A technical team was established in May this year to help the Department of Energy (DoE) to resolve the impasse on the signing of the Power Purchase Agreements (PPAs) between Independent Power Producers for Bid Window 3.5 and Bid Window 4 and Eskom, the Minister explained.
“The technical team met and provided a report of its work this past Wednesday. In that meeting myself and my colleague in Cabinet, Minister Brown, were present and were supported by representatives from DOE, DPE, NT, ESKOM and the IPP Office,” Kubayi said.
She added: “It was brought to our attention that Eskom has excess generation capacity of electricity and based on the current demand patterns the situation is projected to remain this way until 2021. Eskom has submitted a tariff application which is under consideration by the Regulator.
“The Constitutional Court judgement with regard to the Regulatory Clearance Account (RCA) in favour of Nersa has also now paved the way for NERSA to implement tariff adjustments in line with the approved RCA.”
“We further acknowledged that South Africa’s Renewable Energy Power Producer Procurement Programme is world renowned and our model has been adopted by many countries including developed countries.
“While the programme has been a success, there are many lessons we have learnt and there are many areas of improvement to be looked at,” Kubayi said.
Kubayi said that all the matters raised by the team and the recommendations put forward were assessed by her and her team.
“After lengthy deliberations we came to a conclusion on the following actions;
- That the PPA for Bid Window 3.5 and 4 will be signed by the end of October 2017 Read more…
- DoE through the IPP office to engage with all affected parties for Bid Window 3.5 and 4 to re-negotiate not above 77c per kilowatt hour. This will greatly in assist in reducing the requirements for additional government guarantees that would impact negatively in the current economic climate and constraints in the fiscus.
- Eskom to ensure that all contracts are in place for signing on 28 October 2017
- That I as the Minister of Energy meet with all IPPs participants in all Bid Windows, to discuss issues of concerns from IPP and for government to give feedback on concerns before the date of signing.
- With regard to the review of the pace and scale of rollout under the circumstances of overcapacity up to 2021; the Departments agree that majority of the projects in Bid Window 3.5 and 4 will be commissioned closer to 2021 and will therefore have minimal contribution to the overcapacity up to 2021.
- With regard to the review of the level of participation by the historically disadvantaged, there is work underway in this regard that will inform the implementation of the programme
- All future programmes to be put on hold until a proper review is done and to allow the IEP and IRP to be concluded that will give us indication of the capacity we need.”
“It is worth noting that, while taking this decision and communicating our stance as government, we are cognisant of the interdict by the Coal Sector and the Section 77 notice filed by COSATU at Nedlac. We are hoping that all parties will consider this position,” she said.
Kubayi highlighted: “It must be noted that there are other issues that have been raised with us and will need to be addressed with the IPPs.
“Of importance, is the lack of transformation particularly regarding local ownership of some of these projects.”
She added: “This has to be reconsidered and adequately addressed. Allocations of projects and the ownership structure must be in line with South African transformation policies.”
Adding to this, the Minister further noted that the issue of loan conditions given to black South African participants need to be reviewed as well in addition to addressing the need to restructure the community trust dividends.
The Minister concluded: “Transformation of the Energy Sector is long overdue and we can’t compromise on it any longer.”
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