KIMBERLEY – The announcement on 8th March 2018 by the recently appointed Minister of Energy, Jeff Radebe, that that project agreements for 27 stalled renewable-energy projects valued at a whopping R56 billion would be signed on 13th March 2018 comes as a major boost for an otherwise mortally wounded Renewable Energy Independent Power Producers Procurement Programme (REIPPPPP). Prior to this announcement, some commentators had recently lamented on how and why under former President Zuma’s watch, South Africa had managed to almost ruin what had been seen by many as one of the world’s most progressive alternative energy programmes. In less than four years leading up to 2016, South Africa was reported by then Energy Minister, Tina Joemat-Pettersson to have created more renewable energy capacity than that promised by the much delayed and chronically over-budget Medupi coal-fired power station.
The crisis for the REIPPPPP was of course precipitated by the then Eskom head, Brian Molefe when, in mid-2016 he announced that the monopoly power utility was not willing to sign the power purchase agreements (PPAs) it was legally obliged to do so under the Programme. Although Molefe cited a return to surplus generation capacity as the reason for this, there is speculation that he was in fact playing to “his masters voice” and the powerful and reportedly murky nuclear power lobby. Either way in the two years following his decision South Africa almost lost the R56 billion of new investments in this burgeoning sector under bid windows 3.5 and 4 of the REIPPP. Minister Hadebe’s announcement gives renewed hope to a number of IPPs and the prospect of those projects achieving financial closure and moving into construction and commissioning. It goes without saying that the construction and operational phase employment opportunities are to be welcomed. Likewise, it should be seen as great news that communities in remote areas proximate to these projects stand to benefit from the IPPs honouring their license conditions in respect of their obligations to contribute to local socio-economic development. Unfortunately, the negative impact of the Eskom’s aberrant behaviour on the pace of development of linked and ancillary manufacturing industries servicing the renewably energy sector is not easily reversed by Hadebe’s announcement. This will take some time.
Given that capital is internationally mobile, care must therefore be taken to avoid the REIPPPP tripping-up again. That Minister Hadebe’s announcements go a long way to bringing much needed policy and regulatory certainty to a sub-sector and flagship Programme that was on the brink of collapse must be welcomed. So too must his commitment to a 100-day action plan in which he has also committed to clarifying South Africa’s positon on nuclear, releasing an updated Integrated Resources Plan (IRP) for electricity (embarrassingly delayed by his predecessors), releasing the Integrated Energy Plan and possibly also plans for gas infrastructure and the gas-to-power and gas-to-industry sectors. Hadebe’s announcements will have raised expectations that South Africa’s new economic growth imperative will be underpinned by sound energy policy and regulation. We should all welcome his announcements key as they are to our future economic health and welfare. More power to his arm. Regrettably though, news of Minister Hadebe’s announcement was met on 13th March 2018 by a representative of the National Union of Metalworkers of South Africa (NUMSA) claiming on the SABC current affairs show AM Live that the union had obtained a court interdict preventing Minister Hadebe from signing the IPP contracts as originally planned. The union representative cited potential job losses resulting from the probable closure of coal fired power plants in Mpumalanga due to an excess supply of electricity once the renewable projects come on stream as their motivation. While NUMSA may have an argument, the bigger picture issue is that South Africa needs to be weaned off its addiction and dependence on coal to power. The world has turned against this environmentally disastrous means of power generation. NUMSA’s claim of the 30 000 job losses that they say would result from the go-ahead being granted to the stalled REIPPPP projects needs to be tested.
It especially needs to be tested against the job creation and employment multipliers that would result from the local manufacture and maintenance of solar and wind power generation equipment and related capital goods. NUMSA’s claims should also be seen in the context of the environmental damage and related health hazards that coal mining has wrought on communities on the Mpumalanga coal belt over many years. As it turned out the Department of Energy subsequently clarified that no interdict had in fact been granted against Eskom or the Minister but that the matter of NUMSA seeking an interdict had instead been postponed to 27th March 2018. The Department maintains that the Minister had the legal basis to proceed to sign the 27 Power Purchase Agreements but had desisted from going ahead and doing so in the “spirit of constitutionalism and the rule of law”, adding that a new date would be announced following the court date of 27th March 2018. With a positive outcome for the ever increasingly price competitive renewable energy sector, the Northern Cape stands on the threshold of becoming a net producer of renewable energy by 2020.