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South Africa

South Africa

Government forces Eskom to sign PPAs

SOUTH AFRICA: Cautious optimism marks wind-sector reactions to the South African government's 1 September promise to unblock a two-year, 2.38GW backlog of renewables projects, 1.4GW of which is wind power.

Action… Mmamoloko Kubayi took Eskom to task (pic: GovernmentZA)
Action… Mmamoloko Kubayi took Eskom to task (pic: GovernmentZA)

Energy minister Mmamoloko Kubayi said state grid operator Eskom would be forced, by contract, to sign all outstanding power purchase agreements (PPAs) by 28 October.

In return, all developers must renegotiate power sales prices originally made at the end of 2015 in bidding rounds 3.5 and 4.

At face value then, South Africa's wind development is set to restart, albeit with commissioning of pending projects now scheduled for 2021, rather than 2019 as initially envisaged.

Since the government set up its renewables procurement plan, known as REIPPP, in 2011, the country has installed more than 2.8GW of renewables, including nearly 1.5GW of wind power.

But in 2016, following three successful bidding rounds, Eskom refused to sign off PPAs for the 2.38GW of winning bids in rounds 3.5 and 4.

Eskom cited overcapacity resulting from the country's economic downturn and slumping energy demand, although critics suspected the regulator was reserving capacity for coal and nuclear companies.

The South African Wind Energy Association (SAWEA) has welcomed the 28 October PPA deadline as a "signal of government commitment".

Still, the final renegotiated PPA remains the rub. The government has set a price cap of ZAR 770/MWh ($57.81/MWh). In rounds 3.5 and 4, average wind prices came in far lower, at ZAR 622/MWh, though solar PV prices topped the cap.

But "for wind, it's not so much the cap as the renegotiation itself that worries me", a local wind consultant confided. "With its control over grid access, Eskom will leverage prices as low as possible by whatever means."

PPA price qualms aside, South Africa's "economic recovery will bring better tidings" in the long run, the Global Wind Energy Council (GWEC) believes.

Nevertheless, a slowdown is now undeniable, with still no preparation for Round 5, which had originally been planned for 2016 and was to open 1.8GW of new renewables bids to come online after 2019.

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