Eskom to sign South African PPAs by the end of October

The Government of South Africa has announced that Eskom must sign the power purchase agreements (PPAs) for 26 IPP projects by the end of October. 

The energy minister opened the window for the signing of the contracts setting the tariff cap at 77 cents per KWh. Eskom refused to sign the agreements in 2016, because it said it had an over supply of electricity and the current prices were unaffordable for the company.

This price point could be challenging for some projects due to currency, inflation and equipment changes since the projects were procured. The 77c/kWh would apply to all the technologies procured during bid windows 3.5 and 4 of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), including the 100 MW Redstone Solar Thermal Power project.

In August 2016, we informed that Eskom postponed the PPA that was supposed to signed for the Redstone project with a total investment of ZAR8 billion (US$691.8 million). It is unclear how the 100 MW Redstone CSP project could meet the cap, which is below any tariff bid for a CSP project domestically or internationally.

Photovoltaic and wind technology will also struggle to meet the price given turbine technology changes since 2015, the closure of local manufacturing capacity and escalation in both construction and grid-connection costs.

According to sources, the Energy ministry said that the decision to sign was binding on Eskom, which should ensure all contracts are in place for signing on 28 October 2017.The combined price of all the delayed projects represent a value of US$4.5 billion.

We have informed about other renewable energy projects in South Africa:

• 100 MW Xina Solar One in the Northern Cape province
• 557.3 MW Thabametsi coal-fired project in Emalahleni
• 140 MW Loeriesfontein 2 Wind Farm in north Cape
• 140 MW Khobab Wind Farm in north Cape
• 111 MW Gibson Bay wind park in Cape
• 82.5 MW Pulida photovoltaic (PV) park
• 82.5 MW Adams photovoltaic (PV) park