Eskom’s refusal to sign deals raises alarm bells

ESKOM’S refusal to sign 37 outstanding power purchase agreements (PPAs) with renewables independent power producers (IPPs), is now also raising alarm bells among conventional technology developers, such as gas, coal and cogeneration, about potential delays in the closing of their projects.

This is according to the South African Independent Power Producers Association (SAIPPA), who recently said that the difficulties renewable energy IPPs were experiencing with getting their PPAs signed by Eskom, in what so far has been a “well-oiled procurement programme”, would “no doubt” start to worry conventional technology developers and IPPs.

“Gas, coal and cogeneration project developers and IPPs now also need to be concerned about potential delays in closing their projects due to Eskom’s reluctance to sign the final PPA.

“This uncertainty in the nascent IPP sector not only affects new power projects being developed and bid into the DOE Procurement Programmes, but also affects existing pioneer IPPs that have been contributing to the energy supply of South Africa over the past few years,” a SAIPPA representative, speaking on condition of anonymity, said.

“It appears likely that some of these early pioneering IPPs and cogenerators that contributed to grid stability and electricity supply over the past period of constrained Eskom electricity supply will be ‘put out to pasture’ in the near term.

“Should the relevant Short Term Power Purchase Agreements not be renewed for these existing IPPs by the end of March 2017, it will be another blow to aspirant IPPs and this nascent but critical sector.”

Eskom’s previous CEO, Brian Molefe, and its current interim CEO, Matshele Koko, have both refused to sign power purchase agreements with 37 preferred renewable power bidders.

These agreements fall within the pre-construction phase after a duly fulfilled and hugely successful government-led renewable energy power producer procurement programme (REIPPPP).

“Such non-compliance with duly undertaken power procurement has consequences beyond the renewable energy industry in that side-stepping policy introduces risk for other independent power producers currently preparing to bid for the Department of Energy’s already issued or forthcoming requests for proposals,” explained Brenda Martin, chairwoman of the South African Renewable Energy Council (Sarec).

“Following sustained pressure from the industry, the Department of Energy, National Treasury and even the Presidency, Koko backpedaled somewhat when he stated ‘let us first sign the 62c/kWh bids’,” Martin said.