South Africa: Date set for PPA signing, economic benefits highlighted

An end, finally, appears to be in sight to the South African PPA saga, which has been ongoing since 2015.

Newly appointed Energy Minister, Jeff Radebe announced that all 27 power purchase agreements (PPAs) will be signed next Tuesday, March 13. Government ministers and energy utility, Eskom will be present.

Overall, PPAs for 26 projects under Round 4 of the country’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), and one project under Round 3.5, will be signed.

The Round 4 winners, of which 12 are for PV projects totaling 813 MW, were announced in April 2015, but the signing of the PPAs was delayed, due to financial and grid connection issues with Eskom, which refused to award them.

Since then, a number of deadlines have been set for the signing – three in 2017 alone – which were missed. It seems very likely, however, that next week will see an end to the issue.

Chris Ahlfeldt, energy specialist at Blue Horizon Energy Consulting Services tells pv magazine, “There have been a number of commitments made to signing these outstanding PPAs over the past few years, but the difference this time is South Africa’s new President and Minister of Energy who have committed to resolving the impasse in the energy sector created by the previous administration.”

Regarding prices for the solar PV contracts, Ahlfeldt says, “The 12 solar PV projects are expected to range from 77-87 Rand cents/kWh and won’t need to be operational until 2020.”

He adds, “PPA terms for projects that exceed market values, will raise expectations on IPPs to effectively deliver on economic development goals of the projects.”

A further 20 small-scale projects – between 1 and 5 MW – under South Africa’s Small Renewable Programme will also receive the green light to progress, after being on hold since 2015. These “will have a substantial impact on a different market segment i.e. the creation of small businesses. This will immediately ensure a R2.7 billion investment in this part of the economy,” said Radebe.

Economic benefits

The signing of the PPAs will bring a welcome boost to South Africa’s renewable energy industry, which has been on pause while the issue is sorted out. “… it will bring much needed policy and regulatory certainty and maintain South Africa’s position as an energy investment destination of choice,” said Radebe.

He went on to outline the expected economic benefits, including a private sector investment of R56 billion (around $4.7 billion) over the next two to three years, thus supporting the 3.1% GDP growth South Africa recorded in Q4 2017.

Overall, Radebe estimates that 61,600 jobs will be created on the back of the projects, of which 95% will go to the local population and, thus, will serve local communities. “Northern Cape will have 59% of the jobs created, followed by Eastern Cape with 15% and North West 13% of jobs created,” he said.

All of South Africa’s nine provinces, and in particular, rural areas, will directly benefit from the projects, helping to raise living standards and improve services, like education, social welfare and healthcare. Women and the youth will also become more involved.

Specifically, Radebe said local community equity share in the 27 renewable projects totals 7.1% or R1.6 billion, with the shareholders set to receive R5.9 billion in net dividends over the 20 year lifetime of the projects.