South Africa’s expansion of its power sector has seen one more delay, this time by the country’s new Minister of Energy, Mmamoloko Kubayi. Financial closure of outstanding Power Purchase Agreements (PPAs) were to be signed on April 11, however Minister Kubayi asked that the signing of these PPAs be delayed.
While the postponement in signing the PPAs has caused some concern with the SA Renewable Energy Council (SAREC), the delay is to allow for Kubayi to meet with Minister of Public Enterprises, Ms Lynne Brown. It has been indicated that once the two ministers have met, a new signature deadline will be set.
“While we recognize the need for the new Minister to get up to speed on the issues, financial closure of duly procured renewable power for 37 PPAs now stands at almost two years,” commented Brenda Martin, Chair of SAREC.
Eskom has been dragging its feet regarding the agreements with IPPs, due to financial reasons. However, SAREC said that all of Eskom’s concerns in relation to PPA signatures have been addressed by Treasury, NERSA and the Department of Energy. It is clear that in policy, by signing PPAs with duly selected preferred bidders, Eskom is not at risk of any unforeseen financial exposure.
“It is understood that Eskom’s obligation to pay for power procured, will only kick in once power plants are built and power is generated by IPPs,” added Martin.
SAREC, which represents solar and wind interests in the energy sector, estimates that a combined investor value of R58 billion in investment will be unlocked, as soon as PPAs are signed. With this investment added to the already R194 billion attracted by the renewable power industry, the industry can continue to make a direct, cost-effective and job-creating contribution to rural community development, and to South Africa’s ailing economy.
Since SONA2017, the directives from the President, the Finance Minister and the Minister of Energy have been clear: that PPAs for the 37 preferred bids must be concluded. While the Minister of Energy is responsible for the realization of least-cost energy security in South Africa, the Minister of Public Enterprises is responsible for ensuring that state-owned enterprises like the national Utility act in the national interest.
“We hope that Eskom will conclude its legal obligations to renewable power producers before embarking on plans relating to its proposed nuclear deal in June,” concluded Martin.