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South Africa to prioritise Power Purchase Agreements for IPPs

Enoch Godongwana,
Public Enterprises
Deputy Minister
16 March 2010 – The South African government’s commitment to "put an end to the chapter" of independent power producers (IPPs) struggling to conclude power purchase agreements (PPAs) was reaffirmed by Public Enterprises Deputy Minister Enoch Godongwana this week.

According to Godongwana, the South African government cannot leave that issue to Eskom any longer.  He admitted that the government had made a mistake in 1998 by proposing the introduction of IPPs, without much follow up. "We didn’t take the whistle from Eskom. Eskom remained a player and a referee … We want to settle that matter as soon as possible," said Godongwana.

He stated that, through the Interministerial Committee (IMC) on Energy, which was a directive from President Jacob Zuma, factors such as the Independent System Market Operator, and the PPAs were being prioritised and would be addressed in due course.

Godongwana said that South Africa would need some 50 000 MW of additional power generation capacity over the next 20 years, to replace old ageing infrastructure, as well as to have increased capacity for development. He noted that this would include a diversity of energy sources.

The Department of Energy (DoE) stated that, within the South African context, the renewable energy sector had been identified as a key ‘business unusual’ growth sector.

The DoE further noted that a midterm review of the renewable energy policy and target was currently under way, and was expected to produce a revised White paper and targets by December 2010.

"Policies and measures are being put in place to ensure that there is a more ambitious national target for renewable energy that is also attainable," said Godongwana on behalf of Energy Minister Dipuo Peters.

The IMC was also tasked with responding holistically to the challenges relating to integrated resource planning (IRP). The DoE said that the second integrated resources plan, which was expected to be released by June 2010, would reaffirm the current renewable energy target of 10 000 GWh by 2013. It would also address issues around the participation of IPPs, as well as shielding the poor from the impact of increasing electricity prices.

The plan also gives effect to the implementation of the energy efficiency and demand side management through a financial incentive, and the installation of one-million solar water heaters, which was a commitment made by the DoE in 2009.

The National Energy Regulator of South Africa recently indicated that the country would have selected the first renewable energy IPPs to assist the country meeting its target, by the third quarter of 2010.

The lack of skills capacity in South Africa with regard to renewable energy technologies was highlighted by Godongwana as a serious potential challenge which should be tackled.