South Africa’s power utility Eskom has once again refused to sign power purchase agreements with renewable energy project developers, and this time it seems to have the complete backing of the government.
Recently, an inter-governmental team informed the South African Parliament that Eskom is facing some challenges which are preventing it from signing PPAs with renewable energy project developers who had secured projects through competitive auctions.
One of the challenges, as quoted by the team, is oversupply in the grid. This directly highlights the poor planning and foresight of the government which launched, and then expanded, the Renewable Energy Independent Power Producers Procurement Programme.
With its decision not to sign PPAs with planned projects, investments worth $4.45 billion is now stranded. This is the second time that Eskom has backtracked from its commitment to sign the PPAs.
In August last year, Eskom had refused to sign a PPA with a concentrated solar power project backed by SolarReserve with a capacity of 100 megawatts. The project has a tariff of 12.40/kWh and the agreement was supposed to be signed for a duration of 20 years.
Eskom openly stated that it will no longer sign PPAs with any renewable energy projects. The utility stated that there was excess renewable energy going into the grid, which has also increased the cost of power.
Eskom has also expressed concerns over the existing grid’s ability to absorb the new renewable energy projects. However, it received a loan worth $1.34 billion from African Development Bank (AfDB) for the expansion and strengthening of its transmission network.
In January 2017, the South African Renewable Energy Council threatened to drag Eskom to court over its refusal to sign PPAs with renewable energy project developers. There has been no recent update about whether such a lawsuit was ever filed.
In March 2017, energy ministry Tina Joemat-Pettersson said that Eskom would soon sign outstanding PPAs. But the utility missed a deadline set by the ministry.