Green Light for Eskom and IPPs Deals

Eskom, to sign outstanding power purchase agreements (PPAs) with independent power producers (IPPs).
South African Minister of Public Enterprises, Lynne Brown (SowetanLive)

South Africa – The South African Minister of Public Enterprises, Lynne Brown, recently gave an approval for national power utility, Eskom, to sign outstanding power purchase agreements (PPAs) with independent power producers (IPPs).

“The conclusion of the Power Purchase Agreements (PPAs) to enable the implementation of the outstanding projects under bid windows 3.5, 4 and 4.5 of the Renewable Energy Independent Power Producers Programme (REIPPP) is critical to implementation of the national energy policy as articulated in the Integrated Resource Plan of 2010,” Minister Brown said in a statement.

In a move that would lead to the resuscitation of the government driven REIPPP, Eskom had in January 2018 applied to the Minister for a go-ahead to purchase additional energy.

The REIPPP programme had essentially come to a standstill since 2016 with Eskom refusing to sign PPAs with a combined investment of around R60bn from 27 IPPs. The national power utility was then citing high cost worries and the fact that the utility was then having an electricity generation overcapacity.

“South Africans have reason to feel very proud of the progress the country has made adding renewable energy to the energy mix. There are risks to Eskom’s financial and operational stability in the medium term, among others, that must be mitigated. We are committed to reducing our carbon footprint,” Minister Brown said.

“I have requested Eskom to work expediently to implement the decision and avoid further delays. I have also written to the Ministers of Energy and Finance requesting that we discuss how to address Eskom’s genuine concerns through expediting a revision of the Government Support Framework Agreement,” Minister Brown added.

Minister Brown said finalising amendments to the National Energy Regulation Act would enable Eskom and the National Energy Regulator of South Africa (NERSA) to efficiently and effectively resolve deadlocks relating to tariffs and regulatory frameworks by including a pre-determined appeal mechanism.

Welcoming the announcement by Minister Brown, the South African Wind Energy Association (SAWEA) said it was relieved that the 27 renewable energy projects, which include wind, solar PV and CSP should soon be able to proceed toward construction so that South Africa’s internationally acclaimed REIPPP can continue to deliver on-budget renewable power along with social and economic benefits in rural areas.

“We are sure that the many rural communities surrounding prospective wind farms who have been waiting for the development benefits associated with power plant construction, and the thousands of South Africans employed by the Industry are certain to be as relieved as we are,” commented Brenda Martin, CEO of SAWEA.

SAWEA also pointed out that over the past two years, the SA renewable energy industry has operated with extensive uncertainty. With this final step now achieved, there is hope that the country’s renewable procurement programme will soon be back on track so that the many benefits to rural communities can be realised, much-needed jobs can be created, and so that investor confidence can be regained.

Minister Brown’s approval is the last step in the process and all that is now required is for all affected parties to set a mutually suitable date for signing the 27 power purchase agreements, the organisation explained.

“Over the next few weeks, each party will need to ensure that their documentation is current. Once PPAs are signed, IPPs will move ahead according to their implementation agreements’ timelines,” Martin explained further.