HomeIndustry SectorsRenewable energyRefit 11 proposals highlights areas of concern

Refit 11 proposals highlights areas of concern

2 October 2009 – The National Energy Regulator of South Africa (Nersa) recently held a public hearing, on September 3, regarding the second phase of the proposed renewable-energy feed-in tariff, or Refit.

This Refit phase II highlights the addition of six more renewable-energy categories or subcategories to the list, including biomass, biogas, types of solar photovoltaic (PV) and various types of concentrating solar power (CSP) with and without storage.

As a participant at this hearing, it was clear that most were struck by the genuine commitment and professionalism of senior Nersa employees who were rigorously assessing public inputs with a view to refinement of the Refit guidelines. Their dedication to accelerating the deployment of renewables into the South Africa market within a complex legal and regulatory terrain was commendable.

Conversely, however, two other issues of concern were evident. One issue pertained to the lack of constructive, cogent and intelligent private-sector input to deal with the heart of the Refit proposal, especially considering the limited respondents selected and the short time allocation allowances. This was evidenced by a fair number of proponents who either used the platform as a marketing opportunity or fundamentally missed the aim, which was to motivate material aspects that required addressing in the draft Refit phase II public consultation paper.

The second issue was the evident tension between the regulator and its stance on regulations, process and risks, and the potential conflict of interest in the appointment of the renewable-energy purchasing agency (Repa), currently solely the domain of the Eskom single buyer office (SBO). To investors in the emerging renewable-energy market in South Africa, it was once more a mixed bag.

A primary area requiring clarity remains that of market size and prioritisation. This is required for each renewable- energy category as a fundamental informant for any investor decision-making. It is not clear whether the market size issue is to be dealt with by the Department of Energy (DoE) in its forthcoming National Integrated Resource Plan or by the regulator itself or, indeed, by Eskom.

The renewable-energy target of 10 000 GWh by 2013 simply is not a good enough confidence booster for hard commercial money. What remains a concern is that market size may ultimately still be dictated by Eskom in its avoidance of any- thing that may further contaminate its balance sheet.

This scenario would be a sad indictment, considering the momentum renewable energy has enjoyed to date. Recent news about the cancellation of Eskom’s wind and CSP projects and medium-term power purchase programme are all testaments to the fact that renewables just do not make the grade as Eskom buckles under ongoing financial pressure.

The solution? The DoE must clarify the market size and prioritisation for each renewable-energy category, and the Eskom SBO must become independent or be replaced by a new independent Repa under Refit that is nonpartisan, autonomous and which wields the capacity to engage, review and contract expeditiously with independent power producers.

The ‘rule of the last inch’ dictates that the last part of any arduous process should be dedicated with precision and focus to the final refinements, those which deliver the most profound and significant impacts. Similarly, with Refit, as a country, we can ill afford getting out the starting block with a broken leg, and there are enough global case studies and lessons learned to intelligently chart an optimal course between sustainable energy policy, energy affordability and commercial viability.

So, while we wait with bated breath to see whether government can deliver on the last inch before the end of the year, it would make a lot of sense for all stakeholders to align themselves more closely and constructively, and prove sceptics wrong that renewable energy in South Africa does not have to be the bleeding edge, but rather the leading edge for progressive energy proponents. All that remains, then, will be the conviction to get one’s feet wet, and the seas will begin to part.