IPPs played in the electricity market and remained committed to facilitating their entry.
“We continue to deliver on our commitment to environmental sustainability and reducing our carbon footprint with purchases of renewable energy from IPPs. To this end, in the 2015/16 financial year Eskom spent R15.4 billion on procuring power from the IPPs, up from R9.5 billion in the 2014/15 financial year,” the utility said.
But Fieldstone Africa chief executive Jason Harlan disagreed yesterday.
Lower costs
Harlan said the 214 cents per kilowatt-hour (kWh) included prices from the first and second bid windows of the REIPPPP, when prices of the renewable energy technologies were much higher. Prices from future windows would be lower than Eskom’s selling prices.
Soon after news of Eskom’s reluctance to commit to IPP contracts beyond bid window 3.5, Minister of Energy Tina Joemat-Pettersson reiterated the government’s commitment to the REIPPPP. There was no doubt the government would push the programme, but Eskom had created ambiguity.
“When you have a programme you cannot just stop it and say things should change. Business likes predictability,” Harlan said.
He said South Africa’s fall in the rankings was significant. “Load-shedding ended in no small part due to renewable energy providing a secure and reliable energy source. This new generation also enabled Eskom to catch up on its maintenance backlog,” he said.
The report said there was a desire to keep the Eskom balance sheet unencumbered “to be prepared for one particular nuclear initiative, the success of which appears to be close to the hearts of certain elements of government”.
Harlan said IPPs had contributed to rural economies across South Africa. He said the REIPPPP was the single greatest source of foreign direct investment since 1994. By October last year, it had created about 20 000 jobs and led to the investment of R196.4bn.
BUSINESS REPORT