Picture: EPA
JOHANNESBURG - The South African Wind Energy Association (Sawea) on Friday said it expected the conclusion of the 26 outstanding power purchase agreements (PPAs) in the first quarter of this year.

Eskom, the designated buyer of power from independent power producers (IPPs), has delayed signing the contracts, putting at risk investments worth billions of rand.

Eskom has cited concerns about the cost of the renewable energy power and the current electricity overcapacity. Eskom has said the IPP programme should be rolled out at a pace and scale it could afford.

Eskom spokesperson Khulu Phasiwe earlier this month said discussions between the departments of Energy and of Public Enterprises, the National Treasury and Eskom were expected to resume during the course of this month “with the aim of finding a win-win solution in signing the power purchase agreements with the independent power producers”.

Phasiwe said once the discussions were concluded, the Department of Energy (DoE), as the policymaker, would announce the next step and Eskom would implement the decision.

Since the start of the Renewable Energy Independent Power Producer Procurement (REIPPP) Programme in 2011, Eskom has signed 64 power purchase agreements for a total of 4000MW, said Phasiwe.

In a statement on Friday, Sawea said the majority of the processes that precede the finalisation of the PPAs had been fulfilled by the IPP Office and the preferred bidders during mid-December.

It said the Minister of Public Enterprises, Lynne Brown, was required to provide her approval in terms of the Public Finance Management Act so that the DoE could conclude direct agreements with preferred bidders.

“With all previous steps completed, we now await the final step in the process: approval of the minister of public enterprises so that the DoE can finally enter into power purchase agreements with the preferred bidders identified through due procurement process,” said Sawea chief executive Brenda Martin.

The 26 renewable energy projects include wind, solar photovoltaic and concentrating solar power projects.

Sawea said the bulk of the outstanding projects were earmarked to be constructed in the Northern Cape, which has more than 60percent of the preferred bid allocation, while the Eastern Cape has 19percent. The balance of the projects are to be located in North West (10percent), the Western Cape (6percent) and Mpumalanga (1percent).

Shining example

While the REIPPP was initially held up as a shining example of private sector investment in the local sector, the programme has recently been thrown into uncertainty after Eskom voiced concerns about the effect of the contracts on its balance sheet.

Sawea said that, following due procurement, the preferred bidders should have concluded signed PPAs from Eskom by mid-2016. Instead, a delay now entering its third year had halted the associated R58billion investment and the creation of 15000 jobs at a time when the country desperately needed economic stimulus.

“Beyond the direct effects of delayed investment in rural areas, the jobs that have not been realised, along with the loss of jobs throughout the renewable energy value-chain, the cost of investor confidence lost, and citizen confidence in good governance, is worth considering as well.

“We continue to engage with the government and hope to receive a formal notice from the minister of energy regarding the date for conclusion of outstanding PPAs very soon.”

- BUSINESS REPORT