Eskom to sign up for renewable energy

THE long-awaited signing of power purchase agreements between Eskom and renewable energy companies may finally materialise this month after a call by President Jacob Zuma in his state of the nation address put pressure on Eskom to finalise the deals.

Juwi Renewable Energies is one of the companies waiting for round four of the procurement programmes to be finalised so it can start on its 5MW solar photovoltaic project and 138MW wind project. Eskom has given independent providers until April 11 to submit documents confirming they would be ready to start developing projects.

There are 37 outstanding agreements awaiting Eskom’s signature.

Since last July Eskom has refused to sign agreements with independent power producers, saying they cost it a fortune and it considered renewables a passthrough cost that must be recovered in full from the tariff.

In February, the National Energy Regulator of South Africa granted Eskom a 2.2% tariff hike, leaving the power utility with R10-billion to recover (although the regulatory framework makes provision for Eskom to appeal).

Minister of Public Enterprises Lynne Brown said last month that the 2.2% increase posed a significant challenge to Eskom’s revenue and its ability to meet its debt-repayment obligations.

However, Eskom said discussions were continuing with all relevant stakeholders without any commitment date yet.

Juwi MD Greg Austin said if April 11 came without Eskom signing any deals, the company would not suffer much because it had other private businesses it was working on in South Africa and sub-Saharan Africa.

For the projects to reach financial close on April 11 requires a budget quote from Eskom, which would enable producers to finalise loans to fund their projects.

Eskom’s commitment to signing the agreements comes when the country is experiencing weak electricity demand and surplus electricity.

To cover the costs of the deals, Eskom said recently it would shut down five of its power stations whose lives were to be extended. However, Brown said a socioeconomic impact study should be conducted first.

Closing Kriel, Grootvlei, Komati, Hendrina and Camden power stations would result in 6 000 or more workers losing their jobs – and the National Union of Mineworkers said the job losses would in fact be 40 000 because of the impact on other service providers to the power stations, such as transport companies.

The NUM has called on government to review the decision to sign the agreements. “As the NUM we are not convinced that implementing IPPs in South Africa is in the best interest of the country and the taxpayer as our research shows renewables have failed in other countries, like Germany,” it said.

According to the renewable energy council, direct job creation in this sector is around 15 000.

Frank Campbell, of Eaton, a company that provides electrical systems and technology, said given the current surplus and the economic growth potential, SA had an opportunity to be a net exporter of electricity to other countries in the region.