Johannesburg - Eskom's refusal to sign power purchase agreements was creating uncertainty for foreign investors who wanted to put their money into the country's renewable energy infrastructure, according to UK-based financial risk companies Centre for Economic and Business Research and JC Rathbone Associates (JCRA).
The two firms last week released a white paper that looked into renewable energy in sub-Saharan Africa, with emphasis on South Africa.
Lionel Kruger, the director for sub-Saharan Africa at JCRA, said the country’s Renewable Energy Independent Power Producer Procurement Programme (Reippp) had attracted R193billion of private money so far, but this was at risk of dissipating.
“The Reippp and various other government measures have been a fantastic success and South African renewable energy infrastructure is still an attractive prospect for foreign investors. However, the longer Eskom stalls the less appealing and more risky those opportunities become,” Kruger said.
Chris Yelland, an independent energy analyst, said the delay in signing the agreement already has had a negative effect on the companies that had invested in the sector and meant steps to diversify from Eskom as a monopoly were stymied.
Negative effect
“Eskom argues that continuing with the renewable energy programme has a negative effect on it, so we have to look at the balance of interests in terms of the impact on the economy and foreign investment,” Yelland said.
Khulu Phasiwe, spokesperson for Eskom, said the company was not against funding renewable energy, but only projects that charged 62cents per hour as going above that borders on infringing the Public Finance Management Act. “Since the 2013 load shedding problems, we had to take a position that ensures the sustainability of Eskom. We, therefore, cannot pretend as if our power grid had not stabilised since then. Some of the renewable energy projects have become expensive as Eskom has enough capacity to deliver the energy needs of the country," Phasiwe said.
Earlier this year, Eskom said while it acknowledged the role played by the renewable energy sector in the reduction of load shedding, it had also resulted in a net loss of R9billion to the South African economy last year.
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The company said for the first six months of 2015, it had purchased 2.0 Terawatt hours of wind and solar PV.
However, there has been much disconnect by other stakeholders about the methodology Eskom relied on to come to the net loss figure.
The council for Scientific and Industrial Research had recently come with a methodology quantifying the net benefits of renewable energy.
It calculates the benefits of reduced load shedding, as well as cost savings to Eskom. These benefits are the offset against the total traffic paid to the renewable independent power producers, the results of this are either economic benefit or loss.
Brenda Martin, the chairperson of the South African Renewable Energy Council, said the country needed to look at which energy additions would provide the least incremental increases.
“It is crucial that Eskom sign outstanding PPAs (private-partnership agreements) in order to sustain the policy momentum of Reippp, as it will ensure that the declining price path and related value chain effects can be sustained in the national interest,” Martin said.