‘Eskom misled us for nine years’

The utility and the energy department has ditched an independent power producers programme

Bidders who participated in the Small Renewable Energy Independent Power Producer Programme plan to take the department of mineral resources and energy and Eskom to court over the termination of the programme.

They say that for nine years Eskom and the mineral resources and energy department led them to believe the programme would be approved and they would produce power for Eskom.

The department and Eskom introduced the programme to open the market to emerging and smallerscale independent power producers (IPPS). They generally struggled to compete in the larger Renewable Energy Independent Power Producer Procurement Programme.

The programme was launched in 2013 for projects of between one and five megawatts for biomass, biogas, landfill technologies, wind and solar photovoltaic (PV) projects.

This is in line with a 2020 Government Gazette published by the Presidential Infrastructure Coordinating Commission, which listed infrastructure programmes that had been designated as strategic integrated projects in line with the Infrastructure Development Act. A total of 20 projects were identified as preferred bidders in 2013.

In preparation for the projects, bidders rented land where their projects would take place, incurring charges for nine years.

Rudi Kriese, the head of the Busby Renewables Consortium, said they want the department to reimburse them for the losses they incurred while being “strung along’’ for years.

“We lost a lot of money from consulting with firms that were provided as advisers. There were many consultants that we had to pay to see in the process of shortlisting. Every time we went to the IPP office to ask for an update on when the project would be approved, they’d tell us the date has been delayed.

“They kept our hopes high for nothing. In 2020, we went to what they called ‘value for money’ evaluation because Eskom had reservations about the costs and as a result, all the developers had to reduce the rates of the [solar] PV and biomass projects which they would sell power to the [department] and Eskom,” he said.

Nkosi Ncube, of Contrarians, who was also selected as a preferred bidder, echoed the same sentiments. He believes the department’s communication with the smaller producers, the IPP office and Eskom was extremely limited after 2018.

“We incurred a lot of loss. Some instances, these costs included securing updated grid connection budget quotations from Eskom because you must rent land where you will be able to work from to produce power for Eskom. Remember that all the projects had to pass through environmental, technical and commercial thresholds that were identical to those faced by the Bid Window Four bidders, whose Power Purchase Agreements were eventually signed by Eskom in 2018,” he said.

The department has said it will not refund any projects to any bidder. “Projects will not be refunded. The Request for Proposal is clear that there are costs involved in the preparation of projects that are at the risk of the project companies.”

After being selected as preferred bidders, Eskom refused to sign purchased power agreements because it had an oversupply of electricity.

In 2017, the utility refused to issue final budget quotes to preferred bidders in that round of the renewable energy power programme. Consequently, in 2018, when the government finally signed the outstanding power agreements for the projects concluded under this window of the renewable energy power programme, the small power producers’ programme was not included.

Ncube said South Africa has been in a power crisis for years but is not acting to fix the problem. “We are here to provide the services but the government is going the opposite direction. From our consultations we can see that [the department] wants the projects but Eskom says no.”

Johann Ernst, the chief executive of Busby Sawmills, said the department’s actions were questionable because “they said it has to shorten the period and take away the red tape to accelerate the projects but the projects that are already developed and are ready, are being cancelled.”

In November, the department told the small preferred bidders that the programme had been stopped based on a decision by Eskom’s board.

The small power producers said they are willing to continue talks with Eskom, the department and the IPP office to have the programme reopened but, if the decision to not open the programme is upheld, they will go to court.

‘Every time we went to the IPP office to ask for an update ... they’d tell us the date has been delayed’