South African programmes to add coal and gas power generation from independent providers should wait until policies are updated and the nation’s future needs are clearer, said energy minister Mmamaloko Kubayi.
The government is also seeking a “middle ground” with developers in a programme to add renewable energy projects, she said in a phone interview Tuesday. Kubayi announced earlier this month that the long-delayed contracts must be signed by the end of October, but not before pricing was renegotiated to make the deals more attractive to state-owned power utility Eskom.
South Africa expanded the so-called independent power producer programmes to diversify its energy mix and ease the burden on Eskom, which was forced to implement rolling blackouts in 2015 after seven years of power shortages hindered economic growth. However, the country now has surplus capacity after growth in demand for power stalled and more units from Eskom’s new coal plants came online.
“Let’s look at how much capacity do we need, and when,” Kubayi said. The calculations should include economic growth estimates and determinations of how much generation is required from each technology, she said.
The gas-to-power programme included plans for about 3GW of capacity from proposed plants on South Africa’s coast, the department said in October last year. Its coal baseload programme was designed to add 2,5GW of capacity.
South Africa needs to conclude the revision of its Integrated Energy Plan and Integrated Resource Plan, which set long-term policy, before moving ahead with additional programmes to procure electricity from gas and coal, Kubayi said.
“For those, we can’t proceed right now,” she said.
R200bn in investment
While the country’s programme to add renewable energy from private developers has drawn more than R200bn of investment, the most recent bidding rounds have stalled as Eskom refused to sign new power purchase contracts.
While developers welcomed Kubayi’s announcement on 1 September that the deals would be signed by the end of October, industry lobby groups have questioned her comments that pricing must be renegotiated. South Africa’s cabinet and Eskom recommended a maximum price of 77c/kWh.
Bidders will need to consider the legal, financial and credit risk implications on their projects if deals are renegotiated, according to the South Africa Photovoltaic Industry Association.
Setting a price ceiling on the renewable projects “actually removes all of the legitimacy of that programme”, said Niveshen Govender, programme manager for Sapvia. “It’s become actually difficult to understand where we’re moving towards.”
It’s also unclear how the recommended price cap was settled on, said the South African Wind Energy Association.
“Undertaking negotiation after a duly concluded procurement process goes against South Africa’s procurement rules,” association CEO Brenda Martin said in an e-mailed statement. “We would hate to think that the extended delay and related job losses are set to continue for much longer, on the basis of an unachievable target.”
About 20 of the projects that the government plans to renegotiate can be completed for below the 77c level, Kubayi said. She said she isn’t biased for or against any particular type of generation.
“I’m saying let’s find a middle ground,” Kubayi said. “I can’t sit here as minister and continue to put more pressure on Eskom.” — Reported by Paul Burkhardt, (c) 2017 Bloomberg LP
