The age of green power has finally arrived in South Africa and unlikely candidate Eskom is paving the way for the alternative energy industry.
Eskom, because it would be bidding with public money, was excluded from the department of energy’s renewable energy procurement process. The procurement programme for independent power producers (IPPs), a two-phase tender system, requires bidders to meet a range of requirements before being evaluated on bid price and economic-development objectives. The objective is for IPPs to produce 3745 megawatts (MW) of renewable energy by 2016.
Although unable to bid, Eskom is moving quickly to build South Africa’s first large-scale wind and solar generation plants. The African Development Bank signed loan agreements worth $365-million with Eskom last week, which were welcomed by the industry and seen as a major push forward.
Eskom spokesperson Hilary Joffe said the money would go towards Eskom’s 100MW wind project at Sere in the Western Cape and its 100MW concentrating solar power project near Upington in the Northern Cape. Eskom said it planned to begin construction of the wind project early next year.
The new funding comprises $265-million from the African Development Bank’s own resources and $100-million from the Clean Technology Fund.
Eskom said the bank financing was part of a broader funding plan for its renewable projects, which included sourcing from other development finance agencies.
Joffe said Eskom could not disclose the pricing of renewable power for consumers but said that the National Energy Regulator of South Africa (Nersa) set a revenue requirement that took into account Eskom’s operational costs and an allowed rate of return on its assets. Joffe said there would not be separate prices for the solar or wind plants.
‘IPP and co-generation’
In the multi-year price determination (electricity tariffs set by Nersa), Eskom was allowed revenue for “IPP and co-generation”. R2.3-billion was allocated for 2010/2011, R4.2-billion for 2011/2012 and R5.8-billion for 2012/2013.
Joffe said the money for renewables was set aside for Eskom to buy in power from IPPs. The costs of Eskom’s own wind and solar projects were included in Eskom’s capital budget (along with all its other projects), which was submitted to the regulator.
Industry players are encouraged by Eskom’s progress but will be watching developments closely. Eskom, with its wind and solar projects, could be seen to rival the department of energy’s procurement programme, but Kilian Hageman, the director of G7 Renewable Energies, specialists in wind energy, said that would not be the case. He said Eskom’s renewable projects presented no competition to independent producers and were complementary to the procurement process.
He said the development was exceptionally positive for the industry as a whole and Eskom would definitely play a major role in the industry — “mainly because it will create a knock-on effect”, he said. “It will get the supply chain going.”
Suppliers would have to gear up quickly and it would pave the way for other alternative energy generators.
Peet du Plooy, the programme manager for sustainable growth at Tips (trade and industry policy strategies), said he didn’t think the loan would put Eskom in the lead with renewables, as the IPP procurement programme was well advanced and would account for the majority of renewable power. Certainly, as far as wind went, Eskom was not that advanced with its 100MW plant — the department’s integrated resources plan aimed for a total of 8.4 gigawatts (GW).
But Eskom’s concentrating solar power project was something to get excited about, Du Plooy said — the utility was planning to build the biggest in the world.
Part of the African Development Bank loan will go towards this project. “Some funding is in place,” said Joffe. “Additional funding is still being tied up, all of which is development finance.” Eskom hoped to finalise the project design by 2013.
Du Plooy said the integrated resources plan had to be changed to allocate larger amounts to concentrating solar power, which currently is 1GW. The technology is important as it has a storage facility and that was a key element in the viability of renewable energy sources.