It was an African dream to create a cutting edge renewable energy industry in one of the continent’s biggest economies to attract foreign investment and train a pool of talent to run it; that dream is in tatters with the companies, that sank nearly $5 billion into it, left in limbo and out of pocket.
In the next few months, companies behind 37 signed-off renewable energy projects are likely to be on shaky ground because South Africa’s Department of Energy has failed to sign 20-year power purchase agreements. These agreements not only secure a connection to the national grid, but also revenue. Government promised to sign the PPAs on April 11. This evaporated and many fear they may not be signed before the next Integrated Resources Plan – the national plan for the energy mix to take the country to 2050 – to be finalized next year.
Reading between the lines, it appears the Department of Energy is more interested in eking out aging coal-fired operations, which generate more than 70% of South Africa’s power, and planning for a highly expensive nuclear program that could set back the taxpayer $50 billion. There have also been fewer power cuts this year. The feeling among many insiders at Eskom is ‘why should we pay for what we don’t need right now?’ The national power generator also pleads poverty.
“I would say of the 37 projects, 14 are very vulnerable right now,” Brenda Martin, the head of the South African Renewable Energy Council, said.
“If nothing happens in the coming months, companies will not be able to hold on and there will be closures and retrenchments in which hundreds of South Africans will lose their jobs.”
If you want to check the temperature of the sick South African renewable energy industry you should look across the border into Botswana. It is a minor player in energy, let alone renewable energy, with peak demand of a mere 600MW for its tiny population of fewer than two million compared to around 40,000MW in South Africa.
In May, the state-run Botswana Power Corporation put out a call for an expression of interest for a partnership in a small 100MW solar project. Usually a call like this would attract a handful of bidders. This one attracted a staggering 166 bidders, most from South Africa – a clear indication of the hunger at home. A mere 62 of these were selected.
“It’s just crazy. We have to search to survive,” one of the South African bidders, who asked not to be named, said.
The dearth of PPAs in South Africa appears to have unintended consequences across Africa.
“The markets are all opening up across Africa. We have seen shifts happen in sub-Saharan Africa in wind, solar and hydro. Biomass is moving quite fast too and energy from waste is very labor intensive. The bigger companies can go for these projects but the smaller companies won’t be able to afford to,” Martin said.
“But what we are doing now is training wind technicians for jobs in Zambia, Uganda and Ghana. This is the opposite of development that was meant to stimulate jobs for South Africa. We are simply creating jobs for other countries.”
As for a new date for the signing of the PPAs for South African producers?
“I don’t see any strong leadership among government officials right now,” rues Martin.
The Department of Energy requested FORBES AFRICA to e-mail questions over when the PPAs would be signed, which we did and followed up with numerous phone calls. Like the renewable energy producers of South Africa, we didn’t get any joy.