Energy Minister Mmamoloko Kubayi recently announced that Eskom will sign the Power Purchase Agreements (PPAs) with Independent Power Producers in October. The announcement comes on the completion of stakeholder engagement between the Department of Energy and the Department of Public Enterprises.

Legal wrangling commences around PPA signingA technical team has been established to resolve the impasse on signing of PPAs between Independent Power Producers and Eskom, but “the matter remains complex and there are no easy solutions to it”, the minister said. The South Africa Photovoltaic Industry Association has welcomed the announcement, saying it will bring investment, secure jobs, and create new jobs and opportunities for communities surrounding projects.

The South African Wind Energy Association (Sawea) also issued a statement welcoming the announcement, saying that industry is relieved now that the date of signing PPAs has been confirmed, but there are some legal loop-holes that the Department of Energy needs to tackle. The main one is the provision that tariffs will be renegotiated to under 77 cents/KWh.

“This condition, which requires tariff negotiating, is illegal in the Renewable Energy Procurement Programme’s rules. Sawea is looking to the minister for guidance as to how this condition will be imposed,” the association said.

Reports indicate that while Eskom has moved from 62c/kWh, only some of the preferred bidders might be able to contract at the new ceiling of 77c/kWh. The South African Renewable Energy Council (Sarec) has therefore obtained a legal opinion. According to Sarec, government is not entitled to renegotiate that tariffs the Department of Energy already agreed upon with bidders.

Minister Kubayi has said the 77c/kWh provision will “greatly assist in reducing the requirements for additional government guarantees that would impact negatively in the current economic climate and constraints in the fiscus”, but has agreed to “meet with all IPPs participants in all bid windows, to discuss issues of concerns from IPPs and for government to give feedback on concerns before the date of signing”.

The minister stated that Eskom will ensure all contracts are in place for signing on 28 October.

“We are dealing with bid window 3.5 and 4 only because they are the ones that remain to be signed. Anything outside of that we are not committing at the moment. These are approximately 26 projects that we are talking about. Other [bid windows] will have to be put on hold,” she said.

Deputy Minister Thembi Majola added that after the conclusion of bid window 3.5 and 4, the department will embark on a review process. “We do need to take time to look at the long-time implications because it has been a subsidised programme that has had a direct impact in terms of affordability, so we will be reviewing,” she said.

Image credit: http://www.sanews.gov.za/multimedia/minister-energy-mmamoloko-kubayi-briefs-media-outcomes-court-judgement

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