HomeIndustry SectorsFinance and PolicyREIPPPP: project development pending Eskom decision

REIPPPP: project development pending Eskom decision

Until Eskom signs agreements for projects in round 4 of the department of energy’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), these will not be going ahead, says Brenda Martin, chairperson of the SA Renewable Energy Council (SAREC).

In an exclusive interview with Moneyweb, Martin said that a total of 37 renewable independent power producers (IPPs) are still committed to the bids they submitted to government, but need resolution of the impasse with Eskom in this quarter.

Eskom decision

According to Moneyweb, “Eskom has been stalling the signing of power purchase agreements with the preferred bidders in the REIPPP bid windows 3.5, 4 and 4.5, citing an oversupply of electricity from its own generation plants and what it considers to be the high tariffs agreed upon with IPPs.”

Eskom acting CEO Matshela Koko recently stated that the utility is prepared to sign power purchase agreements with IPPs at 62c/kWh or less.

Martin noted that Eskom is not entitled to renegotiate tariffs with preferred bidders that have been agreed upon with the department of energy during its trusted and lawful procurement process.

Earlier this month, senior counsel, Webber Wenztel, issued a legal opinion letter on behalf of SAREC, which confirms that preferred bidders are entitled to approach a court to enforce Eskom’s signature of PPAs.

“In our opinion, Eskom cannot sidestep the binding determination of the Minister; they are bound by the Ministerial determination, which includes signing the power purchase agreements,” stated Advocate David Unterhalter, senior counsel at Webber Wentzel.

Unterhalter continued saying, “As an origin of state, Eskom, cannot raise the reservation of rights in the RFP to defeat a claim for substitutionary relief. Nor can it refuse to conclude a power purchase agreement.”

Eskom decision could hamper GDP

According to Martin, only two of the 37 projects could get even close to the 62c/kWh mark.

“The average tariff for solar photovoltaic projects in bid round 4 was 91c/kWh, for wind 75c/kWh and for concentrated solar power in the expedited bid window (4.5) R1.25/kWh.

“It is only in the expedited round that the average tariffs for wind and solar PV were at 62c/kWh, but these tariffs are in April 2016 terms, in other words they are in real terms higher than 62c/kWh in current terms,” Moneyweb reported.

Martin says the 37 projects represent a total investment of R50 billion, 13,000 jobs in construction and a further 2,000 permanent jobs over the lifetime of the projects of 20 years.

Eskom’s position casts a shadow of uncertainty over the whole programme says Martin.

Gas-to-power and coal IPPs also worried

Prospective bidders for the announced gas-to-power and the coal IPPs are also concerned about Eskom’s stance, Moneyweb added.

“It is extremely costly to prepare one of these tenders and investors are asking whether it is worthwhile,” Martin says.

Media added: “Eskom’s Khulu Phasiwe said the utility would be meeting with representatives of some of the renewable IPPs soon. He said Eskom is committed to the IPPs it has contracted with and will sign contracts with those preferred bidders who are close to the 62c/kWh tariff. If the tariffs are too high, especially if it is above R1.00/kWh Eskom fears it would hurt its finances and would seek to renegotiate, he said.”

Ashley Theron
Ashley Theron-Ord is based in Cape Town, South Africa at Clarion Events-Africa. She is the Senior Content Producer across media brands including ESI Africa, Smart Energy International, Power Engineering International and Mining Review Africa.