Thomas Garner, chair of the South African Independent Power Producers Association, says government red tape is blocking the quickest solution to the country’s unsustainable load-shedding crisis.
“There’s 5,000MW to 10,000MW of plant that could be built in the next two years if IPPs [independent power producers] could get power purchase agreements signed with private off-takers.” And that, he says, is a “challenge”.
“The solution is that we should be allowed to build plant using the merchant plant model without signing PPAs [power purchase agreements]. We need to be able to put those electrons into the grid with different private off-takers taking bundles of that electricity for themselves without having to sign PPAs.”
Without it being shown PPAs the National Energy Regulator of SA (Nersa) won’t license IPPs to build plants. It’s a cumbersome, time-consuming process.
Add private sector procurement processes and it takes months and sometimes years to get to a signed PPA, which is part of the documentation Nersa needs for licensing or registration, Garner says.
“If I had a 100MW wind plant up and running now that I didn’t have a PPA for, if I could switch it on and companies could just pay for the electricity, there’s a lot of companies that would be doing this.
“But now you need to go through a cumbersome procurement process where you need to sign a 15- or 20-year PPA, and only then can you build your plant.”
This is delaying what should be a national imperative, to get SA out of its economically ruinous load-shedding crisis by bringing as much new capacity into play as quickly as possible. If accelerating this process doesn’t suit the agenda of energy minister Gwede Mantashe, a determined champion of fossil fuels, then “Nersa must grow a backbone and say, 'We are a regulator and a regulator has a different role to play from the policymakers'," Garner says.
“Nersa needs to step up and say, ‘In this new market where we have these massive shortages and we can’t build new plant, what should we do as the regulator to enable the market?’ And they’re not doing that.”
There's no policy consistency, the messaging is mixed, the industry doesn't know what direction we want to take in SA.
— Thomas Garner, chair of the South African Independent Power Producers Association
It would be a game-changer if they did, he says.
“The whole thing of having to have a long-term PPA as part of the stuff you need to submit to Nersa for a licence is standing in the way of a quick solution to the load-shedding crisis.”
The South African power market can’t adequately address the crisis the country is in because for the past 10 years it was protected by the regulator and the government to ensure that the private sector could not freely access the energy industry, he says. “They wanted to protect it for the state to play in.”
IPPs were locked out for years after Eskom stopped signing PPAs with them. As a result, the liberalisation of the energy market is only starting to happen now.
“And it’s happening in an unplanned way because the government didn’t plan for it. They’ve been the big obstacle for the last five years.”
Having different factions in the ANC involved is not helping. “President Ramaphosa says we need to go to a net zero [carbon emissions] future. The same day Mantashe says we need to build more coal-fired power.
“There's no policy consistency, the messaging is mixed, the industry doesn't know what direction we want to take in South Africa. That just creates havoc and chaos and no certainty for investment.”
The number of months it would take to build a 100MW independent power producer plant after financial closure has been reached.
— IN NUMBERS: 18
When Mantashe became energy minister in May 2019 he fired the world-class head of the IPP office, Karen Breytenbach, who Garner suspects was moving too fast for him. This was devastating for the renewable energy procurement programme, which is still suffering the consequences “because Mantashe is driving a different agenda than the one prescribed by cabinet in terms of a net zero future”.
Since the cabinet adopted Integrated Resource Plan (IRP) 2019 not one megawatt of capacity has been contracted, he says.
There has still been no financial close following Mantashe's announcement of winning bidders in the risk mitigation IPP procurement programme [RMIPPP] early this year. “They should have reached financial close in June but didn't. That was moved to November, but they still didn't. Now it's been moved to January 2022.”
The supposed emergency programme is running way later than it should have, says Garner, “because it was badly designed without really understanding that there is an emergency”.
“If they can let the projects that have got their permits in the RMIPPP programme reach financial close and carry on, then it would be great, but they're holding the whole programme up because it seems the energy department is hellbent on getting Karpowerships through.”
He says Mantashe's promise to release bid window 6 by the end of January 2022 is encouraging, “but the challenge we've got is that there is not much more space to put more energy into the grid”.
“If there's anything that is going to trip us up in our efforts to stop load-shedding it is that.”
SA must decide how it's going to resolve this because Nersa is “hellbent” on not giving Eskom the money it needs to strengthen the grid, he says. “The fact that they can't do this means no new capacity can be built in renewables”.
The earliest relief from stage 4, but not all, load-shedding will come from the large IPP plants of 100MW which take 18 months to build after reaching financial close. This will take at least six months because of the PPA requirement.
So the best-case scenario for reprieve by renewable energy plants is two years, “if IPPs can get released now from a lot of red tape”.
The only quicker way to get relief from load-shedding will be putting solar photovoltaic panels on as many roofs as possible, which will assist in bringing demand down and giving Eskom space to do maintenance. “We really need to go on a massive drive in the country to enable 6kW to 100kW and 200kW-type installations everywhere we can.
“People and businesses must realise that we need to take our future in our own hands and invest in energy for ourselves”, says Garner.
“As things are, the government has let us down, and reprieve is two years away at best. There's no quicker solution.”
