A rock arch in the Pella mountains near Pofadder and Upington in the northern Cape, South Africa

By Tom Nevin

Financial Close Delayed Until End October, 2012

South Africa's Department of Energy (DoE) continues to wheelspin over the financial close for two CSP projects in the sun-baked Northern Cape Province, South Africa's first venture into the technology. The fact that the purse strings are still tied has not stopped the earthworks at the 50MW parabolic trough at Upington and the 100MW tower installations from proceeding apace, even though the $1.4bn financial package is yet to be signed.  In an earlier interview Rentia van Tonder of the IDC told CSP Today  “We have been told by the DoE  to hold our bid bonds until the end of September.” It appears they will have to hang on yet another month.

The projects are a joint venture between the IDC (49%) and Abener, subsidiary of Spain's Abengoa solar energy conglomerate (51%).

The current round of renewable energy contracts, the only energy-generating activity permitted IPPs  by utility monopoly Eskom were scheduled to reach financial close by mid-July this year, then mid-August, then September and now finally the end of October. Reasons for the delays range from incomplete due diligences to lack of confirmation that land ownership issues for the vast hectareage required by CSP plants had adequately been dealt with.

According to Davin Chown, chairman of the South African Photovoltaic Industry Association, the situation might not be as bad as it seems. The PPAs are in place, he says, signed off  by Eskom in early August, enabling the Treasury to submit the Section 54 Applications, “the final sign-off from senior government, from both the minister of public enterprises, Eskom's owner, and the minister of finance”.

Contrarily, however, the issue seems no nearer to finality as the clock winds down to the latest deadline of end October. What happens at then? “Nothing,” replies Van Tonder, “We just hang on to our bids.” Is she worried? “No, we'll get there eventually,” she says.

Electricity Tariffs Increase in South Africa

Ordinary South African consumers are reeling at the latest round of electricity tariff increases as state-own utility Eskom prepares to hike its rates at an average of 14.6% year to year, after a 16% increase in 2010.  Electricity tariffs have increased by 25.8%, way over the inflation rate. With an increase in group revenue from R91.4bn to R114.8bn, it still apparently has debt of more than R182bn”.

What does this mean for CSP? A balanced approach to energy

Despite prices increases over the past few years, according to the CSP Today Market’s Report (2013), South Africa still has one of the cheapest electricity rates in the world. As such CSP in its current form cannot compete price-wise with existing tariffs.  However, according to the IRP, “Because of the long lead time for CSP plants, a commitment to the capacity planned for 2017 to 2019 is necessary in the next round of the IRP at the latest. By then, the cost and technical assumptions for CSP plants will also be grounded on more solid empirical data.” With Eskom planning to raise tariffs by 48% over the next five years in order to complete its R 340 billion capacity expansion program and pay off all debts used to finance the construction of new power stations, the future energy price playing field should be more level for CSP to enter into the mix.

The IRP notes that “the balanced (generation) scenarios represent the best trade-off between least investment cost, climate change mitigation, diversity of supply, localisation and regional development. A consistent, although more modest, commitment is given to the more expensive concentrated solar power (CSP) option in order to develop local experience with this technology as well as costs. The renewable energy options continue after 2020, but are not specified according to technology type at this stage. These choices will be made when there is more local knowledge and experience with both wind and solar energy.”

Ken Robinson, senior executive at management consultants Accenture with special responsibility for state-owned power utility Eskom, says the sharply increased tariffs South Africans are facing will accrue to Eskom's expendable cash reserves and be utilised in funding energy expansion in all its guises, CSP included. Eskom has identified “a balanced expansion programme” costing around R340bn ($37bn). “The policy adjusted plan for CSP is 200MW already committed and 1000MW new commitments,” says Robinson.

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SIDEBAR

Faster renewables time-to-market for carbon market projects in Southern Africa

A new standardized baseline for the region’s electric power grid, a welcome development in boosting access to climate-friendly investment in Africa, is about to be debuted in southern Africa. Unveiled in the Botswana capital of Gaborone, by the United Nations Environment Programme (UNEP), the initiative will reduce, by an estimated six months, the time it takes for carbon market projects to reach the market. The new emission factor, says a UNEP statement, will include all grid-connected utilities operating within the Southern African Power Pool (SAPP), and will serve as a ready-made benchmark against which the Greenhouse Gas (GHG) impact of future sectoral investments in the region can be measured.

“Such a baseline will make efforts to boost clean power investments in SADC countries more efficient,” says .UNEP's Glenn Hodes.

Standardised  baselines  aim to streamline and simplify the complex design, approval and auditing processes that are required by project proponents to sell carbon credits under the UN’s Clean Development Mechanism (CDM).

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Or contact the editor, Jennifer Muirhead