Unbelievable: Coal puts halt to South Africa’s renewables industry

Just last week, it appeared an end was finally in sight for the renewables PPA saga, which has been ongoing for three years, when new Energy Minister, Jeff Radebe announced the 27 outstanding solar and wind PPAs would be signed today, March 13, by energy utility, Eskom.

Hopes were high that this deadline would, unlike the others, finally be met. Chris Ahlfeldt, energy specialist at Blue Horizon Energy Consulting Services told pv magazine at the time, “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.”

In an unbelievable turn of events, however, two unions – The National Union of Metalworkers of South Africa (NUMSA) and Transform RSA NPC – went to the North Gauteng High Court in Pretoria at the eleventh hour to “obtain an urgent court interdict to prevent Eskom from concluding the outstanding renewable energy Independent Power Producer (IPP) products, including the power purchase agreements.”

In a statement, NUMSA wrote, “NUMSA believes that the signing of these contracts would be detrimental for the working class of Mpumalanga and the country as a whole.

“The signing of the IPP means that Eskom will require less coal fired electricity. This is likely to lead to the closure of the coal fired power plants and the impact will be that at least 30 thousand working class families will suffer because of job losses.”

While the government says an interdict was not granted, and that Eskom is free to sign the PPAs, the unions have nevertheless been successful in their bid, with the matter now being pushed back to March 27, where a hearing will take place in the High Court.

In a statement, Radebe said, “counsel for the Minister, informed the Court that whilst there is no interdict granted, the signing will however be postponed until the 27 March 2018 … his undertaking was made voluntarily on behalf of the Minister in the spirit of constitutionalism and the rule of law.”

Commenting on today’s news, Ahlfeldt said, “It’s disappointing to see special interest groups further delaying local investment and jobs to be created by Round 4 of the IPP program in South Africa. Rather than fighting change, the coal unions should work with local renewable energy industry associations to access training tools and job programs to develop the skills needed to work in the growing renewable energy industry.”

Eskom’s woes

In 2015, the South African government provided the utility, which is the only entity in the country entitled to buy renewable energy power under the country’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), with R.23 billion (US$1.75 billion) in funds to help the company stabilize its precarious finances.

Things haven’t improved since then. This January, the utility faced suspension from the Johannesburg Stock Exchange for failure to publish its interim financial results in December. When they were finally published in January, they revealed a profit decrease of 34% and a debt of over R. 300 billion.

Coal vs. solar

NUMSA states, “The IPP roll out will raise the cost of electricity dramatically, because IPP’s cost much more than coal fired electricity. The ANC government clearly wants to make the working class and the poor suffer even more than they do now.

“Electricity prices will skyrocket because of the IPP roll out; while at the same time that VAT and the fuel price are going up, workers are being paid slave wages of R20 per hour and less. The combination of all these factors will have dire consequences for the working class and the poor.”

Last week, Radebe outline the expected economic benefits on the back of signing the PPAs, including a private sector investment of R56 billion (around $4.7 billion) over the next two to three years, and the creation of 61,600 jobs, of which 95% will go to the local population and, thus, will serve local communities.

In December, meanwhile, a new study conducted by the Frankfurt Institute for Advanced Studies at the Goethe-University Frankfurt, Germany, stated that a mix of solar and wind may be over 10% cheaper than power generation from new coal and nuclear plants in South Africa, even if the cost of renewables and batteries will see no further reduction from today until 2050.

In October, the International Renewable Energy Agency (IRENA) forecast that as much as 90 GW of new solar additions annually across the globe over the next few years, driving a 60% reduction in costs.

And last June, analysts Bloomberg New Energy Finance (BNEF) predicted solar energy costs will drop a further 66% by 2040. Given this prediction, BNEF expects that renewables will undercut the majority of fossil based generation by 2030, even in India and China.