Disagreement over benefit of IPP projects for SA
This follows Wednesday’s conclusion of power purchase agreements (PPAs) with 27 independent power producers (IPPs). The signing of the agreements had been delayed after Eskom refused to sign them, citing current electricity overcapacity and the cost of the renewable power.
According to Minister of Energy Jeff Radebe, the 27 IPP projects would result in R56billion of new investment in the economy over the next two to three years and create 61600 full time jobs. The projects had a combined capacity of 2300MW.
Radebe on Wednesday said that the signing of the agreements re-confirmed the government’s commitment to renewable energy. “Through this programme, we have proved that we can provide sustainable clean electricity at an affordable price to our communities and the people living around these projects, ensuring their health and well-being as one of our highest priorities.” He said the renewable energy procurement programme would provide real economic growth through direct investment and job creation.
But the admiration of renewable energy is not universal. “Renewable energy is a disaster. It is an absolute waste of money,” said energy analyst Andrew Kenny yesterday. He questioned claims that the country was not in a position to proceed with a nuclear programme because of lack of funds and overcapacity.
Speaking in Davos, Switzerland earlier this year, President Cyril Ramaphosa said the country did not have money for major expansion of its nuclear capacity. “We have to look at where our economy is. We have excess power right now, and we have no money to go for major nuclear plant building,” said Ramaphosa at the World Economic Forum.
Kenny said the current electricity overcapacity would diminish if the economy recovered. “Yes, there is overcapacity, but it will not last long. When the economy grows we are going to need additional electricity.” Nuclear energy was “by far” the most reliable power. “All around the world, renewable energy leads to higher costs of electricity,” he said.
South African Nuclear Energy Corporation chairperson Kelvin Kemm yesterday bemoaned what he said was inaccurate information about renewable energy. Kemm said, given their intermittent nature and lack of storage capacity, South Africa could not rely on renewable energy technologies to provide constant electricity capacity. “Solar plants do not produce power at night, because there is no power, and wind plants do not produce when the wind does not blow. So you need back-up capacity in the form of coal or nuclear,” said Kemm.
Economic risk consultant Rob Jeffrey said: “On an economic and cost basis,” the IPP agreements should not have been signed. He said, given South Africa’s surplus supply of electricity and current low economic growth rate, the country did not need additional power from the IPPs. “Economically and financially it is a costly and damaging decision,” he said. He also poured cold water on the claims that the IPPs would create thousands of jobs. He said the jobs would be created during the construction phase only.
Large-scale high penetration use of renewables would lead to a significant decline in the mining sector generally and the coal sector in particular. It could lead to a loss of at least 29000 jobs in the coal mining industry, and almost 162 000 jobs in the economy, he said. The move would also cut the country’s balance of payment. “Coal is the country’s largest export earning commodity, earning approximately R55billion per annum,” he said.
- BUSINESS REPORT