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Radebe ends years of IPP uncertainty, unlocks R56bn in renewables investment

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Radebe ends years of IPP uncertainty, unlocks R56bn in renewables investment

Photo by Creamer Media
Energy Minister Jeff Radebe

8th March 2018

By: Terence Creamer
Creamer Media Editor


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Energy Minister Jeff Radebe moved decisively on Thursday to end the confidence-sapping uncertainty that has hung over South Africa’s independent power producer (IPP) programmes for more than two years, announcing that project agreements for 27 stalled renewable-energy projects would be signed on March 13.

The solar and wind projects, valued at R56-billion, were procured in 2015 under bid windows 3.5 and 4 of South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPPP). However, in mid-2016 State-owned electricity producer Eskom indicated that it was not willing to sign further power purchase agreements (PPAs) for renewables projects, owing to its return to a surplus generation position.

Radebe acknowledged that the delay in singing the PPAs had been damaging, but said he would not focus on the past, but rather on pursuing President Cyril Ramaphosa “action oriented” mandate for reigniting economic growth.  He also insisted that “Eskom would sign on Tuesday”, in response to persistent questions as to whether the utility was in a financial state to proceed.

IPP Office head Karen Breytenbach stressed that projects procured from IPPs were treated a cost “pass through” for Eskom, which meant that the utility’s balance sheet was in no way affected by the PPAs. However, the projects would only enter into commercial operation in 2020, which meant that there would also be no immediate impact on the Eskom tariff.

The projects would add 2 305 MW to the grid and are expected to reach financial close before the end of July. The projects are also expected to create 61 000 jobs, mostly during the construction phase.

The 20-year PPAs for the wind projects would have associated tariffs ranging from 56c/kWh to 76c/kWh, while the solar photovoltaic tariffs would range from 77c/kWh to 87c/kWh. The tariff for the concentrated solar power project selected during bid window 3.5 was not immediately disclosed.

Speaking in Cape Town ten days into his new role, Radebe also announced that government would be proceeding with two coal baseload IPP projects, which had also stalled, and would also move to conclude agreements for another 19 renewables projects bid in 2015 as part of the ironically named ‘expedited bid window’ of the REIPPPP.

Together these projects would attract further investments of more than R103-billion.

In addition, the IPP Office had been mandated to finalise all outstanding requirements for the signing of agreements for 20 small-scale renewable-energy projects, which range between 1 MW and 5 MW in capacity.

Radebe would also lead a delegation to meet with South Africa’s gas-rich neighbours in a bid to facilitate the development of a gas market. “I have tasked the IPP Office to take a lead in facilitating these initiatives, as a matter of urgency, to ensure that South Africa speaks with one voice and prevents confusion in the market and the region.”

Breytenbach said there were still various matters to address before the IPP Office would be in a position to approach the market with gas-infrastructure and gas-to-power plans. In fact, she said a request for proposal should not be anticipated before the first quarter of 2019.

Radebe indicated that the IPP announcement was part of a 100-day action plan, during which he would also address other pressing energy matters, including South Africa’s position on nuclear and the updated Integrated Resources Plan (IRP).

He indicated that he would be making an announcement on the IRP in the next “week or two”.

“We have reached this milestone following a long period of uncertainty but with this signing we are reconfirming government’s commitment not only to renewable energy, but also to a solid partnership with the private sector as we pursue our energy transition objectives in the future.

“This milestone will bring much needed policy and regulatory certainty and maintain South Africa’s position as an energy investment destination of choice,” Radebe said.

The South Africa Photovoltaic Industry Association (SAPVIA) said Radebe's announcement would bring much needed investment into the economy, while also securing current jobs and manufacturing investments in the sector.


"The signing of the PPAs and the attention given to both the expedited round and the smalls programme will fast-track the delivery of employment opportunities, industrialisation opportunities, social development programmes and the benefits of community ownership, all of which are common features of all REIPPPP projects," SAPVIA said in a statement.

The South African Wind Energy Association (SAWEA), meanwhile, said its members, together with the broader renewable power sector, were celebrating Minister Radebe’s confirmation that the country’s renewable procurement programme would resume.


SAWEA CEO Brenda Martin noted that the delay had resulted in financial and job losses in the renewable industry as well as the closure of manufacturing facilities set up to support South Africa's renewables roll-out.

"The task of getting the REIPPPP, which has endured extended policy uncertainty for over two years, back on track will no doubt be a challenge for all involved," Martin said, while expressing relief there there would be no further delays.

Likewise, the South African Renewable Energy Council (SAREC) expressed its excitement at the announcement, which it described as a "bold step" in affirming government's commitment to the REIPPPP.

"The IPPs remain committed to the programme and to ensuring that the goals of government are met," SAREC chairperson Terence Govender said in a statement.

Greenpeace Africa’s senior campaign manager Melita Steele also welcomed the renewables announcement, but expressed concern over Radebe's authorisation of the signing of two coal IPP projects.

"Greenpeace believes this conflicts with his statements about ‘ensuring optimal resource allocation and utilisation in the energy-water nexus’. More water-hungry coal plants will steal what little water we have for polluting coal projects that we don’t need."

Steele, however, praised Radebe's emphasis on policy and regulatory certainty as correct. "We trust that he will follow this up by taking the necessary steps to ensure that the long overdue Integrated Energy Plan and IRP will be released in the near future."



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