JOHANNESBURG - South
African programs to add coal and gas power generation from independent
providers should wait until policies are updated and the nation’s future needs
are clearer, said Energy Minister Mmamaloko Kubayi.
The government is
also seeking a “middle ground” with developers in a program to add
renewable-energy projects, she said in a phone interview Tuesday. Kubayi
announced earlier this month that the long-delayed contracts must be signed by
the end of October, but not before pricing was renegotiated to make the deals
more attractive to state-owned power utility Eskom Holdings SOC Ltd.
South Africa expanded the so-called independent
power-producer programs to diversify its energy mix and ease the burden on Eskom,
which was forced to implement rolling blackouts in 2015 after seven years of
shortages hindered economic growth. However, the country now has surplus
capacity after growth in demand stalled and more units from Eskom’s new coal
plants came online.
“Let’s look at
how much capacity do we need, and when,” Kubayi said. The calculations should
include economic growth estimates and determinations of how much generation is
required from each technology, she said.
The gas-to-power
program included plans for about 3,000 megawatts of capacity from proposed
plants on South Africa’s coast, the department said in October last year. Its
coal program was designed to add 2,500 megawatts of capacity.
South Africa needs to conclude the revision of its
Integrated Energy Plan and Integrated Resource Plan, which set long-term
policy, before moving ahead with additional programs to procure electricity
from gas and coal, Kubayi said.
Can’t Proceed
“For those, we
can’t proceed right now,” she said.
While the
country’s program to add renewable energy from private developers has drawn
more than 200 billion rand ($15 billion) of investment, the most recent bidding
rounds have stalled as Eskom refused to sign new power-purchase contracts. While developers
welcomed Kubayi’s announcement on Sept. 1 that the deals would be signed by the
end of October, industry lobby groups have questioned her comments that pricing
must be renegotiated. South Africa’s cabinet and Eskom recommended a maximum
price of 0.77 rand per kilowatt-hour.
Bidders will need
to consider the legal, financial, and credit-risk implications on their
projects if deals are renegotiated, according to the South Africa
Photovoltaic Industry Association.
Setting a price
ceiling on the renewable projects “actually removes all of the legitimacy of
that program,” said Niveshen Govender, program manager for Sapvia. “It’s become
actually difficult to understand where we’re moving towards.”
It’s also unclear
how the recommended price cap was settled on, said the South African Wind
Energy Association.
“Undertaking
negotiation after a duly concluded procurement process goes against South
Africa’s procurement rules,” association Chief Executive Officer Brenda Martin
said in an emailed statement. “We would hate to think that the extended delay
and related job losses are set to continue for much longer, on the basis of an
unachievable target.”
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About 20 of the
projects that the government plans to renegotiate can be completed for below
the 0.77 rand level, Kubayi said. She said she isn’t biased for or against any
particular type of generation.
While the
government “seems to be in its legal rights to stipulate a price cap,” the
uncertainty may deter investors in the future, Jason Harlan, CEO of Fieldstone
Africa, a Johannesburg-based, energy-focused investment bank, said in an
emailed reply to questions.