19 August 2010 – Uncertainty over the standard power purchase agreement that will guide the sale of private power in SA is holding up Mainstream Renewable Energy SA’s R2,3bn 125MW wind farm near Jeffrey’s Bay in the Eastern Cape, a representative of the company said yesterday.
The Jeffrey’s Bay wind farm and other renewable energy initiatives are important for the security of electricity supply and the reduction of SA’s carbon footprint.
The project, once connected to the electricity grid , can power about 200000 homes, says Mainstream Renewable SA. The company, a joint venture between Irish company Mainstream Renewable Power and South African-based Genesis Eco- Energy, is developing the wind farm. It is expected to be ready in 2013.
Speaking in Johannesburg, Mainstream Renewable Power SA director Davin Chown said the wind farm, with 40 to 50 wind turbines, could be built in two years.
But the standard power purchase agreement being developed by the National Energy Regulator of SA was on the project’s so-called critical path as it could delay the process.
Mr Chown said independent electricity producers needed “bankable” power purchase agreements, implying that financial institutions must find the agreements attractive enough to finance.
A power purchase agreement is a contract between the producer and buyer of electricity. Without it, independent producers are unlikely to raise the finance for their projects.
Mr Chown said other areas of concern included uncertainty over connection to the national grid. “This must be sorted out because time is running out,” he said.
The concerns over grid connection are behind suggestions that the transmission function should fall outside Eskom.
Mr Chown said the procurement process to be followed was also unclear. “It is not clear who the buyer of the power will be. ”
According to the government’s electricity regulations, published in August last year, the system operator will be responsible for procurement of electricity.
The government has decided to move the system operator out of Eskom and establish an independent system and market operator. This was a move made to address the potential conflict of interest in Eskom’s role as power producer and buyer of electricity from independent producers.
Meanwhile, Mainstream Renewable Power CEO Eddie O’Connor yesterday defended the costs of wind energy.
He said that it cost the same amount to generate a megawatt from wind and coal. “The difference is the operation costs. Wind is free,” he said. He also supported the local wind industry’s suggestion that 25% of SA’s power must come from renewable energy sources by 2025.
“If government were to declare 25% (renewable energy contribution) by 2025, many companies would set up plants. The industry wants a long-term commitment from government,” he said.