The Independent Power Producer office, responsible for the government’s shining success story — the renewable IPP programme — is to become a subsidiary of the Central Energy Fund (CEF), new Energy Minister Mmamoloko Kubayi announced on Friday.
The programme attracted R196bn in investment between 2011 and 2015, when it stalled after Eskom opposed the signing of further power purchase agreements with producers.
It had, however, been criticised for its failure to create significant black participation at ownership level.
The IPP office, which was run by widely respected public finance expert Karen Breytenbach, enjoyed a large degree of autonomy and independence. Part of the success of the programme had been its transparency and investor confidence in the contracting process that the office established.
Although it was part of the Department of Energy, the office was housed at the Development Bank of SA, which funded its starting up. Since then it has been financed by a 1% levy on successful projects. In her maiden budget speech on Friday, Kubayi said that "the office would move to operate under the CEF group". The CEF group is also to undergo restructuring.
Kubayi commented on the potential of the renewable IPP programme to change ownership patterns in the economy. "The IPP remains one of the critical tools to achieve radical economic transformation…. We need to look at how we can best assist SMMEs [small-, medium and micro-enterprises] that are interested in participating in this programme. We will engage the Treasury to ensure the guarantees we sign are for securing and supporting the participation of SMMES." The Treasury guarantees the power purchase agreements, through Eskom. But since July 2016 Eskom has refused to sign agreements even for approved projects, on the grounds it has excess capacity.
Industry players responded cautiously to the announcement.
Mark Pickering, director of the South African Renewable Energy Council, said while it was premature to pronounce on the implications there was "concern" that what had been an effective and functioning unit of government could be affected by "the poor governance history of the CEF".
Davin Chown, chair of the South African Photovoltaic Industry Association welcomed Kubayi’s recommitment to the programme. "We don’t know what the implications are. What is more important for us [than the move] is to get a clearer sense of what the government’s long-term vision for the industry is … it’s also an absolute priority to get the outstanding bids approved by Eskom," he said.
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