S Africa to sign renewable PPAs in October, renegotiate rates

The much-delayed renewable energy power purchase agreements (PPAs) with South African grid operator Eskom will be signed by end-October, but the prices will have to be renegotiated.

Energy minister Mmamoloko Kubayi said on Friday that the independent power producers (IPPs) that won contracts in the Bid Window 3.5 and 4 tenders will have to renegotiate the power sale rates below a cap of ZAR 0.77 (USD 0.058/EUR 0.049) per kWh. Thus, the South African government will trim the requirements for additional government guarantees that would have a negative impact in the current economic climate.

The minister said Eskom will have to ensure that all PPAs are in place for signing on October 28, 2017. Before that Kubayi will meet with the affected IPPs to discuss issues of concern.

Eskom supplies about 95% of South Africa’s electricity and holds a near monopoly on bulk electricity. In 2016 it refused to enter into new deals with IPPs that had won preferred bidder status in the last tenders under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

The grid operator currently has excess power generation capacity. South Africa’s energy minister said that based on the current demand patterns, the overcapacity is seen to remain until 2021. Meanwhile, most of the Bid Window 3.5 and 4 projects will be commissioned near 2021 so their contribution to overcapacity will be minimal.

(ZAR 10 = USD 0.76/EUR 0.64)

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