Monday, March 28, 2011
Lower renewable energy feed-in tariffs (Refit) proposed this week by the National Energy Regulator of SA (Nersa) sparked a turf war with the Department of Energy yesterday over when the new rates would kick in, causing investors to panic.
Feed-in tariffs are bulk-up rates paid to the independent producers of electricity for the national power grid.
The Department of Energy said the first batch of Refit projects – due to be finalised this year – would earn revenue according to a higher Refit schedule that was set in the first round of tariffs finalised by Nersa in 2009.
But Nersa, a statutorily established independent regulator, said it was not clear how the government had arrived at this conclusion.
Thembani Bukula, Nersa’s regulator member for electricity, insisted that the new tariffs would be applicable from the moment of their approval, probably in May.
“I don’t think South African consumers should pay a little more for these technologies if they don’t have to.”
Nersa’s proposals would have the effect of reducing the price of three solar technologies in the order of 40 percent compared with the old rates. They would also shave 25 percent off the price paid for wind-generated power.
But Thabang Audat, the Energy Department’s chief director of electricity, said a team of external advisers to the department and the National Treasury was drafting a standardised power purchase agreement (PPA) for the first phase of Refit that was “based on the first round of tariffs”.
He said: “Nersa determines the tariff… we work on the policy. The sign-off everyone will receive from our minister will make it clear to everyone, including Nersa.”
The PPA was due to be released at the end of this month, while preferred suppliers for the first-phase of Refit would be selected by mid-year, Audat said. On his version, the first-phase Refit recipients would earn the higher tariff.
“The guys in phase one incur penalties for not meeting a 2013 (commissioning) target. They will have to fast-track construction and that will cost more, hence the justification to get the higher tariff,” he said.
Audat nevertheless said the older Refit prices were “way too high by international standards”.
SA Wind Energy Association chairman Mark Tanton conceded that tariffs should be reviewed, but said the timing of the tariff review posed “a huge risk of derailing the market” due to investor uncertainty.
“The faith the industry has in the process has been severely eroded by an 11th hour document that changes the rules of the game,” he said, adding that the wind power industry had spent more than R400 million developing projects in South Africa.
Tanton pointed out that Eskom’s most recent multi-year price determination authorised by Nersa included 1 025 megawatts of renewable energy capacity set aside for Refit projects at the higher tariff schedule.
A substantially higher allocation for renewable energy is proposed in the second integrated resource plan, which was approved by the cabinet this month but has not been released publicly.
(via IOL, by Ingi Salgado, 28th March 2011)