Solving the electricity crisis is necessary if we are to realise the potential of our economy (Waldo Swiegers/ Bloomberg/ Getty-Images)
Bidders who participated in the Small Renewable Energy Independent Power Producer Programme plan to take the department of minerals resource and energy (DMRE) and Eskom to court over the termination of the programme.
They say that for nine years Eskom and the department led them to believe the programme would be approved and they would have an opportunity to start producing power for Eskom.
The department and Eskom introduced the programme to open the market to emerging and smaller-scale South African independent power producers (IPPs). These producers generally struggled to compete in the larger Renewable Energy Independent Power Producer Procurement Programme.
With South Africa’s energy crisis, power producers were invited to bid to help Eskom maintain its power until 2030.
The programme was launched in 2013 for projects between one and five megawatts for biomass, biogas, landfill technologies, wind and solar photovoltaic (PV) projects.
This is in line with a 2020 government gazette published by the Presidential Infrastructure Coordinating Commission, which listed infrastructure programmes that had been officially designated as Strategic Integrated Projects in line with the Infrastructure Development Act. A total of 20 projects were identified as preferred bids in 2013 in the smaller renewable energy power programme.
In preparation for the projects, bidders rented out land where their projects would take place, incurring charges for nine years.
Rudi Kriese, the head of the Busby Renewables Consortium, who was selected as a preferred bidder in the programme, said they want the department to reimburse them for the losses they incurred while being “strung along” for years.
“We lost a lot of money from consulting with firms that were provided as advisers. There were many consultants that we had to pay to see in the process of shortlisting. Every time we went to the IPP office to ask for an update on when the project would be approved, they’d tell us the date has been delayed.
“They kept our hopes high for nothing. In 2020, we went to what they called ‘value for money’ evaluation because Eskom had reservations about the costs and as a result, all the developers had to reduce the rates of the [solar] PV and biomass projects which they would sell power to the DMRE and Eskom,” he said.
According to the smaller companies, the programme is being replaced so that bigger companies will be able to produce more power to Eskom.
“Eskom should have told us that they had no intentions for us because I have insider information that there is a budget for the projects that we had initially bidded for, but obviously they want to give these projects to bigger companies that bring money. What we have learnt is that if your pockets are not deep enough, the government will not listen to you,” they said.
Nkosi Ncube, the owner and managing director of Contrarians, who was also selected as a preferred bidder, echoed the same sentiments. He believes the department’s communication with the smaller producers, the IPP office and Eskom was extremely limited after 2018.
“We incurred a lot of loss. Some instances, these costs included securing updated grid connection budget quotations from Eskom because you must rent land where you will be able to work from to produce power for Eskom. Remember that all the projects had to pass through environmental, technical and commercial thresholds that were identical to those faced by the Bid Window 4 bidders, whose Power Purchase Agreements were eventually signed by Eskom in 2018. It’s not like we were just sitting, we were waiting for the department’s go ahead all this time,” he said.
Kriese added that the department told the developers of the small renewable energy programme that it had been negotiating with Eskom to reopen the programme, and this had kept their hopes up.
The department has said it will not refund any projects to any bidder.
“Projects will not be refunded. The Request for Proposal is clear that there are costs involved in the preparation of projects that are at the risk of the project companies,” the department said in a written response.
After being selected as preferred bidders for the small renewable energy programme, Eskom refused to sign purchased power agreements because it said it had an oversupply of electricity and would be paying for electricity it did not need.
In 2017, the utility refused to issue final budget quotes to preferred bidders in that round of the renewable energy power programme.
Consequently, in 2018, when the government finally signed the outstanding power agreements for the projects concluded under this window of the renewable energy power programme, the small power producers’ programme was not included.
Ncube said it was ironic that South Africa has been in a power crisis for years but is not acting to fix the problem.
“We are here to provide the services but the government is going the opposite direction. Between the departments themselves, there is a gap because, from the looks of it, Eskom reports to no one, because the DMRE cannot tell them anything. From our consultations we can see that DMRE wants the projects, but Eskom says no,” he said.
He believed the cancellation of the programme meant the department was not willing to empower energy producers because this would give the smaller companies experience to bid for bigger projects.
Johann Ernst, the chief executive of Busby Sawmills, said the department’s actions were questionable because “they said it has to shorten the period and take away the red tape to accelerate the projects but the projects that are already developed and are ready are being cancelled,” he said.
In November last year, the department informed the small preferred bidders that the programme had been terminated based on a decision by Eskom’s board.
The department said it had “communicated to the preferred bidders on 21 October 2021 that it had received formal communication from the Eskom board confirming that it has not approved the 20 projects appointed under the Small Renewable Energy Independent Power Producer Procurement [REIPPPP] Bid Windows one and two in 2015 and 2016”.
“The Eskom board officially communicated that it did not approve the conclusion of the purchase agreements of the 20 projects and, as such, requested the cancellation of the programme. Eskom board further encouraged the current investors in the Small REIPPPP Projects to find alternative buyers for the energy from their projects, in view of recent policy changes announced by the government around the lifting of licensing requirements.”
The department said it is dependent on Eskom’s board to approve power agreements because it would buy the energy.
“Without such an approval, the department could not further pursue the preferred bidders,” it said.
The small power producers said they are willing to continue talks with Eskom, the department and the IPP office to have the programme reopened but, if the decision to not open the programme is upheld, they will go to court.
[/membership]