Author: Adam Green – Sustainable Business Analyst at GCX Carbon & Energy
Mayor Patricia de Lille, in April, confirmed the city’s intention to forge ahead by taking the Minister of Energy to court for the right to procure energy directly from suppliers.
The renewable industry has ground to a halt with Eskom’s continued delays in signing off on preferred bid winners from previous rounds of the Independent Power Producer Programme (IPPP), despite continued promises by Government to the contrary. To date, Eskom has signed 64 PPAs (power purchase agreements) for a total of 4 000MW. In addition to the signed PPAs, there are 37 PPAs remaining to be signed. It was expected that new energy minister Mmamoloko Kubayi would sign the outstanding contracts in April 2017, however, her office asked that the signing be delayed yet again. These 37 projects represent a total investment of R50 billion, 13 000 jobs in construction and a further 2 000 permanent jobs over the 20-year lifetime of the projects.
With economic growth at a virtual standstill, local economies are not waiting for Government, but taking the lead by creating opportunities and investment under the Green Economy. IPPP has been one of the key economic successes in SA since its launch in 2011. Provinces have taken notice and want to boost local economies by pursuing their own power generation. Benefits include job creation, both direct and indirect, creating new local industries within the energy sector and downstream businesses (parts, training, maintenance, accommodation etc). Independent power producers are required to provide jobs and to share ownership with local communities, and also to fund social projects in the surrounding community. By June 2016, R216 million has been spent on social-economic development since November 2013, and a total of R9.2 billion has been committed to the 64 active projects over their 20 year lifetimes.
Many cities and provinces have greenhouse gas emissions and renewable energy mix targets. Meeting such targets is predominantly reliant on Eskom, with cities realising that they need to take ownership of the process to meet targets. For instance, the City of Cape Town is committed to source 20% of its energy from renewable sources by 2020. It seems the only way to meet this is to procure its own renewable energy.
Eskom risks becoming obsolete as the world moves to clean energy (advanced by radically falling renewable prices and fast moving technological improvements). Some renewable energy can already supply cheaper electricity than the newest coal power plants. The cost gap will only increase in the future, with renewables getting cheaper. Cities want energy supply independence and to become leaders in the Green Economy that could attract investment and create new industries. In December, Cape Town was ranked 21st in the world on the list of cities with the best foreign direct investment strategies by FDI Intelligence, a division of the Financial Times. With this in mind, Cape Town wants to further leverage investment around a successful renewables programme.
Cities want to procure their own energy and key to this would be the ability to independently sign agreements with new energy producers. This would be in the form of a PPA, whereby the city would sign a long term agreement (usually 15 or 20 years) with renewable energy project developers, who would only be willing to take on the risk and raise finance with a guarantee (PPA) that the clean energy from their plant would be purchased by the city.
The City of Cape Town is preparing to take legal action against the energy minister over where it receives its electricity supply from. This legal action will be closely watched by city administrations across South Africa.