13 April 2012 – Sustainable Energy Society of Southern Africa (Sessa) acting CEO, Theo Covary says that South Africa’s appetite for renewable energy is higher than anticipated and the government should move quickly to take advantage of this interest and expand its independent power producer (IPP) purchase programme.
Using the IPP purchase programme, the South African government aims to procure 3,725 MW of renewables capacity that could be introduced to South Africa’s electricity network between 2014 and 2016.
Energy minister Dipuo Peters confirmed that the Department of Energy received 79 tenders during the second bidding round of the programme, which closed on the 5th of March 2012. These 79 tenders represented some 3,233 MW of potential power generation capacity, which is almost three times the 1,275 MW allocated for the March window. A further 2,300 MW is still available for allocation under the programme at a future date.
Covary says the oversubscription was an indication of South Africa’s appetite for renewable energy, as each tender represented a distinct and separate installation. He recommends that government speedily resolve all legal requirements for locking in successful bidders, and then proceed with the next round of bidding as soon as possible to capitalise on the interest.
He also suggests that government seriously consider increasing its target of 3,725 MW of renewables capacity. The fact that the second round of bidding has attracted nearly three times as much capacity as called for indicates that the 2016 target may be set too low, Covary says.
Asked to comment on the fact that most of the technology specified in the bids is coming from abroad, Covary says it is to be expected but stresses that future bidding rounds must demand higher local content and skills.
This should be a key consideration when negotiating new trade agreements with BRICs or other regions, as it may create conflict between different policy objectives. For example solar water heating installations in South Africa have increased dramatically, with over 180,000 m² installed last year. Unfortunately most of these were imported and at least two long standing manufacturers have closed down.
“Government tasking industry with creating green jobs is one thing; in reality it is very difficult to implement if local content and skills targets are not set and enforced,” he says. Covary also suggests government ring fences any revenue it receives from carbon taxes, and uses it to grow the industry instead of ploughing it into other service delivery areas. The latter, he says, sends the wrong message about the importance of renewable energy and does nothing to support the fledgling industry, which requires financial incentive to spur on further growth.
Furthermore, renegading on the published schedule of electricity price hikes may be politically expedient but it gives rise to market uncertainty, which in turn only serves to kill, or delay, new renewable energy and energy efficiency projects. “Consistency is required, or business will continue to hold off on the large projects that will act as the catalysts for growth in both commercial and domestic markets,” he says.