Signing of PPAs removes uncertainty, creates job opportunities



Jeff Radebe

Speaking at the signing of the outstanding power-producer’s agreements (PPAs) in Pretoria recently, the minister of energy, Jeff Radebe, said that South Africa has passed the period of uncertainty, not only for the renewable energy industry, but also for private sector investment in the energy sector. Radebe said that the procurement of 27 new projects is the biggest IPP procurement by the Department of Energy (DoE) to date, representing a total of R56-billion of investment and about 2300 MW of generation capacity to be added to the grid over the next over years.

The minister said that the Renewable Energy Independent Power Producers’ Procurement Programme (REIPPPP) delivers real economic growth through direct investment, creation of jobs and stimulates a green economy as per the Green Economy Accord signed in November 2011 between labour, business, government and civil society.

According to Radebe, the procurement of these 27 projects will result in the creation of 58 000 new jobs for South Africans, mostly for the youth. Most of these jobs will be created during the construction period and entail the utilisation of the workforce who live near the projects, and other jobs will become available across the entire value chain with an additional 1500 jobs possible in the manufacturing sector.

The localisation potential of these new projects is substantial. The DoE estimates that around 2,8-million solar PV modules, 600 inverters and 385 transformers as well as roughly 500 wind towers and turbines, will be needed.

South African manufacturers stand to benefit from this huge demand given the local content commitments made by the IPPs. Also, opportunities for suppliers of local goods and services will become available, including the opportunity to transport these huge blades from the ports of entry to the specific wind farms.

Radebe said that the REIPPPP is the only programme which progressively enables mandatory participation by black South Africans in electricity generation. In Bid Windows 3.5 and 4, South Africans own the majority share of 57,8% (R11,9-billion) in the project companies. Of this shareholding, an average of 64,2% (R7,64-billion) is held by black shareholders. The balance of the shareholding is held by institutional investors such as PIC and Old Mutual, as well as state-owned companies.

As in most of the bid rounds, the Northern Cape will receive the majority of the investment with 15 new wind, solar PV and concentrated solar power (CSP) projects; the Eastern Cape will have four new wind projects; The North West Province will also have four new solar PV projects; the Western Cape will add another two wind projects to its portfolio, the Free State will have a small hydro project, and Mpumalanga will have its first IPP project, a biomass plant.

The renewable energy programme confirms South Africa’s commitment, together with 195 other countries around the world, to the Paris Agreement for the reduction of CO2 emissions worldwide.

Generating electricity using renewable energy is an efficient way to minimise water consumption in the energy sector. These projects, once fully operational and at maximum capacity, will save 9,6- million kl of water per annum, compared to similar MWh of electricity from fossil fuels. This is equivalent to the water needs of more than 1,2-million people a year.

Nersa, as the energy regulator, will continue to play a critical role in ensuring justifiable tariffs to the consumers, while allowing investors in electricity generation to receive a fair return on investment, the minister said, although indications are that prices will continue to decrease in future rounds as demonstrated by recent solar PV and wind prices elsewhere in the world.

These lower prices from the renewable energy projects will provide the much-needed relief to indigent households under the current economic conditions, he added.

Socio-economic conditions and government objectives have changed in South Africa since the start of the procurement process of Bid Windows 3.5 and 4 in 2013/14. Although very late in the procurement process, the DoE has challenged private partners to deliver even more value for money through a request to enhance socio-economic transformation opportunities for black South African participation in these projects.

The minister said that there are still other projects in the pipeline to be signed. The DoE is considering an expedited bid window of 1800 MW (worth R63,4-billion) which is awaiting an announcement, depending on its affordability, prices, economics and value for money. This could contribute another 80 000 jobs within the foreseeable future, he said.

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