SA still attractive to IPP investors

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There remains significant scope for the introduction of renewable energy and conventional independent power producer (IPP) capacity in South Africa, despite lower-than-anticipated power demand growth, an electricity researcher said on Wednesday.

In fact, Frost & Sullivan research analyst Gareth Blanckenberg said during a Web briefing that he still anticipated rapid IPP growth even if actual demand growth fell short of the projections used in the Integrated Resource Plan (IRP).

The IRP, which offers a guideline for power generation capacity additions between 2010 and 2030, would be revised periodically. But currently, the plan expected that some 56 500 MW of new capacity would have to be added over the period to raise South Africa’s total installed capacity to around 89 500 MW by 2030, of which more than 42 000 MW remained uncommitted.

However, the document itself cautioned that the demand forecast used was at the higher end of the spectrum and that there was a real risk that demand could be lower.

South Africa’s demand growth subsequent to the 2009 recession had been low, with Eskom reporting that its sales grew by only 2.7% in 2010/11 to 224 446 GWh. This against an internal growth forecast of 4.2%, which would have translated into sales of around 227 000 GWh.

Demand had also not recovered robustly during Eskom’s current financial year, owing to a combination of the higher tariffs and the generally depressed economic climate.

But Blanckenberg said new capacity would still be required and that the recent increase in the power tariffs, together with greater policy and regulatory certainty, would make South Africa a more attractive IPP investment destination.

He also expected projects to emerge that were not listed in the IRP, particularly, where IPPs moved to supply industrial and mining customers directly.

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