Cape Town, South Africa — ESI-AFRICA.COM — 24 June 2011 – The South African Wind Energy Association (SAWEA) is looking forward to the national energy regulator’s imminent announcement of the revised renewable energy feed-in tariffs, and sees this as a positive step in the implementation of renewable energy in South Africa.
SAWEA is concerned, however, that the Department of Energy’s intention to pursue a competitive bidding process for the first rounds of South Africa’s renewable energy procurement could adversely affect investor confidence and destroy South Africa’s nascent renewable energy industry.
In 2009, the national energy regulator NERSA announced feed-in tariffs “’ guaranteed purchase prices for electricity generated from renewable energy sources “’ that were intended to kick-start renewable energy development in the country.
The refit has sparked intense investor interest in the South African renewable sector, and to date in excess of R400 million has been invested by wind energy developers in preparing for the refit programme through feasibility studies, wind measurements, environmental impact assessments, other regulatory compliance and the general overheads associated with doing business.
In March this year, NERSA announced a review of the feed-in tariffs. After initially opposing the review before even one round of renewable energy procurement at the original tariffs, SAWEA and other industry associations have supported and participated in the tariff revision process with a clear understanding that the refit would be implemented after consultation and input from all stakeholders.
Over the past two years, numerous government departments and documents have spoken about the refit programme, most recently the Minister of Energy in her budget speech a month ago.
Now the Department of Energy is claiming the refit programme to be unlawful in that it does not comply with the legislation that requires public entities to engage in a competitive procurement of goods and services.
Internationally, feed-in tariffs have proven to be an effective means to establish a nascent energy industry. Conversely international experience has shown that if the industry is price competitive early on, it fails to take off.
In a competitive tender process, inexperienced and overly-optimistic developers tend to bid at a price that may secure a tender but is insufficient to raise the project finance required to construct projects.
The refit is a mechanism designed to do the opposite, to provide price security that facilitates the bankability of the project. In 2008, a detailed analysis by the European Commission concluded that "well-adapted feed-in tariff regimes are generally the most efficient and effective support schemes for promoting renewable electricity".