04.06.2018 / Blog, Company
After a confidence-sapping delay of over two years 27 independent power producer (IPP) projects have finally been signed on April, 4, 2018, by new South African Minister of Energy, Jeff Radebe. Amongst them: three juwi projects. On our blog, Greg Austin, Managing Director of juwi South Africa, provides insight into and an outlook for the South African renewable energy market and the renewable energy industry.
The previous two years were characterized by uncertainty and unpredictability, not only for the renewable energy industry but also for private sector investments in the broader energy sector. As a result, we saw numerous manufacturing companies and competitors within the renewable energy industry losing faith and withdrawing from the South African market. With the IPPs finally being signed and with the new government in place we see confidence returning to the market and the economy. We are now looking forward to the new Integrated Resource Plan that will indicate the amount of renewables that will be installed by 2030. Depending on the energy scenario chosen by the Department of Energy, we anticipate that the installation rate will be at least 20,000 MW by 2030.
What caused such a long delay? The 27 projects were identified as preferred bids already back in 2015, following bid windows 3.5 and 4 of the Renewable Energy Independent Power Producer (REIPP) Procurement Programme. However, the procurement process stalled after the parastatal utility “Eskom” announced, in mid-2016, that it would no longer conclude power purchase agreements with renewable energy IPPs, claiming that the country had reach an energy surplus situation and that renewables were not cost-effective. Following the recall of President Jacob Zuma and the appointment of Jeff Radebe as new Energy Minister by new President Cyril Ramaphosa, it was announced that the project agreements, including the PPAs with Eskom, would be signed on March 13. After some additional delays the signing process could proceed and was executed on April 4. For juwi, this means that we are now finally able to finalize the contracts for building a portfolio of 250 Megawatts as we have been selected preferred EPC contractor to three utility-scale PV projects in bidding round 4. We are expecting financial close for these projects by the end of July. We also signed the contract with our client for the sale of our self-developed 138-Megawatt wind-farm Garob in the Northern Cape. We are expecting financial close for this project by the end of August.
We used the time during the delay to expand our project pipeline in order to play a leading role in future bidding rounds. During the previous two years we also supported juwi’s hybrid initiative. So, in a nutshell, we are delighted that the standstill is behind us, that confidence is returning to the market and that the new government is fully committed to renewables.