Department of energy delays frustrate power producers

RENEWABLE energy independent power producers say that they are concerned that the latest round of successful bids have still not achieved financial closure, creating uncertainty over planned investments in the sector.

Previous rounds of the renewable energy independent power producer procurement (REIPPP) process have been a great success, with 21 renewable projects, which will provide 1,076MW, connected to the grid. The renewable programme is viewed as important means to help close the power gap in a period when SA’s energy supply is extremely constrained.

However, the third round ran into problems, initially due to a delay in undertakings by Eskom.

Eskom has also indicated that it cannot invest in grid connections for further rounds of the REIPPP.

Eskom said on Tuesday that it had now provided quotations for all the third round project connections. The next stage, which is the management of the financial close, is the responsibility of the Department of Energy. An initial deadline of the end of July was shifted to November 24. As the close must be staggered to avoid a knock on the currency, the South African Renewable Energy Council has raised doubts over whether the deadline will be met.

The Department of Energy did not respond to several inquiries over two days on whether it would make Monday’s deadline.

The outstanding success of the first two rounds of renewable bids, generated about R120bn in investment, says the council. It says that these investments are now in jeopardy as uncertainty grows over subsequent rounds.

CEO of the council Johan van den Bergh says at some firms production of wind turbines was stalled due to the delays while several manufacturers of photovoltaics were running at 2% capacity, despite millions made in investments.

"The viability of manufacturing facilities and the accompanying jobs and companies may be threatened if finality does not come before year-end. Uncertainty about the timing of announcing the preferred bidders for round 3.5 (for concentrated solar power only) and round 4 has also added to discomfort."

Eskom recently made it clear that it is unable to fund grid strengthening any further than the requirements of round 3.

In reply to questions Eskom said on Tuesday it was investing in the transmission infrastructure in the Northern Cape to accommodate about 500MW of renewable energy. This would be more than adequate to meet the requirements for rounds one, two and three of the renewable energy bids, it said.

However, the power utility would not be able to provide for the needs of round four as this was not included in the plans submitted to the National Energy Regulator of SA under the multiyear price determination which runs from 2013-14 to 2017-18.