Eskom instructed to sign outstanding PPAs

South Africa’s minister of Public Enterprises, Lynne Brown, has given state-owned utility Eskom the go ahead to resume the signing of outstanding Power Purchase Agreements (PPAs) with renewable independent power producers (IPPs).

The PPAs have been kept on ice since 2016, resulting in an estimated R58 billion ($4.4 billion) of stalled investment – an estimated 13,000 construction jobs lost and billions of Rands of local economic development spend foregone. Read more…

The delay in government’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), was according to the utility, due to serious liquidity issues. Read more…

Brown said in a statement: “The conclusion of the PPAs to enable the implementation of the outstanding projects under bid windows 3.5, 4 and 4.5 of the REIPPPP is critical to implementation of the national energy policy as articulated in the Integrated Resource Plan of 2010.”

IPPs to proceed with work

The green light brings restored hoped to the 27 renewable energy projects – including wind, solar photovoltaic (PV) and CSP – as they can soon commence with construction.

In response to Minister Brown’s approval, CEO of The South African Wind Energy Association (SAWEA), Brenda Martin, stressed that now all affected parties are required to set a mutually suitable date for signing the 27 PPAs.

Martin explained the process:  “Over the next few weeks, each party will need to ensure that their documentation is current. Once PPAs are signed, IPPs will move ahead according to their implementation agreements’ timelines.”

SAWEA notes industry achievements

Up until the time of the impasse, the REIPPP programme was internally acclaimed and regarded as one of the most ambitious and successful Public-Private-Partnership that the country has ever undertaken.

The programme saw over R20 billion ($1.64 billion) being committed to socio-economic development, the majority of which goes to empowering South Africa’s rural communities.

It has resulted in:

  • A 59% decline in the actual average tariffs for wind energy from the first bidding window in 2011 (2011 to 2015). Reasons for price decline: drop of technological component prices; technological advancements in wind harvesting; strong competition for low wind energy costs by IPPs.
  • The 2016 tariff for wind energy is almost 40% cheaper than the one for baseload coal.
  • The price assumptions applied in the IRP 2016 are higher than actual REI4P tariffs.
  • REI4P has resulted in over R20 billion [$1.6 billion] being committed by IPPs over 20 years to socio-economic development, with a strong focus on education, health, skills dvelpment, predominantly within a 50km radius of the power plants.