IPPs need clarity on energy feed-in tariffs


Thank you for the timely piece by Eskom’s Kannan Lakmeeharan (“IPPs hold the key to SA’s ever growing demand for energy” in Business Report, September 1) on the role of independent power producers (IPPs) in meeting electricity demand, with its implicit challenges to the government and the private sector. 

Perhaps there was not space to consider implementation of the renewable energy feed-in tariff (Refit), yet this offers the greatest alignment between public benefits and private sector participation in electricity supply, as well as the greatest incentive for investment by IPPs.
The requirements laid out by Lakmeeharan apply to IPPs publicising their interest in developing local industries to utilise our long-neglected renewable resources, but a specific challenge to harnessing such investment is lack of clarity on Refit.

With Eskom settling for a 25 percent average tariff increase, annually for three year, it is the provision for financing Refits that Eskom chooses to cut back, increasing the risks (and associated cost of capital) for projects that should be finalising their power purchase agreements by now.

The Treasury is reluctant to underwrite optimal take-up of the Refits, but the government must finally deliver on the 1998 policy commitment to directing “an equitable share of resources” to renewable technologies. Explicit and active involvement by the Treasury is surely vital to securing power purchase agreements.

If the government wants to mobilise significant private investment in electricity supply it needs to address uncertainties and recognise the full value to society of fuel-free renewable energy. It would also help if the IPPs that stand to profit while contributing to security of supply were more coherent and explicit about what they plan to deliver and had their legal people driving contracting processes. 




Source busrep.co.za