The Climate Report 2017/18 - Page 64



CLIMATE REPORT
2017:
A WATERSHED
YEAR FOR SA’S
RE INDUSTRY
In 2010, the South African (SA) government took the bold
decision to create a legislative and practical environment in
which the Department of Energy could procure power that
would be generated by the private sector.
With first independent power procured in 2012, the REI4P has
seen 1000 MW Coal and 6 376 MW RE power procured, with the
first Gas procurement set to begin in 2017. The RE programme
(REI4P) has attracted R194 billion in new investment, of which
27.5% represents the foreign direct investment share, with the
balance secured from South African financial institutions.
Electricity generation in SA has long been dominated by Eskom,
the wholly state-owned national utility, a vertically integrated
monopoly which also owns and operates the national electricity
grid. Eskom supplies approximately 95% of South Africa’s power,
predominantly from coal resources. In addition to generation
assets, Eskom also operates the integrated national high-voltage
transmission system and supplies electricity directly to large
consumers such as mines, mineral beneficiators and other large
industries.
This represents the largest source of investment growth in the
economy in recent years. It has created the much-needed fiscal
space for the National Treasury to invest in the socio-economic
welfare of the country through its budget allocations for
education, health and social grants.
53% of the power procured under the REI4P is from onshore
Wind. South Africa is now the largest Wind power producer on
the African continent.
Between 2001 and 2011, SA electricity tariffs increased by 378%.
At the same time, the global era of cheap coal and electricity
has ended at a time when pressure to reduce carbon emissions
is growing.
The programme has created 26 790 jobs, of which 47% are
occupied by youth and women. In keeping with the local
economic benefit rules of the programme, a total R92.1 billion
has been committed over the twenty-year contract period to
Socio-Economic Development (SED), almost exclusively in rural
areas with depressed economies.
South Africa’s Intended Nationally Desired Contribution
(INDC) proposes significant investments that require
international support up to 2030, for example:

Over $40bn per year would be required in next generation
vehicles, split three quarters for hybrid electric vehicles and
one quarter electric vehicles. Just less than half a billion per
year would also be required for public transport infrastructure.

$8bn per year would be needed in renewables and nuclear,
including beyond 2030.

The estimated cost to expand REI4P is $3bn per year.

Renewable power capacity equivalent to all of the offshore
wind turbines in Europe today is expected from REI4P.
Perhaps of even greater value from investor perspective, the
REI4P has delivered its power on-budget 98% of the time.
Not surprisingly, the appetite amongst both domestic and
international investors and developers for the chance to bid in
successive rounds of the REI4P grew rapidly and this resulted in
ferociously competitive costs of renewable electricity delivered
into the grid.
Key to all of this has been the leadership and custodianship
of the Department of Energy and National Treasury who
together run the Independent Power Producer procurement
office. Its track record of service excellence ensured that by late
2015, the REI4P had developed a solid reputation for stability,
predictability and success.
The SA government joined the dots between the need to
diversify and strengthen SA’s energy mix, to reduce its carbon
footprint and to ignite and maintain economic growth by
opening up access to the domestic electricity market.
The SA renewable energy independent power producer
procurement programme (REI4P) would procure – competitively
and transparently – private power from the Coal, Gas and
Renewable Energy (RE) sectors. SA’s energy consumption of 127
Mtoe in 2014 is comparable to fellow coal giant Australia’s 123
Mtoe and only one seventh of India’s.
Since then however, the programme has been stalled, pending
conclusion of 37 duly procured power purchase agreements
(PPAs) with the monopoly utility which in the law, is still the sole
buyer of independent power. Taking a short-sighted approach
62
www.sawea.org.za

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