Long-delayed South African power deals signed

SOUTH AFRICA: State utility Eskom has signed the last of 27 long-delayed power purchase agreements (PPAs), according to energy minister Jeff Radebe.

Energy minister Jeff Radebe announced the last of the 27 outstanding PPAs had been signed (pic: Minister of Energy / Twitter)

The contracts cover 2.3GW of renewable energy projects, with wind accounting for 1.4GW of this total.

Developers had won allocations in tenders carried out under South Africa’s renewables procurement plan (REIPP) in April 2015.

But Eskom delayed signing the power deals, citing overcapacity resulting from the country’s economic downturn and slumping energy demand.

Critics, however, suspected the regulator was reserving capacity for coal and nuclear companies.

On 4 April 2018, South African minster of energy Jeff Radebe, appointed by new prime minister Cyril Ramaphosa in February, said all of the outstanding contracts had been signed. 

The South African Wind Energy Association (SAWEA) stated the renewable energy industry could now add to the country’s economy "through rural development, job creation, advancing the transformation agenda and attracting further foreign direct investment".

Brenda Martin, CEO of SAWEA, said: "We welcome the Department of Energy’s determination to unlock rural development and much-needed jobs particularly in the construction and manufacturing sectors, to provide assurance to the employees of the industry and to regain investor confidence."

Renewable energy projects covered by the PPAs include solar PV and CSP (concentrated solar power), while wind power accounts for 1.4GW of the 2.3GW total, SAWEA had previously stated.

The bulk of these projects are expected to be constructed in the Northern Cape, which has more than 60% of the preferred bid allocation, while the Eastern Cape has 19%. The remaining projects are to be located in the North West (10%), Western Cape (6%) and Mpumalanga (1%) regions.

In a briefing note published prior to the signing of the PPAs, SAWEA claimed that the agreements remaining unsigned had delayed investments worth ZAR58.5 billion (US$4.94 billion), the creation of more than 13,000 construction jobs and 2,000 operations jobs. SAWEA added the delayed benefits came "at a time when the country has desperately needed an economic stimulus".

The organisation added: "Renewable industry employees across the value chain, at power plants, construction companies, manufacturing facilities, service providers and other related firms have been retrenched and many local firms continue to face significant financial losses due to the delay."

The South African wind industry’s hopes of the outstanding PPAs being signed had been repeatedly raised and then crushed.

After his state of the union address was delayed in February 2017, former South African president Jacob Zuma announced he would force public utility and grid operator Eskom to sign the contracts.

A month later, Eskom told Windpower Monthly it had approved the backlog of power deals — but the concluded agreements were not forthcoming.

Later in the year, former energy minister Mmamoloko Kubayi said Eskom would be contractually forced to sign all outstanding power agreements by 28 October.