South Africa moves forward on green power subsidies
December 7, 2010 8:20pm
by Simon Mundy
South African environmentalists have grown increasingly frustrated of
late: while the government is full of bold plans for renewable energy,
it has been slow to bring about real growth in the sector. So they
will be cautious in their approval of Monday�s announcement that the
government will start a long-awaited subsidy scheme in the first
quarter of next year, in the hope of unleashing a wave of green
electricity investment.
The cause is more urgent now than ever. For one thing, it has become a
key part of the government�s fight against unemployment � the state
wants to create 300,000 jobs in the �green economy� in the next decade.
But it is also needed to avert a repeat of the electricity crisis that
swept the country three years ago. Eskom, the state electricity
company, is racing against time to build enough capacity to keep up
with the economy as it recovers from last year�s recession, and is
pressing ahead with two 4,800MW coal-fired power stations.
If the lights are to stay on � and if South Africa is to meet its
ambitious targets on carbon emissions � then renewables will also have
to play a role, but Eskom�s expertise in the area is limited.
So bringing independent power producers into the game is imperative.
There has been no shortage of interest: companies including Vestas,
the Danish wind energy business, China�s Suntech, the leading solar
energy company, and India�s Suzlon have established offices in the
country.
The renewable energy feed-in tariff (Refit) system, set up early last
year, was meant to provide a framework under which companies could
sell power to the national grid, but has yet to lead to a single deal.
Having received 384 applications from power companies, the government
will release �procurement documentation� in the first quarter of next
year, says Ompi Aphane, acting deputy director-general at the
department of energy.
The reasons for the delay are not clear, says Ralph Berold, an energy
analyst at Quartile Capital. �It could be a lack of capacity in the
department, legal issues around its role, or the funding of the Refit
programme,� he says.
Eventually, the government hopes to see green power generation of
24,000MW � about two-thirds of the country�s entire current capacity.
In the medium term, it wants a more modest 16 per cent of electricity
to come from renewables.
That target is more than feasible, Berold says; Germany, for example,
is aiming for more than double that proportion. But big changes are
needed � not least the establishment of an independent power
purchaser, to end the current set-up whereby private producers must
rely on Eskom to buy their electricity.
�Eskom has expressed the need to sign up independent producers, but
it�s not really geared to think about a liberalised power market,� he
says. �And there�s no real urgency from the government�s side.
Renewables are desperately needed, but they�ve been dragging their
heels.�
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